lerien norro.'nr^ 
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 apen or pencil marks. 
 
 UNIVERSITY 
 
 OF CALIFORNIA 
 
 LOS ANGELES 
 
 SCHOOL OF LAW 
 LIBRARY
 
 A TREATISE 
 
 ON THE LAW OF 
 
 COLLATERAL SECURITIES 
 
 AS APPLIED TO 
 
 NEGOTIABLE, QUASI - NEGOTIABLE, 
 
 NON- NEGOTIABLE CHOSES IN ACTION. 
 
 BT 
 
 WM. COLEBEOOKE, 
 
 CHICAGO . 
 CALLAGHAN & COMPANY. 
 
 1883.
 
 Entered according to Act of Congress, in the year 1883, by 
 
 WILLIAM COLEBKOOKE, 
 In the office of the Librarian of Congress, at Washington 
 
 T 
 
 C 
 
 R, R. DOXMU.KT 6 SONS, PRINTKRS, 
 
 '
 
 PREFACE. 
 
 The law and principles of collateral security, given for loans 
 of money, discounts of bills of exchange or promissory notes, and 
 other valuable considerations, have become a recognised branch 
 of commercial jurisprudence. Occasional references to the sub- 
 ject are found in the text books, and the contract of pawn or 
 pledge, as applied to corporeal personal property, is properly 
 regarded as a division of the law of bailment. Different and 
 more important questions arise, however, from the use of col- 
 lateral securities, the term itself implying the existence of a 
 principal promise or obligation of the borrower. The posi- 
 tion of the indorsee of negotiable paper, receiving the same 
 as collateral security, as a holder for value, in the usual 
 course of business, and his rights, duties, and liabilities; and 
 of the holder or indorsee of documents of title, such as 
 certificates of stock, bills of lading, warehouse receipts, and 
 other choses in action, as collateral ; and of the borrower 
 depositing such collateral security, require, for their proper 
 consideration, a treatise exclusively devoted thereto. An 
 endeavor has been made in this work, with more or less 
 success, as the reader may judge, to cover the important 
 questions indicated. 
 
 The natural division of collateral securities has been fol- 
 lowed by an arrangement thereof into three general classes, 
 including first, negotiable instruments, bills of exchange and 
 promissory notes, bonds and coupons, notes (and bonds) 
 and mortgage securities, and the rights, duties, and liabili- 
 ties of the holder, creditor, surety, accommodation acceptor 
 
 14- (o
 
 ii PREFACE. 
 
 or indorser, or guarantor, holding collateral securities from 
 the principal. The second, documents of title, which are, 
 by commercial usage, quasi-negotiable, certificates of stock, 
 bills of lading, and warehouse receipts; and the rights of 
 stock and other brokers, dealing under the usages of Ex- 
 changes, with the collateral stocks and other securities of 
 their customer, and of the factor as pledger. The third 
 class includes the large order of non-negotiable choses in 
 action and equitable assignments of funds available as col- 
 lateral. 
 
 The present work presents a complete citation of cases 
 (over four thousand in number) directly relating to the law 
 of collateral security, and including the latest published in 
 the American and English reports. 
 
 WM. COLEBROOKE. 
 
 Chicago, Not. 15, 1888.
 
 CONTENTS. 
 
 PART I. NEGOTIABLE COLLATERAL SECURITIES. 
 CHAPTER I. 
 
 NEGOTIABLE COLLATERAL SECURITIES. 
 
 General statement as to and definitions of "Collateral security," and 
 "Collateral," - .... 1-3 
 
 CHAPTER II. 
 
 THE ACT OF PLEDGE. 
 
 The act of pledge by indorsement and delivery Indorsement for special 
 purpose Delivery Possession by pledgee or by third person Ex- 
 change and substitution, - - 4-15 
 
 CHAPTER III. 
 
 THE PLEDGEE A HOLDER FOR VALUE. 
 
 Upon present and future advances And for antecedent debt The question 
 of valuable consideration The rule as to antecedent debt, without 
 further consideration, under limitations, - - 16-30 
 
 CHAPTER IV. 
 
 ACCOMMODATION PAPER AS COLLATERAL. 
 
 The favor shown to its use as collateral security Its pledge after maturity 
 For antecedent debt Under acts of misappropriation The 
 pledgee's recovery, - - 31-42 
 
 CHAPTER V 
 
 BONDS AND COUPONS AS COLLATERAL. 
 
 The use of such securities as collateral by delivery merely The rule as to 
 "registered" bonds The pledge of severed coupons The use of 
 debentures as collateral, 43-49 
 
 (HI)
 
 iv CONTENTS. 
 
 CHAPTER VI. 
 
 THE PARTNER'S PLEDGE OF SECURITIES. 
 
 The partner's authority to borrow money, and give collateral security 
 The use of trust funds Guaranties, accommodation paper, as col- 
 lateral for partner's own debt Misappropriation of partnership 
 securities as collateral The recovery of the pledgee, - 50-60 
 
 CHAPTER VII. 
 BANKS AND BROKERS. 
 
 Collateral securities, in relation to banks and brokers The enforcement 
 of mortgage securities by National Banks, - 61-64 
 
 CHAPTER VIII. 
 MISAPPROPRIATION IN PLEDGE. 
 
 The pledgee's rights, under misappropriation of bills and notes, and accom- 
 modation paper Under forgery, where lost or stolen, after due, or a 
 statutory offense In cases of misappropriation by agents, bankers, 
 executors, trustees, directors Rides as to notice Recovery of 
 pledgee, - 65-78 
 
 CHAPTER IX. 
 
 TRANSFER AND SUB-PLEDGE. 
 
 Th pledgee's transfer and sub-pledge Estoppel, as applied against pledg- 
 ers, upon sub-pledges for sums larger than original advance Sub- 
 pledges of negotiable and non-negotiable collateral distinguished Dis- 
 charge of the sub pledgee, - - 79-84 
 
 CHAPTER X. 
 
 THE PLEDGEE'S DUTIES. 
 
 The pledgee's duties as to collateral paper His recovery And upon 
 "short," uncollectible, over-due paper His compromise or surrender 
 of Application of to other debts, and of interest " Marshalling" secu- 
 rities The statute of limitations Production, and return of collateral 
 The pledgee's use of negotiable bonds, - . 85-103 
 
 CHAPTER XI. 
 THE ENFORCEMENT OF COLLATERAL SECURITIES. 
 
 The enforcement of the principal note, while holding collateral And of 
 the collateral notes Liabilities of parties upon collateral paper Elec- 
 tion of pledgee as to enforcement When liable for loss Concurrent 
 remedies Production of collateral notes upon action on principal note 
 Action upon antecedent debt, - . S 104-116
 
 CONTENTS. V 
 
 CHAPTER XII. 
 THE PLEDGEE'S SALE OF COLLATERAL. 
 
 The sale of collateral paper and long-time bonds The requirements of a 
 valid sale Sales under contract The purchaser's title The enforce- 
 ment of mortgage securities, - - - 117-124 
 
 CHAPTER XIIL 
 THE PLEDGOR'S RIGHTS. 
 
 The pledger's transfer or re-pledge of His right to surplus, and to return 
 of Remedies upon tortious sales or sub-pledges His relief in 
 equity, - - 125-133 
 
 CHAPTER XIV. 
 USURY, AS APPLIED TO COLLATERAL SECURITIES. 
 
 The rights of pledgor and pledgee, upon collateral paper given upon usu- 
 rious loans the recovery of National Banks upon such collat- 
 eral, - ... . 134-143 
 
 PART II. NEGOTIABLE NOTES AND MORTGAGES. 
 CHAPTER XV. 
 
 THE INDORSEE'S TITLE TO THE NOTE. 
 
 The indorsee's title to the note Transfer of note carrying mortgage secu- 
 rity The mortgagee as trustee The question of record Mistakes in 
 mortgages Recovery of indorsee- 1 His concurrent remedies Equita- 
 ble aid to the maker of notes Statute of limitations upon note Ap- 
 plications of proceeds of mortgage securities, - - 143-160 
 
 CHAPTER XVI. 
 THE INDORSEE'S TITLE TO THE MORTGAGE SECURITY. 
 
 The indorsee's title to, freed from equities The rule where such enforce- 
 ment is subject to limitations Mortgages securing negotiable bonds and 
 accommodation paper, under the rule, free of equities, - 161-174 
 
 CHAPTER XVII. 
 NOTES AND MORTGAGES AS COLLATERAL. 
 
 The pledgee's title to the note and mortgage Pledge of to National Banks 
 The pledgee's and sub-pledgee's recovery, sale, and collection of 
 His foreclosure and sale of the land The pledger's re-transfer 
 of, , - - 175-183
 
 ri CONTENTS. 
 
 CHAPTER XVIII. 
 
 ASSIGNMENTS OF BONDS AND MORTGAGES. 
 
 The equities to which the assignee is subject Equitable estoppel, as applied 
 to such collateral securities The certificate of " no defense " Under 
 indorsement, the bond and mortgage quasi-negotiable Payments to 
 and releases by fraudulent mortgagees, - - - 184-193 
 
 CHAPTER XIX. 
 
 BONDS AND MORTGAGES AS COLLATERAL. 
 
 The pledgee's title under assignments as collateral security His rights 
 under fraud, misappropriation, etc. His realization and recovery 
 of his collateral securities, 194-200 
 
 PART III. THE PARTIES TO THE INSTRUMENT. 
 CHAPTER XX. 
 
 THE CONTRACT OF THE SURETY. 
 
 The parties to the instrument The contract of the surety His liability on 
 invalid loans, or forged or fraudulent paper On official bonds Femes 
 covert and minors, - - 201-208 
 
 CHAPTER XXL 
 
 THE SURETY'S RIGHT TO COLLATERAL. 
 
 The surety's right to collateral securities held by creditor When defeated 
 Equitable limitations of subrogation Subrogation of creditor to 
 collateral securities of surety Application of proceeds. - 209-221 
 
 CHAPTER XXII. 
 
 THE SURETY'S COLLECTION OF COLLATERAL. 
 
 The surety's enforcement in equity of collateral securities from principal 
 Where given for indemnity only The surety's obligations holding col- 
 lateral His recovery thereon His action at law against the prin- 
 cipal, - - 222-229 
 
 CHAPTER XXIII. 
 CONTRIBUTION BY SURETIES WITH COLLATERAL. 
 
 Contribution between sureties holding collateral Its limitation and waiver 
 Application of proceeds from Primary resort to Action at law, 
 while holding collateral The right of, upon payment of part of debt 
 As between accessory sureties, - - - - 230-238
 
 CONTENTS. Vii 
 
 CHAPTER XXIV. 
 
 DISCHAKGE OF THE SURETY. 
 
 The surety discharged by surrender or loss of collateral securities Or 
 by misrepresentations as to The effect of mere delay in enforcement 
 Acceptance of, as an agreement to extend time of payment Other 
 causes of discharge, - 239-252 
 
 CHAPTER XXV. 
 
 INDORSEES AND GUARANTORS. 
 
 The rights of holders of notes to collateral held by accommodation indors- 
 ers or guarantors Subrogation of indorsers or guarantors to securities 
 of creditor or holder of note Notice to guarantors Duty and rela- 
 tions of pledgee of collateral notes to indorsers, - - 253-262 
 
 PART IV. QUASI -NEGOTIABLE COLLATERAL 
 SECURITIES. 
 
 Drv. I. CERTIFICATES OF STOCK. 
 
 CHAPTER XXVI. 
 THE CERTIFICATE OF STOCK; 
 
 Documents of title, under indorsement, as collateral security The certifi- 
 cate of stock Its character as quasi-negotiable "Approximating to 
 negotiable paper " Indorsements in blank, - - 263-268 
 
 CHAPTER XXVII. 
 
 THE PLEDGEE OF STOCKS, A HOLDER FOR VALUE. 
 
 The transfer of stocks as between the parties, and as against the company 
 Transfer, as controlled by terms of certificates Pledges of stock by 
 delivery Insolvency of pledger Pledges for antecedent debt and 
 future advances Collections of dividends Protection of prop- 
 erty, - - 269-281 
 
 CHAPTER XXVIII. 
 
 THE PLEDGEE, UPON TRANSFER, A STOCKHOLDER. 
 The pledgee as a stockholder Where controlled by statute Transfer, to 
 protect pledgees from liabilities, not a conversion Equitable relief to 
 pledger upon, - - 282-288 
 
 CHAPTER XXIX. 
 THE PLEDGEES' RIGHTS, AS AGAINST LIENS. 
 
 The Pledgee's rights, against liens of company or legal process by creditors 
 Liens under statutory and charter provisions Limitations, waiver, 
 and loss of liens, 289-295
 
 yiii CONTENTS. 
 
 CHAPTER XXX. 
 
 STOCK CERTIFICATES AS COLLATERAL. 
 
 The use of stock certificates as collateral by trustees, executors, married 
 women, minors, by and to corporations, and stockbrokers The rules 
 of notice as to trust and mining stocks Equitable mortgages of trust 
 stocks, ..... 296-307 
 
 CHAPTER XXXI. 
 
 ILLEGAL AND TORTIOUS PLEDGES OF STOCKS. 
 
 The use of forged, fictitious, and misappropriated stocks as collateral 
 The rights of parties under forgery Or upon issues of fictitious stocks 
 Equitable estoppel, as applied in favor of innocent pledgees for value, 
 as against companies and owners of stocks In cases of misappropria- 
 tion by brokers or agents Measure of damages, - 308-318 
 
 CHAPTER XXXII. 
 
 THE SUB-PLEDGE OF STOCK CERTIFICATES. 
 
 The transfer and sub-pledge of stocks, by pledgee Sub-pledges for sums 
 larger than principal debt Equitable estoppel, in favor of sub-pledgees 
 Bub-pledges under limited title Application of proceeds by sub- 
 pledgees The broker's use of collateral stock certificates, 319-327 
 
 CHAPTER XXXIII. 
 THE SALE OF COLLATERAL STOCKS. 
 
 Sale of collateral stocks by pledgees and brokers Sales under contract 
 Requirements of valid notice and sale The pledgee as purchaser 
 The title of the bona fide purchaser Measure of damages upon wrong- 
 ful sale The pledger's right to profits on such sales The broker's 
 right of set-off, .... 328-339 
 
 CHAPTER XXXIV. 
 THE RIGHTS OF THE PLEDGOR OF STOCKS. 
 
 The pledger's relief in equity Defeated by laches Specific performance 
 Recovery at law of pledgor His action upon transfer by the pledgee 
 of stocks When entitled to return of collateral stocks, 840-346 
 
 CHAPTER XXXV. 
 
 THE BROKER'S OPTION CONTRACT. 
 
 General rules as to option contracts The "seller's option " The question 
 of evidence of intention Gambling deals for differences, 347-355
 
 CONTENTS. ix 
 
 CHAPTER XXXVI. 
 THE BROKER'S SUIT AGAINST CUSTOMER. 
 
 The broker's recovery upon valid deals*, or upon settlement of losses at cus- 
 tomer's request Upon negotiable paper given in settlement Illegal 
 deals, void by statute" Corners" Relief to the customer, 356-362 
 
 CHAPTER XXXVII. 
 USAGES OF STOCK AND OTHER EXCHANGES. 
 
 Usages of brokers to sell collateral stocks, upon default, without notice 
 Use of collateral stocks Not to retain identical stocks, nor ware- 
 house receipts Usages as to collateral funds, charges, and inter- 
 est, 263-372 
 
 Drv. 2. BILLS OP LADING. 
 
 CHAPTER XXXVIII. 
 THE BILL OF LADING. 
 
 The bill of lading, by water or land, as collateral security Its character 
 quasi-negotiable except where negotiable by statute A symbol of 
 property, - 373-379 
 
 CHAPTER XXXIX. 
 BILLS OF LADING AS COLLATERAL. 
 
 The title of the pledgee of bills of lading Transfer with or without in- 
 dorsement For antecedent debt Future advances Reversionary in- 
 terest in a, aa collateral, - - - 380-385 
 
 CHAPTER XL. 
 
 THE PLEDGEE'S TITLE, AS AGAINST CARRIER. 
 
 Delivery as essential to valid bill of lading The pledge of fictitious bills 
 of lading Estoppel, as against explanation as a receipt as against 
 pledgees The pledgee's title, without notice to carrier When latter 
 subject to legal process, - - 386-396 
 
 CHAPTER XLI. 
 
 THE PLEDGEE'S RIGHTS, UNDER ESTOPPEL. 
 
 Estoppel, as applied to bills of lading pledged, negotiable or quasi-negotia- 
 ble Estoppel of owner, under general indorsement of Pledge of 
 fosged, fictitious, or fraudulent bills of lading Where pledgee is 
 chargeable with notice of limited title of pledger The remedies of 
 the pledgee The pledgee a holder for value, against the unpaid ven- 
 lor, seeking to enforce his right of stoppage in transitu, 397-400
 
 X CONTENTS. 
 
 CHAPTER XLII. 
 
 THE FACTOR AS PLEDGOR. 
 
 The factor, at common law, not allowed to pledge The factor, upon ad- 
 vances, a pledgee Pledgees with notice of fraud Estoppel in favor 
 of innocent pledgees from factors, - - - 407-411 
 
 Drv. 3. WAREHOUSE RECEIPTS. 
 
 CHAPTER XLIII. 
 WAREHOUSE RECEIPTS AS COLLATERAL. 
 
 Transfer of receipts as collateral, with or without indorsement The ware- 
 house receipt quasi-negotiable Estoppel of warehouseman by terms of 
 receipts as against innocent pledgees Of owner where third person 
 holds receipts The warehouseman's receipts for his own property as 
 collateral The rule, under statutory restrictions, - - 411-421 
 
 PART V.NON- NEGOTIABLE COLLATERAL 
 SECURITIES. 
 
 CHAPTER XLIV. 
 CHOSES IN ACTION AS COLLATERAL. 
 
 The use of choses in action and equitable assignments of funds as collat- 
 eral security, with or without indorsement Equities to which pledgees 
 are subject Part assignments Insurance policies as collateral Notice 
 to debtor Divers choses in action used as collateral, - 423-431 
 
 CHAPTER XLV. 
 ESTOPPEL IN PAIS, IN FAVOR OF PLEDGEES. 
 
 Equitable estoppel as applied to choses in action By representations upon 
 face of non-negotiable securities Of owner, under misappropriation 
 as collateral Blank indorsements, - - 432-440 
 
 CHAPTER XLVI. 
 
 THE PLEDGEE'S RIGHTS AND DUTIES. 
 
 Equitable aid to the pledgee His action at law His duty as to collection 
 and sale Application of payments The pledger's rights, upon 
 wrongful sale or sub-pledge His discharge, upon payment, 441-448
 
 TABLE OF CASES. 
 
 THE REFERENCES ARK TO THE SECTIONS. 
 
 Abbey v. Van Compen, 226 
 
 Abbott v. Pomfret, 15 
 
 Ackerson v. Lodi Branch R. R. Co., 
 
 124 
 Adams v. Drake, 215, 283, 237 
 
 v. Jenkins, 30 
 
 v. Jones, 259 
 
 v. Merchant's Nat. Bank, 421 
 
 v. O'Connor, 404 
 
 v. Rowan, 191 
 
 v. Smith, 28 
 
 9. Sturges, 60, 282, 288, 343, 345, 
 372 
 
 v. Way, 247 
 
 Adderly v. Storm, 282, 283, 285 
 Addison v. Cox, 424 
 Agawara Bank D. Strever, 14, 17, 32 
 Agnevv . Ball, 230, 233 
 Agra & Masterman's Bank, in re, 46, 
 
 269, 273, 422, 432 
 Agricultural Bank v. Burr, 264, 271, 
 
 295 
 
 Ainsworth v. Brown, 250 
 Alabama, etc., Manf. Co. . Third 
 
 Nat. Bank, 409 
 
 Albany, etc., Co. v. Devendorf, 243 
 Albert v. Savings Bank, 282, 298, 
 
 312 
 
 Albright v. Griffin, 29 
 Alcock v. Hopkins, 109, 110 
 Alderman v. Eastern Ry. Co., 404 
 Aldrich v. Cooper, 39, 98 
 
 9. Hopgood, 230 
 
 v. Martin, 217 
 Alexander v. Bank, 109-23 
 
 9. Relfe, 312 
 
 9. State, 51 
 
 Alexandria Ry. Co. 9. Burke, 18, 
 
 120. 123 
 
 Alford v. Baker, 144 
 Alston, ex parte, 98, 408, 411 
 Alsatt 9. Farquharson, 49 
 Allaire 9. Hartshorne, 18, 31, 37, 43, 
 
 46, 78 
 
 Allen, in re, 144 
 Allen 9. Allen, 153 
 
 9. Brown, 220 
 
 9. Culver, 219 
 
 9. Dallas Ry. Co., 18,43, 46, 
 125 
 
 9. Dykers, 276, 327, 337, 363, 
 369 
 
 9. Graves, 37 
 
 9. Henley, 212 
 
 9. King, 4, 6, 88 
 
 v. Massey, 421 
 
 9. Maury, 263, 412-413, 415 
 
 9. Suydam, 257 
 
 v. Williams, 379, 382 
 
 9. Wood, 238 
 
 9. Woodward, 209 
 Alliance Bank 9. Broom, 23 
 
 . Kearsley, 50 
 Allison 9. Sutuerlin, 212, 213 
 Allis 9. Ware, 207 
 Amos 9. McMichael, 18 
 American Ex. Bank v. Corliss, 23 
 American Nat. Bank . Harrison 
 
 Wire Co., 66, 104, 256 
 American Ry. Frog Co. 9. Haven, 
 
 283 
 
 Ames 9. Smith, 21 
 Ammons v. Whitehead, 248 
 Amy 9. Dubuque, 47, 48
 
 Xll 
 
 TABLE OF CASES. 
 
 Anderson v. Baumgarten, 144, 158 
 
 9. Heath, 106 
 
 9. Nicholas, 383, 336, 344 
 Andrews t>. Becker, 430 
 
 t. Etna Life Ins. Co., 184, 
 188 
 
 t>. Hart, 161 
 
 9. Hopgood, 159 
 
 v. McCoy, 23 
 
 9. Pond, 76, 95 
 
 '. Scotton, 111, 154, 156 
 
 t>. Thayer, 157 
 
 9. Torrey, 198 
 
 v. Marrett, 243 
 
 . Wrigley, 301 
 Androscoggin R. R. Co. t>. Auburn 
 
 Bank, 90, 100, 115 
 Angle v. K Y. Ins. Co., 32 
 Anglo-Californian Bank v. Bank, 
 
 289 
 
 Anon, 65 
 
 Ansonia Fibre Co., in re, 52 
 Anthony v. Capel, 241 
 
 9. Lawson, 140 
 Appleton v. Donaldson, 23, 34, 36 
 
 9. Parker, 30, 249 
 Arnold v. Camp, 109 
 
 9. Rock River R. R. Co., 3 
 Arbouin t>. Anderson, 75 
 Arents v. Commonwealth, 43. 169 
 Argentina, The, 375. 379, 397, 398 
 Argenti . San Francisco, 180, 260 
 Armitage v. Baldwin, 215 
 
 9. Puliver 230 
 Armour . Michigan Ccn. R. R. Co., 
 
 390, 397, 899, 432. 439 
 Armstrong t>. Toler, 356, 859 
 Arnold v. Delano, 405 
 Arnot v. Woodburn, 213 
 Ashby t>. Blackwell, 309 
 Ashtcn v. Dakcn, 348, 852 
 Ashton's App., 2J, 24, 138, 186. 189, 
 
 190, 198. 324, 435 
 Ashton v. Atlantio Bank, 298, 301 
 
 9. Taylor, 75, 77 
 Ashurst c. Bank, 65, 69 
 
 Ashworth, ex parte, 106 
 Asiatic Banking Corp , in re, 303 
 Asttey v. Reynolds, 135 
 Athill, in re, 2 
 Atlantic Bank v. Boies, 2 
 Atlas Nat. Bank v. Doyle, 43 
 
 v. Savery, 55 
 Atkinson v. Atkinson, 265, 298 
 
 v. Brooks, 5, 6, 23, 27, 42, 175 
 Atlantic Bank . Ferree, 316 
 Atwater v. Underbill, 186 
 Audenried v. Randall, 405 
 Aultman's App., 282 
 Ault v. Colket, 815, 316 
 Aurora City v. West, 8, 47 
 Austen, ex parte, 54 
 Austin v. Belknap, 239, 240 
 
 9. Brooks, 242 
 
 v. Curtis, 23, 27, 87 
 Averal v. Wade, 292 
 Ayere v. Hays, 144, 152 
 
 v. French, 344 
 
 9. Waite, 183 
 
 9. Watson, 111 
 Aylwin v. Witty, 427 
 Babcock, in re, 153, 212, 220, 25 
 
 o. Bonnell, 405 
 
 9. Jordan, 18 
 Backhouse v. Harrison, 75 
 Backus v. Coyne, 236 
 Bahia & 8. F. Ry. Co., in re, 275, 
 
 310, 314, 318, 440 
 Bailey 9. Baldwin, 43, 56, 243 
 
 9. Bensley, 327, 329 
 
 9. Bidwell, 56 
 
 9. Brownfleld, 50, 57, 212, 215 
 
 9. Buchanan, 258 
 
 9. Clark, 52 
 
 9. Edwards, 247 
 . Finch, 62 
 
 9. Malvin, 158 
 
 9. Merrick, 144, 147 
 
 9. Smith, 135, 171 
 Baird v. Bradley, 260 
 
 9. Bank of Washington, 64, 180 
 
 9. Cochrane, 54 /
 
 TABLE OF CASES. 
 
 XI) 1 
 
 Baker v. Bishop Hill Colony, 422 
 
 o. Bliss, 298 
 
 v. Briggs, 114, 212, 239, 244 
 
 v. Cincinnati, 249 
 
 v. Drake, 306, 327, 334, 337, 366 
 
 v. Lehman, 154 
 
 0. Walker, 22, 27, 243 
 Balback v. Frelinghuysen, 5 
 Ball v. Gilbert, 361 
 Ball, ex parte, 68 
 Ball v. Wyeth, 153, 228 
 Baldwin v. Canfield, 269, 281, 296, 
 303, 304 
 
 v. Ely, 32, 79, 425, 438, 447 
 
 0. Van Duessen, 207 
 Ball v. Wyeth, 153 
 Baltimore v, Ketchum, 309 
 Baltimore & Ohio R. R. Co. v. Wil- 
 
 kius, 378, 386, 388 
 Bank v. Allen, 229 
 
 v. Anderson, 147, 151, 152, 192 
 
 v. Babcock, 28 
 
 v. Bank, 23, 26, 61, 271, 272 
 
 v. Beresford, 241 
 
 0. Binuey, 51 
 
 v. Campbell, 270 
 
 v. Carrington, 18, 28 
 
 v. Case, 296 
 
 v. Chambers, 18, 22 
 
 v. Curry, 32 
 
 v. Dubuque R. R. Co., 126, 332 
 
 0. Fowler, 23, 26 
 
 v. Goodman. 282, 283 
 
 0. Guttschlick, 156 
 
 v. Hall, 28 
 
 0. Haskill, 244 
 
 v. Hatch, 239 
 
 v. Haurick, 239 
 
 v. Hemingiay, 72, 92 
 
 0. Hoge, 203 
 
 0. Ives, 241 
 
 0. Kimball, 32 
 
 0. Kortright, 273 
 
 0. Lanier, 265, 266, 270, 271, 
 275, 289, 310 
 
 0. Leighton, 75 
 
 Bank v. Myers, 241 
 
 0. Peabody, 106 
 
 0. Penfield, 35 
 
 0, Railroad Co., 46. 332 
 
 0. Rollins, 241 
 
 0. Scoville, 28 
 
 0. Slemmons, 135 
 
 0. Spence, 66 
 
 0. Tarleton, 144, 158, 159 
 
 0. Wexson, 27 
 
 Banking Assn. v. Wiltz, 276 
 Banking Co. v. Raultenberg, 260 
 Bank, ex parte, 441 
 Bank of Manchester, ex parte, 269 
 Bank of Attica v. Manufacturer's 
 
 Bank, 289 
 
 Bank of Auburn v. Throop, 217 
 Bank of Brighton v. Smith, 221 
 Bank of Chemung v. Bradner, 55, 
 
 57, 66 
 Bank of Chenango v. Hyde, 10, 107 
 
 0. Osgood, 86, 90 
 
 Bank of Columbia 0. Marshall, 413, 
 
 418 
 
 Bank of Commerce's App., 271, 273 
 Bank of England v. Parsons, 309 
 Bank of Holly Springs v. Pinson, 
 
 263, 275, 289, 291 
 Bank of Kentucky v. Schuylkill 
 
 Bank, 314, 318, 320 
 0. Wister, 7 
 
 Bank of Louisville v. State Bank, 278 
 Bank of the Metropolis 0. N. E. Bank, 
 
 61, 298 
 
 Bank of Mobile 0. Polnitz, 23, 64 
 Bank of Montgomery 0. Reese, 337 
 Bank of New York 0. Vanderhorst, 
 
 1, 16, 27, 65, 81 
 
 Bank of Pittsburg v. Neal, 32, 66, 75 
 Bank of Rochester 0. Bowen, 55 
 
 0. Jones, 379, 380, 382, 403, 408 
 Bank of Rome 0. Village, 8 
 Bank of Rutland v. Buck, 35 
 
 v. Woodruff, 102, 109, 129 
 Bank of Salina v. Babcock, 27 
 Bank for Savings 0. Frank, 185 
 
 A*
 
 XIV 
 
 TABLE OF CASES. 
 
 Bank of South Australia . Case, 52 
 Bank of St. Albans v. Gilliland, 28, 
 
 75 
 
 Bank of Toronto . Hunter, 255 
 Bank of U. S. v. Hatch, 258 
 
 v. Peabody, 15 
 
 v. Patton, 229 
 Bank of Utica v. Bank, 272, 291 
 
 v. Smalley, 270, 271, 273 
 Bangs v. Story, 209 
 Banning v. Markham, 3 
 Bancroft v. Abbott, 228 
 
 t>. McKnight, 65 
 Bange t. Flint, 23, 28, 153. 161 
 Bangs v. Mosher, 243 
 
 t>. Strong, 242, 247 
 Barber . Meyerstein, 394, 396, 379 
 Bardsley v. Delp, 28 
 Baren v. Haskins, 223 
 Barker, in re, 283 
 Barnard v. Backhaus, 349, 351, 359 
 
 v. Campbell, 400, 414, 417 
 Barnes t>. Mott, 239, 240 
 Barnett v. Nat. Bank, 139 
 Barney v. Earle, 28 
 Barre Nat. Bank v. Kingham Man. 
 
 Co., 282, 286 
 Barrett v. Russell, 56 
 
 v. Swan, 51 
 Barrow v. Rhinelander, 88, 114 
 
 v. Shields, 240 
 Barry, ex parte, 278, 279 
 Barry t>. Ransom, 203, 233 
 Bartlett t. Cunningham, 220 
 
 t>. Smith, 346, 359 
 Barton v. Peterson, 279 
 Bast v. Bank, 85, 86, 442 
 li.i^'jtt . Spofford, 399 
 Batnrd v. Hawes, 238 
 Batchelder v. Fiske, 230, 232, 238. 
 
 252 
 
 Batchelor . Nat Bank, 206 
 Batchellor v. Priest, 90, 257 
 Bate v. Conyngham, 292 
 Batcman v. Joseph, 89 
 
 . Poolc, 102, 106, 129 
 
 Bates . Todd, 392, 393 
 
 t>. Wiles, 336 
 Batesville Inst. v. Kauffmann, 144, 
 
 181, 446 
 
 Bayard v. Bank, 273 
 Bayley v. Gould, 144 
 Beach t>. Fulton Bank, 312 
 Beach v. Mosgrove, 143, 144 
 Beadle v. Southern Bank, 65 
 Beal v. Warren, 423, 425 
 Beale v. Bank, 90 
 Beals v. Neddo, 144, 161, 168 
 Beavan v. Oxford, 428 
 Beaver v. Beaver, 226 
 
 . Blanker, 212, 214 
 Beaver Co. v. Armstrong, 43, 47 
 Beavers v. Lane, 397 
 Bebout v. Bodle, 247 
 Becker v. Hallgarten, 263, 373, 382, 
 
 383, 405 
 
 Beckham v. Drake, 52 
 Beckwith v. Burroughs, 293 
 
 v. Sibley, 104, 108 
 Bedford . Dakin, 58, 242 
 Beebe v. Bank, 185, 241, 255 
 Bcecher v. Wells, etc., Co., 264, 271, 
 
 282 
 Belcher v. Hartford Bank, 79, 217j 
 
 239 
 Belden t>. Davis, 422 
 
 v. Manley, 65, 78, 158, 159 
 
 v. Meeker, 431 
 
 v. Perkins, 409 
 Belknap v. Gleason, 156 
 Bell v. Jasper, 230 
 
 9. Lent, 136 
 
 v. Martin, 243 
 
 0. Simpson, 16, 143, 144, 153, 
 
 175 
 
 Bellas v. McCarty, 301 
 Belloni v. Freeborn, 222, 224 
 Belmont v. Hoge, 65 
 Belohradsky . Kuhn, 155, 170 
 Belshaw v. Bush, 109, 110 
 Bemis v. Wadill, 54 
 Benedict v. Caffe, 258
 
 TABLE OP CASES. 
 
 XV 
 
 Benon v. Paquin, 115, 129 
 Bennett v. Cook, 254 
 Benson v. Stewart, 156 
 Bentley v. Bates, 429 
 Beresford v. Ward, 144 
 Bergen v. Urbahn, 107 
 Berger v. Williams, 221 
 Berkeley v. Watling, 392 
 Berlin v. Eddy, 369 
 Berndtson 0. Strang, 397, 405 
 Berry 0. Alderman. 56 
 
 v. Van Beuren, 140 
 Berryman v. Mauker, 245 
 Berthold v. Berthold, 212 
 Bertrand v. Barkman, 23, 27 
 Best v. Crall, 4, 16 
 Bettune v. Wallace, 222, 234 
 Bevan v. Lewis, 52 
 Biddle v. Bayard, 265 
 Bigelow v. Baldwin, 228 
 
 v. Benedict, 346, 348, 349,350, 
 353 
 
 v. Cassidy, 213 
 Biggs v. Barry, 405 
 Billard v. Raynor, 140 
 Billings v. Sprague, 240 
 Billington v. Waggoner, 140 
 Bird v. Cockrem, 48, 69, 95 
 Birt v. Birt, 62 
 
 Bishop v. O'Connor, 212, 214 
 Bissell v. Ry. Co., 180, 260, 312 
 Bittleston 0. Cook, 16 
 Black v. Zacharie, 265, 271 
 Blackburn v. Shaw, 250 
 Blackburn Bldg. Society v. Cuniiff, 
 
 180 
 
 Blackford v. Brown, 227 
 Black River Bank v. Page, 114, 209, 
 
 220 
 
 Black well v. Barnett, 157 
 Blair v. Mathiott, 186 
 Blaisdell 0. Smith, 156 
 Blakely v. Johnson, 245 
 Blakely Ord. Co., in re, 46, 49 
 Blakesly, in re, 43 
 Blanc v. Hartzog, 100, 343 
 
 Blanchard n. Dedham Gas Co., 271, 
 295 
 
 v. Stevens, 7, 18, 24, 175 
 Blanchett v. Powell Co., 392 
 Blazer v. Bundy, 249 
 Blinn v. Chester, 228 
 
 0. Evans, 50 
 Bliven 0. Hudson River Ry. Co., 
 
 394 
 
 Blodgett v. Weed, 51, 56, 57 
 Blouin 0. Hart, 93, 276 
 Blumenthal v. Jassey, 145-151, 153, 
 
 172 
 Blunt v. Norris, 144, 153, 164, 175- 
 
 177 
 
 Blydenburgh v. Bingham, 247 
 Blyth v. Carpenter, 341 
 Board of Supervisors v. Otis, 241 
 Boardman v. Holmes, 441 
 Boaler v. Mayor, 250 
 Bodenham v. Hoskyns, 62 
 Body v. Jewson, 23 
 Boling v. Young, 249 
 Bolton v. Dugdale, 3 
 
 v. R. R. Co., 405 
 Bonar v. Macdonald, 245 
 Bonbonus, ex parte, 50, 54 
 Bond v. Aitkin, 59 
 
 0. Central Bank, 18 
 
 v. Fitzpatrick, 95 
 
 v. Mount Hope Co., 273 
 
 v. Wiltze, 16 
 
 Bonham v. Galloway, 220, 228 
 Bonito v. Mosquero, 407, 408, 41l 
 Bonney, in re, 328 
 Bonnsavill 0. Wolf, 241 
 Booth v. Storrs, 244 
 
 0, Wiley, 210 
 
 Boogher 0. Life Assn., 312 
 Borden 0. Gilbert, 262 
 Borland v. Clark, 315, 316 
 Borney v. Seeley, 228 
 Borst v. Corey, 156 
 Borup 0. Meininger, 257 
 Bosanquet v. Forster, 23 
 Bosley v. Taylor, 237
 
 XVI 
 
 TABLE OF CASES. 
 
 Boss v. Hewitt, 48 
 
 Boston Music Hall Assn. r. Cory, 293 
 
 Bostwick v. Dodge, 28 
 
 Boswell v. Goodwin, 144 
 
 e. Green, 50 
 
 Botts *. McCoy. 407, 408, 411 
 Bouligny v. Fortier, 178 
 Boulton, ex parte, 276, 278 
 Bowman v. McElroy, 173 
 
 v. Van Kuren, 16, 23 
 
 c. Wilson, 43 
 
 . Wood, 90 
 Bowden v. Farmer's Bank, 282, 295 
 
 v. Johnson, 285 
 Bowditcli . Green, 129 
 Bowen v. Haskins, 215 
 Bowring v. Shepherd, 371 
 Boyd v. Beck, 23 
 
 0. Brotherson, 33 
 
 v. Corbitt, 5 
 
 . Cummings, 27, 34, 65 
 
 . Dunlop, 190 
 
 t>. Hind, 228 
 
 v. Kennedy, 43 
 
 . Parker, 144, 161 
 Boyer v. Keystone Nat. Bank, 39 
 Boylan v. Huguet, 336, 344, 3G9 
 Boys, in re, 5, 62 
 Brackett v. Winslow, 233, 237 
 Bradley v. Ballard, 180 
 
 . Burwell, 252 
 
 e. Chester Valley Co., 154 
 
 v. Root, 424 
 
 Bradner . Campbell, 401 
 Bradshaw v. Combs, 247 
 Bradstreet v. Heran, 392, 393, 397 
 Braham >: Ragland, 256 
 Brainerd v. Jones, 221 
 Brainard v. Reaves, 23, 25 
 
 v. N. Y. R. R. Co., 8, 43 
 Bramah . Roberts, 22 
 Bramhall t. Beckett, 14, 23 
 Branch Bank v. James, 203 
 Brandao v. Barnett, 61, 298 
 Brandt . Bowlby, 381 
 Brass . Worth, 331 
 
 Braught v. Griffith, 215 
 Breckenridge v. Shrieve, 50 
 Breese v. Schuler, 228 
 Breidenbecker v. Lowell, 219 
 Brcngle v. Bushey, 242 
 Brett, ex parte, 214 
 Brewer r. Franklin Mills, 213 
 Brewster v. Galloway, 431 
 
 v. Hartley, 264, 303 
 
 v. Simes, 298, 300, 320, 382 
 Brice's App., 144 
 Brice . Bannister, 424, 446 
 Brick . Brick, 287, 340 
 
 v. Freeholders etc. Co., 220 
 Bridge v. Hubbard, 140, 141 
 Bridgeport Bank v. N. Y. & N. H. 
 
 Ry. Co. 263, 267, 270, 275, 311 
 Bridgeport City Bank v. Welch, 18 
 Brierly v. Kendall, 409 
 Brigden v. Cheever, 238 
 Briggs v. Boston R. R. Co., 409 
 
 . Dorr. 192 
 
 . Jones, 436 
 
 t>. Rice, 143, 161, 164, 175, 181 
 Brigham v. Potter, 148 
 Bright v. Judson, 23 
 Brinkerhoff v. Brinkcrhoff, 187 
 
 v. Foot, 141 
 
 v. Lansing, 14 
 Brinton v. Gerry, 239 
 Brisbane . Railroad Co., 273, 31 
 Bristol Co. v. Probasco, 29 
 Brittain v. Quett, 226 
 Broadbent v Barlow, 408, 411 
 Broadway Bank v. McElrath, 265, 
 
 271, 273, 293 
 
 Broad well v. Howard, 413, 420 
 Brombey v. Smith, 189 
 Brooklyn v. Ins. Co., 8, 43, 47, 48 
 Brookman v. Metcalf, 16, 117 
 
 c. Rothschild, 332 
 Brooks v. Rice, 80, 83 
 
 v. White, 228 
 
 v. Whitson, 23 
 Brower v. Pcabody, 8, 399 
 Brown, in re, 392, 89 7
 
 TABLE OF CASES. 
 
 XV11 
 
 Brown c. Bateman, 424, 446 
 
 0. Black, 371 
 
 v. Blydenburgh, 145 
 
 v, Bowen, 390 
 
 v. Cascaden, 154 
 
 0. Curtis, 253 
 
 v. Delaney, 144, 158 
 
 v. Davis, 76 
 
 v. Graw, 328 
 
 v. Hall, 353 
 
 v. Kent Co., 205 
 
 v. Kidger, 50 
 
 v. Kneeland, 295 
 
 v. Leavitt, 28 
 
 v. Lee, 238 
 
 v. McGraw, 364 
 
 v. Meyers, 348 
 
 0. Mott, 41, 42 
 
 0. Powell Co. 386, 388, 392 
 
 0. Prophit, 247 
 
 0. Ray, 50, 217, 212, 230, 234, 235 
 
 0. Rockhold, 156 
 
 0. Runolo, 133 
 
 0. Scott, 29 
 
 0. Tyler, 120, 161, 164, 175, 183 
 
 0. Ward, 117. 120, 121, 331 
 
 0. Warren, 9, 16 
 Bronson 0. Fitzhugh, 250 
 Brownlow 0. Arnold, 158 
 Brua's App., 346, 349, 350, 359, 360 
 Bruce 0. Gardner, 426 
 Brush v. Scribner, 18, 28, 65 
 Bryan v. Baldwin, 331, 332 
 
 0. Carter, 289 
 Bryant v. Damon, 144, 158 
 
 0. Vix, 17 
 
 Bryson v. Rayner, 332, 334 
 Buchanan 0. International Bank, 17, 
 
 111, 147, 170 
 
 Buck v. Albee, 349, 350, 351, 361 
 Buckley v. Garritt, 97 
 Buckmaster v. Consumer's Ice Co., 
 
 341 
 
 Buckner 0. Street, 156 
 Budd v. Monroe, 298 
 Bufflngton 0. Curtis, 381, 382 
 
 Bulkley 0. Garrett, 441 
 Bull 0. Bliss, 261 
 
 0. Bull, 228 
 Bullard v. Bank, 289 
 
 0. Randall, 444 
 Burbank v. Warwick, 168 
 Burchart 0. Dresser, 50 
 Burdett 0. Clay, 144 
 Burgess v. Seligman, 8, 282-284, 287, 
 
 303 
 
 Burgett 0. Patton, 237 
 Burhaus v. Hutcheson, 144, 151, 161, 
 
 16*7 ' 
 
 Burke's App., 340 
 Burke . Noble, 250 
 
 v. Savage, 404 
 Burkett 0. Taylor, 334 
 Burleigh 0. Parton, 54 
 Burling v. Goodman, 153 
 Burlingame v. Green, 129 
 Burmester 0. Norris, 52 
 Burnhisel v. Firman, 15, 16, 141, 143 
 Burns v. Burrows 253 
 
 0. Huntington Bank, 213, 237 
 Burnside 0. Fetzner, 215, 254 
 Burr 0. Boyer, 240 
 
 0. Smith, 214 
 
 0. Wilcox, 283 
 Burrall v. Bushwick, 264 
 Burrell, in re, 127, 181 
 Burridge 0. Row, 427 
 Burrows 0. Bangs, 442, 446 
 
 0. Gore, 297 
 
 0. Hannigan, 258 
 Burt 0. Dutcher, 337 
 
 0. Fowler, 261 
 Burtis 0. Cook, 422 
 Burton's App., 263, 265, 316 
 Burton 0. Baxter, 147 
 
 0. Curyea, 401, 412, 413 
 
 0. Peterson, 14, 263, 265, 267, 
 316 
 
 0. Wilkinson, 394 
 Bush v. Cooper, 156 
 
 0. Crawford, 50 
 
 0. Cushman, 186, 189
 
 XV111 
 
 TABLE OF CASES. 
 
 Bush v. Lathrop, 185, 198, 422 
 
 v. Stamps, 217 
 Bushell, ex parte, 56 
 Bushncll v. Chautauqua Nat. Bank, 
 63 
 
 . Kennedy, 7 
 Bu swell v. Pioneer, 109 
 Butler o. Bc-rkiu, 212, 230, 2o4 
 
 v. Carter. 297 
 
 . Ladue, 223, 225 
 
 9. Miller, 108, 113 
 
 t>. Slocurab, 153, 173, 176 
 Butterfleld . Stevens, 328, 334, 364 
 Butters v. Haugbwort, 18 
 Buttenvorth v. Kennedy, 104, 280, 
 
 304 
 
 Butts v. Dean, 29, 30 
 Cabeen v. Campbell, 405 
 Cabot Bank v. Bodman, 254 
 Cady v. Potter, 295 
 
 . Sheldon, 261 
 Cain v. Hanna, 159 
 Caines v. Bates. 220 
 Cairo Nat. Bank v. Crocker, 373, 
 
 380 
 
 Calahan v. Babcock, 405 
 Calais Steamboat Co. v. Van Pelt, 75 
 Caldwell v. Ball, 381 
 
 T. Bartlett, 414 
 
 v. Warehouse Co., 135 
 Calhoun v. Delhi Ry. Co., 44 
 Calkins v. Lockwood, 17, 217 
 Callanan v. Shaw, 137. 
 Calvo v. Davis, 203, 250 
 Campbell v. McHarg, 141 
 
 v. Mesier, 230, 233 
 
 v. Morgan, 265, 272 
 
 t>. Parker, 194, 199, 334 
 
 9. Vader, 147 
 
 Cameron . Durkhcim, 331 , 834, 349 
 Canadian Bank . McCrea, 401, 412, 
 
 417 
 Canneld v. Minneapolis, etc., Assn., 
 
 319, 832, 340 
 Cannan v. Bryce, 859 
 Capen's App., 65, 214 
 
 Capron v. Smith, 322 
 
 9. Thompson, 306 
 
 Cape Girardeau Co v. Harbison, 156 
 Capel v. Butler, 239 
 Cardin v. Jones, 90 
 Carey v. Railroad Co , 180, 260 
 Carlisle t>. Hill, 135 
 
 v. Wishart, 28 
 Carpenter v. Insurance Co., 21 
 
 9. Kelly, 232 
 
 9. King, 239, 244 
 
 v. Longan, 143, 144. 148-150, 
 153, 161, 162, 165, 193 
 
 . O'Doughcrty, 207 
 Carr, ex parte, 447 
 Carr . Carr, 175, 194 
 
 i>. Fielding, 106, 156 
 
 v. Hilton, 298 
 
 v. London Ry. Co., 392, 397, 434 
 
 v. Roberts, 222, 224 
 
 9. Waugh, 430 
 Car ra way v. Oleneal, 248 
 Carriere v. Ticknor, 29 
 Carroll v. Mullanphy Savings Bank, 
 267. 269, 271, 289, 291, 332 
 Carter v. Carter, 221 
 
 t>. Duncan, 249 
 
 v. Howe Mach. Co., 312 
 
 9. Nat. Bank, 29G, 301, 302 
 
 9. Wake, 119, 120, 126, 329 
 Cartwright v. Wilmerding, 383, 418, 
 
 411-413 
 Cary v. Holmes, 238 
 
 v. White, 242, 243 
 Case 9. Bank, 273, 289-291 
 
 v. Boushton, 104 
 
 v. Hawkins, 240 
 
 v. Mechanic's Bank. Assn., 66, 
 
 78 
 Casey v. Cavaroc, 13, 133 
 
 v. Nat. Bank, 13 
 
 t>. Schneider, 6, 9, 13 
 Cassard v. Hinman, 34&-850 
 Cassidy . First Nat. Bank, 425 
 
 v. Keeley, 212 
 Castellan v. Hobson, 871
 
 TABLE OF CASES. 
 
 XIX 
 
 Castelman 0. Holmes, 28 
 
 Cater . Merrill, 413 
 
 Cathcart's App., 144 
 
 Catskill Bank 0. Messenger, 250 
 
 Causey v. Yates, 135 
 
 Caussidere e. Beers, 402 
 
 Cayuga Bank v. Hunt, 35 
 
 Cazet v. Field, 148, 161 
 
 Cecil, in re, 283 
 
 Cecil Bank v. Heald, 28 
 
 Central Nat. Bank v. Pratt, 139 
 
 Central Trust Co. v. Nat. Bank, 180 
 
 Chadwell v. Wheless, 144 
 
 Chaffee v. Jones, 230, 237, 238 
 
 0. Talliaferro, 240 
 Chamberlain v. Greenleaf, 280, 319, 
 
 820, 326, 340, 342, 369 
 Chambers 0. Manchester etc. Ry. 
 
 Co., 205 
 
 Chambersburg Ins. Co. v. Smith, 2 
 Champncy -o. Coope, 195 
 Chandler, in re, 355 
 Chandler v. Fulton, 405 
 
 v. McKinney, 207 
 Chapin v. Thompson, 140 
 Chapman 0. Brooks, 79 
 
 v. Clough, 111, 113 
 
 9. Lee, 108, 113, 154, 156 
 Charles 0. Marsden, 41 
 Charlotte Bank v. Lineberger, 248, 
 
 250 
 Chase v. Bank, 283 
 
 0. Chapin, 278 
 Cheap. Cranwood, 370 
 Cheesebrough v. Millard, 98, 231, 239 
 Cheever v. Meyer, 263, 264, 269, 271, 
 
 273, 275, 331 
 
 Chemung Canal Bank v. Bradner, 56 
 Chenowith v. Chamberlain, 57 
 Cherry 0. Frost, 15, 263, 264, 267, 
 269, 271, 279, 320, 325 
 
 0. Lea, 14 
 
 9. Miller, 239, 241, 247 
 Chester v. Bank of Kingston, 239 
 
 v. Wheelwright, 97 
 Chester Glass Co. v. Dewey, 264 
 
 Chestnut Hill Turnpike Co. v. Rutter, 
 
 312 
 Chew v. Bank of Baltimore, 309 
 
 0. Buchanan, 158, 159 
 Chicago, D. & V. Ry. Co. v. Lowen- 
 
 thal, 174 
 
 Chicago Lum. Co. 0. Ashworth, 157 
 Chicago Co. v. Lowell, 410 
 Chickering v. Fullerton, 422 
 Chicopee Bank v. Chapin, 1, 16, 18, 
 
 42, 46, 70. 78, 93, 175 
 Child v. Hugg, 306, 331, 334 
 Childs v. Corp, 88, 114 
 
 v. Hudson's Bay Co., 290 
 Chilton v. Chapman, 231 
 Chinncry v. Viall, 409, 552 
 Chitty v. Glenn, 229 
 Chouteau 9. Allen, 74, 100, 121 
 
 v. Burlando, 156 
 
 Chouteau Springs Co. v. Harris, 273 
 Christian v. Newburry, 144 
 Christian Union v. Yount, 180 
 Christie v. Sawyer, 424 
 Christiner 0. Brown, 239 
 Christmas v. Griswold, 423 
 
 v. Russell, 423, 424 
 Christy 0. Dyer, 154 
 Chrysler 0. Renois, 27, 23 
 Church 0. Malloy, 248 
 
 0. Simmons, 220 
 
 0. Smith, 158, 159 
 
 . Sparrow, 51, 52 
 Churchill v. Hunt, 222, 224 
 Citizen's Bank 0. Knapp, 100, 343 
 Citizen's Nat. Bank 0. Leming, 139 
 City Fire Ins. Co. 0. Olmstead, 278 
 City 0. Lawson, 47 
 City Bank, ex parte, 49 
 City Bank 0. Armstrong, 61 
 
 0. Babcock, 122, 334 
 
 0. Johnson, 343 
 
 9. Perkins, 4, 10, 72. 78, 90, 91 
 
 0. Rome, 382 
 
 0. Taylor, 81, 112 
 
 0. Tuckie, 255 
 City Nat. Bank 0. Dudgeon, 213
 
 TABLE OF CASES. 
 
 City of Chicago v. Gage, 205 
 Cily of Lexington . Butler, 7 
 City of Philadelphia App., 424 
 Clack v. Holland, 427 
 Clafliu v. Kimball, 424 
 
 v. Ostrom. 253 
 
 . South Carolina R. R., 17, 43 
 Clagett o. Salmon, 250 
 Clapp v. Lebanon Bank, 212 
 
 v. Rice, 250 
 
 0. Sheppard, 175, 183 
 Clark 0. Badgley, 134 
 
 v. Bardett, 259 
 
 v. Bouvain, 334 
 
 0. Bryce, 205 
 
 0. Bush, 221 
 
 . Dearborn, 56, 409 
 
 Devlin, 202, 258 
 
 0. Ely. 23, 217, 218, 238 
 
 0. Figes, 153 
 
 v. Finlon, 140 
 
 v. Foss, 346, 348, 350, 354, 356, 
 358 
 
 0. Henry, 175, 194 
 
 0. Iowa City, 8, 47 
 
 0. Iselin, 11, 15, 16 
 
 0. Loker, 25 
 
 0. Loomis, 136 
 
 v. Roberts, 422, 436 
 
 Sickler, 241 
 
 0. Young, 93 
 Claridge v. Dalton, 89 
 Clasey v. Sigg, 161, 165, 171 
 Clason v. Morris, 212, 233 
 Clay v. Cottrell, 54 
 Clement v Leveritt, 4, 65 
 Cleveland v. Borem, 132 
 
 0. Cohrs, 144 
 
 0. Martin, 144 
 
 v. State Bank, 23. 26, 279 
 Clinton Bank v. Ayres, 33 
 Clinton v. Cox, 156 
 Clopton . Spratt, 239, 240, 241 
 Clow v. Derby Coal Co., 209, 239, 240 
 Clute v. Robinson, 185 
 Coutes App., 212 
 
 Cobb v. Dows, 402 
 
 0. Doyle, 18 
 
 v. Prell, 246, 249, 351 
 Coburn v. Parker, 227 
 
 v. Webb, 32 
 Cochrane v. Cushing, 213 
 
 v. Rippey, 420 
 Coddington v. Bay, 23, 24, 71 
 
 v. Davis, 258 
 Coe i>. R. R Co , 7 
 Coggill v. Hartford Ry. Co., 401 
 Cohen v. Gwynne, 315, 316 
 
 0. Hole, 109, 110 
 Colby v. Everett, 156 
 Cold v. Ives, 264 
 Colderwood v. McCrea, 348, 350 
 Cole v. Fox, 220 
 
 v. Milmine, 346, 348 
 
 v. Sackett, 109 
 
 v. Whitman, 132 
 
 Colehour v. State Savings Inst., 170 
 Coles v. Bank of England, 315, 316 
 
 v. Bristowe, 268, 363 
 
 v. Pack, 259 
 Coleman v. Riches, 388 
 Colgrove 0. Tallman, 220 
 Colket v. Ellis, 334, 364 
 Collamer v. Langdon, 30, 109 
 Collett v. Emmett, 32 
 Collier v. Martin, 4 
 Collins v. Gilbert, 1, 38, 42, 76 
 
 . Martin, 22, 65, 72, 78, 81 
 Collinson v. Lister, 801, 302 
 Collis v. Emett, 66 
 Column v. Eastern Counties Ry. Co., 
 
 260 
 
 Colona v. Eaves, 44 
 Colt v. Ives, 294 
 
 0. Lasiner, 73 
 
 v. Owens, 334, 337 
 Coltman, in re, 205 
 Combe t>. Wolff, 14, 247 
 Combes v. Chandler, 422, 425, 436 
 Com. Exchange Nat. Bank v. Bab- 
 cock, 29, 118, 207 
 Commercial Bank v. Hughes, 61
 
 TABLE OF CASES. 
 
 XXJ 
 
 Commercial Bank v. Kortright, 263, 
 
 285 
 
 0. Martin, 106, 116, 175 
 0. Pfeiffer, 8 SO, 408 
 0. Ramsey, 54 
 Commercial etc. Ins. Co. v. Scan- 
 
 rnon, 180 
 Commissioners Knox Co. V. Aspin- 
 
 wall, 47 
 
 Commonwealth v. Cox, 237 
 0. Pittsburg, 43 
 v. Holmes, 206 
 v. Vanderslice, 240 
 v. Watmough, 271, 293, 363 
 Comper v. Cunningham, 397 
 Compton v. Blair, 89, 106, 133 
 ComsttQck v. Gage, 244 
 
 v. Smith, 29, 108-110 
 Cottam v. Eastern Counties Rys., 
 
 308 
 Conant v. Seneca Co. Bank, 274, 
 
 280, 291, 303 
 Conger v. City of New Orleans, 276, 
 
 343 
 
 Connecticut v. Bradish, 147 
 Com. Mu. Life Ins. Co. v. Jones, 
 
 107, 154 
 
 v. Ry. Co., 260, 350 
 Connerly v. Planter's Ins. Co., 81, 
 
 34, 41 
 Conover v. Hill, 238 
 
 v. Van Mater, 186 
 Conrad v. Atlantic Ins. Co., 271, 
 
 380, 381 
 v. Foy. 220 
 
 Constant v. Matteson, 217 
 Continental Nat. Bank v. Eliot Nat. 
 Bank, 263, 265, 270, 273, 
 293 
 
 v. Townsend, 31, 34, 85 
 Cook, ex parte, 299 
 0. Armstrong, 229 
 v. Davis, 346, 348, 349 
 v. Helms, 23 
 v. Norwood, 66 
 0. Satterlee, 3 
 
 Cook t>. Tullis. 15, 16 
 Cooke v. Chaney, 114 
 Cookes 0. Culbertson, 156 
 Cool t>. Phillips, 413, 420 
 Coolidge v. Lamed, 156 
 Cooper 0. Condon, 29 
 
 v. Dietrich, 253 
 
 v. Evans, 246 
 
 0. Meyer, 66 
 
 v. McClurhan, 54 
 
 0. People, 204 
 
 v. Thompson, 7 
 Conyngham's App., 132, 331, 33b, 
 
 338 
 
 Cope v. Smith, 220 
 Copeland v. Manton, 23, 26 
 Copis v. Midclleton, 213, 215, 219 
 Copley v. Machine Co., 312 
 Copper v. New Jersey City, 43 
 Corbett v. Underwood, 146, 162, 
 
 247, 248, 328, 349, 367 
 Corcoran v. Powers, 135, 136 
 Corey v. Leonard, 212 
 Core v. Wilson, 203 
 Cork & Y. Ry., in re, 43, 180 
 Cornell v. Hickens, 162 
 Corneyfl. De Costa, 258 
 Cornick v. Richards, 263, 264, 26Y, 
 269, 271, 289, 293 
 
 v. Murray, 185 
 Cornog 0. Fuller, 147 
 Cortelyou v. Lansing, 121, 131, 831 
 Cornwall . Gould, 227 
 Cothart 0. Ballard, 35 
 Cott rail's App., 212, 255 
 Couch 0. Mills, 250 
 County of Beaver v. Armstrong, 8 
 County of Clay 0. Society of Sav- 
 ings, 43, 44 
 
 County of Ray v. Vansycle, 47 
 Covell v. Hitchcock, 405 
 
 0. Loud, 307, 328, 334, 364 
 Coventry 0. Gladstone, 397, 405 
 Cover v. Black, 14 
 Cowdrey v. Vanderburgh, 422, 436, 
 438
 
 xxii 
 
 TABLE OF CASES. 
 
 Cowell v. Edwards, 238, 252 
 
 t>. Spring Co., 180 
 Cowles v. Burns, 152 
 Coxe . Harden, 381 
 Craft v. McConoughy, 361 
 
 . Miss. & T. R. R. Co., 403 
 Crafts v. Mott, 215 
 Craig v. Parkis, 95, 253, 261 
 Crain v. Paine, 156 
 Crane v. Ailing, 250 
 
 . March. 153, 162, 163 
 
 t>. Turner, 185 
 Craythorne t>. Swinburne, 213. 215, 
 
 230, 233, 237, 238 
 Crawford v. Richeson, 239 
 Creamer v. Perry, 258 
 Crease t. Babcock, 282 
 Creath n. Sims, 248 
 Creech v. Byron, 95 
 Creery v. Holly, 158 
 Creighton v. Hyde Park, 424, 430, 
 
 446 
 
 Creswell o. Lanahan, 133 
 Crist v. Burlingame, 204 
 Crocker t>. Crocker, 298, 316, 317, 
 320, 397, 421 
 
 . Nat. Bank, 139 
 
 t>. Thompson, 151 
 Crofts v. Beale, 22, 37 
 Croft*. Bunster, 150, 153, 162 
 
 t>. Williams, 73 
 Cromwell's App., 217 
 Cromwell v. County of Sac, 8, 42, 
 
 46, 47, 57, 153 
 Cronin v. Patrick Co., 45 
 Crook v. Jadis, 75 
 Crosby c. Brownson, 144 
 
 . Crafts, 217, 241, 251 
 
 c. Long, 68 
 
 t>. Roub, 16, 165 
 
 e. Wyatt, 250 
 Crossley v. Glasgow Life Ins. Co., 
 
 420, 446 
 
 Crossman v. Wohlleben, 247 
 Crosthwait v. Ross, 50 
 Crouch v. Credit Foncier, 49 
 
 Crow v. Clay, 108 
 
 t>. Vance, 144 
 Cruger 0. Burke, 242 
 Cruikshank v. Duffin, 301 
 Cruise . Paine, 371 
 Cullom v. Bloodgood, 50 
 Cullum V. Branch Bank, 23 
 
 v. Irwin, 144, 160 
 Culver 0. Benedict, 18 
 Cumberland Ry. Co. v. Baab, 312 
 Cummiugs v. Boyd, 23, 34 
 Cunningham v. Hawkins, 157 
 Currie v. Misa, 22, 24 
 Currier . Fellows, 232 
 Curry v. McCauley, 217, 240 
 Curtis v. Hubbard, 30. 144 
 
 v. Leavitt, 303 
 
 v. Mohr, 16 
 
 . Tyler, 217, 254 
 
 0. Valiton, 141 
 
 Curtius v. Caledonia Ins. Co., 446 
 Cushman v. Thayer Manf. Co , 271, 
 
 341 
 
 Cutler v. Haven, 145 
 Cutting v. Dameral, 267,270, 271, 278 
 
 v. Malor, 88 
 Cutts v. Gould, 422 
 
 v. York. Mauf. Co., 175 
 Duke v. Cahawba Nav. Co., 293 
 Dalton v. Midland Ry. Co., 309 
 
 v. Smith. 183 
 
 Dammick v. Hubbard, 220 
 Dana v. Conant, 56, 261 
 
 . Lull, 50 
 
 Danbury v. Robinson, 186, 187 
 Dando's App., 305, 328 
 Danforth v Semple, 247 
 Daniel . Joyner, 224 
 Daniels v. Meinhard, 424 
 Darst v. Bates, 109, 228, 239, 262 
 
 v. Gale, 170 
 Darling v. March, 57 
 Darlow v. Cooper, 111 
 Daubigny v. Duval, 407 
 Davenport Nat. Bank v. Homeyer, 
 382
 
 TABLE OF CASES. 
 
 XX111 
 
 Davidson's Case, 283 
 Davidson v. Allen, 159 
 
 v. Lanier, 32 
 
 . Young, 433 
 
 Davis 0. Bank of England, 202, 
 309 
 
 . Barr, 186 
 
 t>. Barrington, 203 
 
 v. Beckstein, 422, 436 
 
 v. Bigler, 407 
 
 t>. Blackwell, 55 
 
 fj. Bradley, 69, 95 
 
 v. Carson, 25 
 
 . Emerson, 238 
 
 v. French, 302 
 
 0. Humphreys, 236 
 
 0. Leopold, 185, 191 
 
 v. Maynard, 14 
 
 v. People, 247 
 
 0. Perrine, 215 
 
 0. Randall, 17, 32, 139 
 
 v. Richardson, 50 
 
 v. Russell, 18, 407, 408, 413, 
 415 
 
 v. Snead, 220 
 
 v. Stainbank, 202, 203 
 
 v. Stalls, 207 
 
 v. Stevens, 285 
 
 0. Wells, 259, 260 
 Davis etc. Co. v. Jones, 261 
 
 v. Buckles, 244 
 Davy v. Prendergrass, 249 
 Day T). Elmore, 261 
 
 v. Hickney, 29, 30 
 
 v. Holmes, 267, 288, 323, 332, 
 345, 368 
 
 V. Leal, 242 
 
 v. Saunclers, 66 
 
 V. Thompson, 29 
 Dayton v. Trull, 88 
 Dayton Nat. Bank v. Bank, 14, 17, 
 
 32, 264, 278, 289, 303, 379 
 Deacon v. Stoddart, 214 
 Deal v. Cochran, 220 
 Dean v. Howell, 135 
 
 v. King, 388, 392, 393 
 
 Dearie v. Hall, 428 
 Dearborn v. Taylor, 144 
 Debout v. Bodle, 248 
 Decatur Bank v. Speuce, 66 
 DeClery v. Jackson, 448 
 Dedham Bank v. Chickering 204 
 Deering v. Winchelsea, 203, 230, 233, 
 
 237, 252 
 
 De La Chaumette v. Bank of Eng- 
 land, 5, 6 
 
 Delano v. Bennett, 144 
 Delespine v. Campbell, 159 
 Demeritt v. Batchelder, 156 
 Dempsey v. Bush, 215 
 Denick v. Hubbard, 220, 247, 248 
 Denegre v. Ham, 229 
 Denier v. Myers, 249 
 Denning . Colt, 50 
 Dennis . Rider, 215 
 Dennison, ex parte, 338, 368 
 Dennison v. Gibson, 239 
 Denny v. Dana, 148 
 
 . Lyon, 215, 240, 3Q8, 317 
 
 v. Palmer, 258 
 Dent v. Holbrook. 336 
 
 v. Wait, 212 
 
 Denton v. Jackson, 328, 335, 367 
 D'Meza's Succ., 9 
 Depeau v. Washington, 23, 27 
 Depuy v. Clark, 96 
 Derring v. Boyle, 207 
 Detroit v. Weber, 206 
 Detroit Savings Bank v. Zeigler, 204, 
 
 206 
 
 DeVoss v. Richmond, 43, 45 
 Dewy v. Bowman, 425, 431, 442, 443 
 DeWitt v. Brisbane, 135, 191 
 DeWolf 0. Gardner, 379, 380, 382, 
 408, 418, 420 
 
 v. Johnson, 140, 141 
 Dey v. Dey, 188 
 De Zeug v. Fyfe, 34 
 Dias v. Bennett, 213 
 Dibrell v. Dandridge, 215 
 Dickinson v. Central Nat. Bank, 272, 
 278, 293
 
 XXIV 
 
 TABLE OF CASES. 
 
 Dickinson v. King, 30 
 
 v. Worthington, 144, 151 
 Dickerson . Miner, 245 
 
 . Seelye, 392, 383 
 
 t>. Valpey, 50 
 Dickson . Swansea R. R. Co.. 432 
 
 9. Thomas, 346, 349, 350, 359 
 Diercks v. Kennedy, 189 
 
 t>. Roberts, 32 
 DUlaye t. Commercial Bank, 185, 
 
 187, 196, 436 
 Diller v. Brubaker, 306 
 Dillon v. Russell, 239 
 Dinsmore v. Duncan, 43 
 Disbrough v. Neilson, 348, 353 
 Disbrow v. McDonald, 41^ 
 Dix t. Cobb, 425, 428 
 
 9 Tully, 90, 112 
 
 t>. Van Eyck, 140 
 Dixueld v. Newton, 433 
 Dixon v. Baldwin, 405 
 
 v. Dixon, 28, 30 
 
 9. Vandenburg, 251 
 Dob 9. Halsey, 54, 57 
 Dodd v. Winn, 238 
 Dodge v. Bank, 11, 144 
 
 v. Emerson, 30, 144 
 
 9. Freeman's Savings & Trust 
 
 Co., 214 
 
 Dolby v. Spaicls, 350. 359 
 Dole v. Young, 253 
 Doll . Rizotti, 173 
 Dolman v. Crane, 140 
 Don ley t>. Hays, 159 
 Donald v. Suckling, 79, 82, 819, 409, 
 
 444 
 
 Donnelly v. Ryan, 52 
 Donohoe . Gamble, 119 
 Donohue t>. Woodbury, 228 
 Doolittle v. Cook, 18 
 Door t>. Shaw, 98 
 Dorlon t>. Christie, 243 
 Dorrill v. Eaton, 79, 181 
 Dorsell v. Mitchell, 153 
 Doss t>. Ditmare, 158 
 Doty 9. Bates, 51 
 
 Douglas' App., 214 
 Douglas v. Howland, 261 
 
 9. Reynolds. 88, 257-259 
 Dovey's App., 23, 270, 316 
 Dowell v. Cardwell, 424 
 Downey v. Thorp, 186 
 Downing v. Traders Bank, 221 
 Dow v. Gould etc. Co., 280 
 Dows v. Greene, 380, 398, 405 
 
 v. Kidder, 397, 402 
 
 v. Nat. Exchange Bank, 380- 
 382, 400, 404 
 
 v. Purrin, 393, 403 
 
 v. Swett, 29, 110 
 Drake v. Christy, 256 
 
 9. Mitchell, 109, 110 
 
 v. White, 86 
 Draper v. Cowles, 28 
 
 v. Saxton, 65, 68, 80, 164, 181 
 Dresser . R. R. Co., 31, 78 
 Driscoll v. West Bradley Manf. Co., 
 271, 289, 293, 320, 380, 439 
 Drysdale v. Piggott, 217 
 Ducker v. Rapp, 240, 241, 247 
 Duden v. Waitzfelder, 332 
 Dudley v. Caldwell, 145 
 
 v. Cooper, 215 
 
 ?. Elwes, 144 
 
 v. Miller, 120 
 Duke v. Cahawba Nav. Co., 265, 
 
 271 
 
 Dumont v. Fry, 61, 98 
 Duncan . Bank, 212 
 
 v. Brennan, 62, 97 
 
 9. Gilbert, 3S, 42, 66, 78, 196 
 
 tn. Hill, 372 
 
 v. Hinckley, 291 
 
 9. Jaudon, 62, 178, 296-298, 302 
 
 9. Luntley, 309 
 
 . Louisville, 144, 162 
 
 . Mobile etc. R. R. Co., 214 
 
 9. McCullough, 89 
 
 . N. & S. W. Bank, 202, 203, 
 
 253 
 
 Dundas v. Sterling, 251 
 Dunbrow v. McDonald, 383
 
 TABLE OF CASES. 
 
 XXV 
 
 Buncombe v. N. T. & H. &. N. R 
 
 R. Co., 16-18, 23, 74, 78, 79, 
 
 108, 134, 125, 133 
 Dunham v. Clogg, 32 
 
 9. Countryman, 247 
 Dunkley v. Van Buren, 154 
 Dunlop, in re, 292 
 Dunn v. Weston, 31, 41, 42 
 Dunning t>. Merrill. 141 
 Dunscomb v. Banker, 136 
 Durant 9. Bart, 356 
 
 v. Einstein, 328, 342 
 Durham v. Price, 258 
 Durrell v. Wendell, 250 
 Dutchess Ins. Co. v. Hatchfleld, 75, 
 
 76 
 
 Dutchman 9. Tooth, 260 
 Dutton v. Connecticut Bank, 273, 
 
 278, 295 
 9. Ives, 151, 161 
 Duty v. Graham, 157 
 Duvall v. Farmers' Bank, 258 
 Dyer v. Pearson, 437 
 Dykers v. Allen, 331, 338 
 Dyott's est., in re, 130 
 Earl Vane v. Rigden, 301 
 East India Co. v. Donald, 142 
 East Lincoln v. Davenport, 48 
 Eastman 9. Foster, 156, 159, 217, 231 
 East Oakland v. Skinner, 44 
 Easton v. Clark, 408, 410 
 
 v. Hasty, 212 
 Eaton v. Cook, 405 
 Edger v. Emerson, 213 
 Edgerton v. Young, 144, 170 
 Edgington v. Hefner, 153, 154 
 Edmonston v. Drake, 259 
 Edmondson v. McLeod, 102, 129,133 
 Edwards v. Martin, 426 
 v. Skining, 137 
 V. Thomas, 54 
 Egberts v. Woods, 50 
 Eggershall v. Ruggles, 228 
 Eichelberger v. Murdock, 279 
 Elder v. Rouse, 104 
 Eldred v. Hazlett, 433 
 
 Ellerhorst, in re, 221 
 Ellett v. Butt, 144 
 Elliott v. Russell, 374 
 Ellis v. Jones, 405 
 
 9. Kreutzinger, 426, 446 
 
 v. Lamme, 158 
 
 9. Laurie, 158 
 
 v. Roscoe, 159 
 
 v. Willard, 392 
 Ellsworth v. Harmon, 253 
 
 v. Lockwood, 215 
 Elston v. Deacon, 54, 56, 58 
 Elting v. Vanderlyn, 27 
 Elwood v. Diefendorf, 212, 228, 230, 
 
 242, 243 
 Ely 9. Guest, 293 
 
 9. Ely, 154 
 
 9. Scofield, 193 
 Emanucl v. White, 28 
 Emerine v. O'Brien, 243, 244 
 Emery's Sons v. Irving Nat. Bank, 
 
 263, 373, 379, 380-382 
 Emerson v. Harmon, 51 
 Emicks v. Powell, 237 
 Emis v. Widowson, 242 
 Emly v. Lye, 52 
 Emory v. Keighan, 156, 157 
 Empire City Bank, in re, 282, 283 
 Empire Ins. Co. 9. Stewart, 180 
 Enders 9. Brine, 213 
 English v. Carney, 159 
 Erickson v. Rafferty, 154 
 Erie & P. Dispatch Co. 0. Compress 
 
 Co., 417, 419 
 Ernest v. Nicholls, 52 
 Erskine v. Lowenstein, 286 
 Erwin t>. Schaffer, 27, 33 
 Essex Co. Bank 9. Russell, 39 
 Esser v. Linderman, 306, 335 
 Est. of Busch, 241, 331 
 Etheridge v. Parker, 184, 186 
 
 v. Vernoy, 424 
 
 Eubanks v. Leveridge, 154, 156 
 European Bank, in re, 4, 61, 62 
 Evans t>. Bell, 261 
 
 9. Bremridge, 245, 250
 
 XXVI 
 
 TABLE OF CASES. 
 
 Evans t. Potter, 407 
 
 t>. Wain, 363, 370 
 
 t>. Wells, 55, 56 
 
 . Wood, 268, 371 
 Evansville etc. R. R, Co. c. Erwin, 
 
 401 
 
 Everett v. Strong, 50 
 Everly c. Rice, 240 
 Everingham t>. Emsworth, 54 
 
 . Meighan, 346, 349. 359 
 Evertson n. National Bank, 8, 43, 47, 
 
 48 
 
 Ewell v. Daggs, 140 
 Exchange Bank v. McLoon, 424 
 Exeter Bank v. Jordan. 94, 96, 116 
 Eyre v. Everett, 241 
 Factor's Ins. Co. . Drydock, 276 
 Fair c. Howard, 23 
 Fairchild v. Brown, 95 
 Faith v. Richmond , 52 
 Fales t>. Mayberry, 152 
 Falkney v. Reynous, 357 
 Fallen v. Railroad Co., 340 
 Farebrother v. Woodhouse, 212 
 Fareira t>. Gabell, 849, 350, 351, 359 
 Farmer v. Russell, 357 
 Fanner's Nat. Bank v. Atkinson, 378, 
 403 
 
 t>. Champlain Transp. Co., 804 
 
 t>. Bearing, 139 
 
 t>. Erie R. R, Co., 390, 400 
 
 t>. Fletcher, 161, 165 
 
 t>. Ilazeltine, 873, 875, 378, 898, 
 403 
 
 r. lelehart, 293 
 
 v. King, 62 
 
 c. Lang, 260 
 
 t. Logan, 263, 373, 375, 379, 380, 
 889, 395, 401, 403 
 
 t>. Stover, 203 
 
 . Van Metier, 256 
 
 c. Wilson, 295 
 Farmer's Ins. Co. t>. Wilkinson, 104, 
 
 109 
 
 Farmer's Loan etc. Co. t. Clarkin, 
 180 
 
 Farnsworth v. Coots, 247, 250 
 
 Farquharson v. Flower, 98 
 
 Farr v. Stevens, 80, 109 
 
 Farrar v. Walker, 283 
 
 Farrell v. Lovett, 57 
 
 Farwell, L. J. The, 387, 388 
 
 Farwell v. Importer's Bank, 1, 16, 
 
 65, 90, 92, 93, 98, 99, 129 
 Fatman v. Lobach, 270, 330 
 Faulkner v. Hill, 91 
 Fawcett v. Kennedy, 213 
 Fay v. Gray, 252, 323 
 Fearon v. Bowers, 395 
 Feldman v. Beire, 109 
 Fellows V. Powell, 388, 401 
 Fellows v. Prentice, 243, 247 
 Felt v. Heye, 320, 321, 824, 346 
 Feltz v. Walker, 191, 422 
 Fenby v. Pritchard, 17, 23 
 Fennell v. McGowan. 79, 83, 112 
 Feuouille v. Hamilton, 23, 27 
 Fenton v. Machine Co., 312 
 Ferdon v. Miller, 196 
 
 v. Smith, 16 
 
 Ferguson v. Union Furnace Co., 127 
 Ferry v. Hickman, 23 
 Fessler v. Hickernell, 215 
 Fetrow v. Wiseman, 207 
 Fickett, in re, 217 
 Field v. Farrington, 328, 864 
 
 v. Holland, 219 
 
 t>. Mayor, 430 
 
 t>. Megaw, 423, 424, 446 
 
 t>. Schieffelin, 73, 298, 301 
 Fieldens v. Lahens, 55, 57, 251 
 Fielding 0. Waterhouse, 212, 215, 
 
 216, 231 
 
 Finney's App., 265, 269, 293 
 Fireman's Ins. Co. v. Wilkinson, 242 
 First Nat. Bank v. Bates, 141, 412- 
 414-416 
 
 f>. Beard, 18 
 
 t>. Bentley, 27 
 
 v. Breeze, 55, 57 
 
 c. Bryce, 263, 409, 412, 419 
 
 t>. Carpenter, 253
 
 TABLE OF CASES. 
 
 XXV11 
 
 First Nat. Bank 0. Cony, 187, 190 
 
 v. Dearborn, 379 
 
 v. Fourth Nat. Bank, 257 
 
 0. Fowler, 27, 32, 65, 77, 205 
 
 0. Grant, 41, 42 
 
 v. Guarlinghouse, 139 
 
 0. Haire, 64, 180 
 
 D. Hartford Ins. Co., 269, 290 
 
 . Kelly, 379-380, 580 
 
 v. Lamb, 139 
 
 v. Leavitt, 243 
 
 0. Nelson, 407, 410. 419 
 
 0. Northern Ry. Co., 263, 394 
 
 0. Ocean Nat. Bank, 63 
 
 v. Pierce, 247 
 
 v. Shaw, 403 
 
 v. Stewart, 296, 304 
 
 v. Southwick, 39 
 
 v. Tabor, 47 
 
 v. Whitman, 248 
 
 v. Wood, 255 
 Fish 0. DeWolf, 135 
 
 v. Kempton, 298 
 Fischer 0. Meyer, 254 
 Fisher v. Biadford, 127 
 
 v. Bridge, 349 
 
 v. Brown, 178, 298 
 
 0. Essex Bank, 273, 293, 295 
 
 0. Fisher, 18, 31, 38, 42, 65, 66, 
 78, 92, 108, 335 
 
 v. Knox, 147 
 
 v. Marvin, 28 
 
 v. Mossman, 156 
 
 v. Seligman, 282, 285 
 Fiske v. Carr, 273 
 Fitch v. Jones, 7 
 
 Fitchburg Saving's Bank v. Rice, 244 
 Fitzgerald v. Blocker, 120 
 Fitzroy v. Gwillim, 135 
 Flagg v. Munger, 90 
 Fleckner v. Bank of U. S., 183 
 Fleeman v. McKean, 397 
 Fletcher v. Case, 23 
 
 . Dickinson, 117, 120, 121, 129, 
 
 181, 175, 331 
 Flower v. Elwood, 147 
 
 Fluker v. Bui lard, 9 
 Flynn v. Mudd, 247 
 Foley v. Rose, 144, 158, 175 
 
 v. Smith, 5, 69, 95, 176 
 Follett v. Steele, 30 
 Foot v. Brown, 88, 90 
 
 v. Savin, 57 
 
 Forbes 0. Boston & Lowell R. R. Co., 
 380, 383, 394, 395, 401 
 
 v. Jackson, 212 
 
 0. Rowe, 253, 261, 263 
 Ford v, Russell, 301 
 
 0. Thornton, 61 
 Fordick 0. Barr, 147 
 Forrey 0. Baxter, 30 
 Fort Scott 0. Schulenberg, 157 
 Foster 0. Beals, 192 
 
 0. Blackstone, 428 
 
 0. Fox, 144 
 
 0. Hall, 52 
 
 0. Mackinnon, 66 
 
 0. Mackreth. 50 
 
 0. Strong, 144, 17l 
 
 0. Trustees, 215 
 Fourth Nat. Bank 0. City Bank, 61 
 
 0. Compress Co., 413, 415, 417 
 Fowle 0. Ward, 298, 299, 323, 336, 
 
 338, 340 
 Fowler 0. Brantley, 69, 76, 95 
 
 0. Gilman, 409 
 
 0. Ludwig, 29 
 Fox 0. Blossom, 156 
 Fraker 0. Reeve, 117, 118 
 France 0. Clark, 1, 8 n , 81, 119, 263, 
 
 268, 319, 328, 333, 340 
 Franchot 0. Leach, 422 
 Francia 0. Joseph, 24, 71 
 Frank 0. Littlefield, 32 
 Franklin 0. Twogood, 150 
 Franklin Bank v. Commercial Bank, 
 
 282, 304 
 
 Frankfort Bank 0. Johnson, 312 
 Fraser 0. Charleston, 263, 265, 269, 
 
 270, 272, 293, 340 
 Frazer 0. Jordan, 248 
 Frazier Gaines, 66
 
 XXV 111 
 
 TABLE OF CASES. 
 
 Frazier t. McQueen, 229 
 
 Freeholders v. Thomas, 29, 109 
 
 Freeman v. Cooke, 440 
 
 Freeman's Nat. Bank v. Savery, 57 
 
 French v. Gibbs, 132 
 
 French v. Haskins, 158 
 
 Freund v. Importer's Bank, 34, 35, 
 
 39. 428 
 
 Frink v. Green, 250 
 Frith 0. Cartlaud, 02, 403 
 Frost r. Clarkson, 327, 348, 369 
 Frou's Est., 215 
 Fuentis v. Montis, 81. 408 
 Fuller v, Hapgood, 233 
 
 v. Toinlinson, 241 
 Fullerton v. Sturges, 66 
 Fulford v. Johnson, 29 
 Fulton v. Fulton, 175 
 
 0. Matthews, 241 
 Furnis v. Durgin, 222, 224 
 Furnold v. Bauk, 213 
 Frye v, Barker, 255 
 Fryer v. Rishell, 305 
 Gabarron v. Kreft, 398, 537 
 Galbert v. Schwartz, 144, 161 
 Gage v. Lewis, 222, 224, 261 
 Gahn v. Niemcewicz, 242, 243 
 Gainsforth v. Griffith, 221 
 Gaither v. Farmer's & Mech. Bank, 
 
 135, 140 
 
 Galbraith v. Fullerton, 247. 248 
 Gallagher v. Nichols, 253 
 Gallagher's exec. v. Roberts, 29 
 Galway v. Fullerton, 195 
 Gardner v. Gager, 18, 65, 68 
 
 v. Maxwell, 42 
 
 0. Suydam, 413 
 
 0. Watson, 247, 248 
 Garland v. Jocomb, 54 
 Garlick v. James, 93, 96 
 Garner v. Gay, 173 
 Garth v. Cooper, 137 
 Garton v. Union City Nat. Bank 
 
 92 
 
 Garvin c. Wiswell, 43 
 Gary v. Cannon, 211 
 
 Gass 0. Hampton, 296, 298, 300, 316, 
 
 319, 320, 322, 324 
 Gaston v. American Bunk, 298 
 Gates v. McKee, 204 
 Gaty v. Holliday, 280 
 Gansesoort v. Williams, 54, 58 
 Gay t. Ide, 144 
 
 0. Moss, 425 
 
 G. & S. W. R. R. Co. v. Stahl, 129 
 Gelpecke v. City of Dubuque, 43, 47 
 Gebhart 0. Sorrels, 26 
 Gen. Ass. Co., in re, 61, 6 
 General Credit & Discount Co. 0. 
 Bank, 329 
 
 0. Glegg. 120 
 Genet 0. Rowland, 334 
 George v. Oxford, 48 
 
 0. Tait, 422 
 
 0. Woodward, 158, 173, 175, 179 
 Gerber v. Sharp, 158. 213 
 German Mining Go's. Case, 205 
 German Union Bldg, Assn. 0. Send- 
 
 meyer, 267. 271, 272, 293 
 Gerson v. Hamilton, 259 
 Gette 0. Buisse, 251 
 Geyer 0. Ins. Co. 289, 290 
 Gibbs 0. Cannon. 88-89, 261 
 
 0. Menard, 223, 225 
 Gibson 0. Cooke, 424 
 
 0. Chillicothe Bank, 412, 413, 421 
 
 t>. Connor, 18 
 
 0. Martin, 175, 177, 181 
 
 0. Stevens, 373, 379, 380. 381, 
 412, 413, 414 
 
 0. Tobey, 88 
 
 Gifford, ex parte, 236, 250 
 GifTord v. Holmes. 132 
 Gilbert v. Gimgar. 346, 348, 3:54, 336 
 
 0. Manchester Iron Co., 271 
 Giles r. Baremore. 156 
 
 0. Bradley, 348 
 Gill 0. Downing, 427 
 Gillin.;ham 0. Boardman, 261 
 Gilmati r. Illinois Telegraph Co., 154 
 
 0. Moody, 225 
 Gill 0. Continental Gas Co., 272. 273
 
 TABLE OF CASES. 
 
 XXIX 
 
 Gill v. Cubitt, 75 
 
 Gillet v. Peppercome, 332 
 
 Gilpia v. Howell, 103, 287, 306, 369 
 
 Ginnell, in re, 329 
 
 Girard Life Ins. Co. v. Marr, 14, 15 
 
 Glass v. Fallen, 213, 214 
 
 Glazier v. Douglass, 220, 240 
 
 Gleadon v. Tinker, 50 
 
 Glendenning, ex parte, 250 
 
 Globe Insurance Co. v. Carson, 242, 
 
 247 
 Glyn, Mills & Co. v. E. &. W. India 
 
 Docks Co., 263, 373, 375, 
 
 380, 382, 393, 394, 396 
 Gold Mining Co. v. Nat. Banking 
 
 Co., 64 
 Golding, ex parte, 1, 54, 373, 397, 
 
 405 
 
 Goldshede v. Swan, 32 
 Goldsmith v. Trustees, 125 
 Gommersal, in re, 91 
 Good v. Cheesman, 228 
 Goodfellow v. Smith, 166 
 
 v. Stillwell, 151, 152, 162 
 Goodale v. Richardson, 106, 115, 
 
 116 
 
 Goodheart v. Johnson, 223 
 Goodloe v. Clay, 159, 231 
 Goodnow 0. Hill, 207 
 Goodman v. Litaker, 203, 220 
 
 v. Simonds, 7, 8, 18, 19, 21, 23, 
 
 25, 27, 32, 65, 66, 75, 76 
 Goodrich v. Tracy, 243 
 Goodspeed 0. Bank, 312 
 Goodwin 0. American Nat. Bank, 
 
 296, 301 
 0. Conklier, 27 
 v. Robarts, 65, 432, 436 
 Gordon 0. Ellis, 50 
 Gorgier v. Mieville, 8, 22, 65, 71 
 Goring v. Edmonds, 241 
 Gormdie v. Northampton Co., 64 
 Gosling v. Griffin, 112 
 Goss v. Emerson, 4, 79, 96 
 Gossin v. Brown, 217 
 Gould v. Central Trust Co., 99, 326 
 
 Gould v. Farmer's L. & T. Co.. 6VT, 
 79, 80, 81, 83, 99, 279, 321, 
 322, 324, 326, 328 
 
 v. Hayden, 229 
 
 v. Robson, 243 
 
 v. Segel, 28 
 Graff v. Hitchman, 52 
 Grafton Bank v. Foster, 144 
 
 0. Kent, 203 
 Graham v. Johnson, 422 
 
 v. Newman, 144 
 Grandin v. Le Roy, 34 
 Granite Bank v. Richardson, 335 
 Grant, ex parte, 370 
 
 v. Burr, 156 
 
 v. Kidwcll, 23, 25, 42 
 
 0. Norway, 386, 388, 390, 399 
 
 0. Taylor, 62 
 
 Grapengether v. Fejervary, 144, 158 
 Grassley v. Rein back, 170 
 Grattan v. Wiggins, 144 
 Graves 0. Johnson, 203 
 Gray0. Agnew, 407, 411 
 
 0. Bennett, 139 
 
 0. Brown, 140, 247 
 
 0. Portland Bank, 222 
 
 0. Ward, 50, 63 
 Gray's Admr. 0. Bank of Kentucky 
 
 189 
 
 Green's Case, in re, 359 
 Green 0. Chappell, 144 
 
 0. Deakin, 54 
 
 0. Hart, 144 
 
 0. Kemp, 140 
 
 0. Kennedy, 28 
 
 0. Key, 214 
 
 0. Millbank, 212, 231 
 
 0. Tanner, 52 
 
 v. Wyman, 250 
 Greene 0. Bates, 242 
 
 0. London Omnibus Co., 313 
 
 0. Warwich, 185, 196 
 Greer 0. Bush, 255 
 Gregg 0. Fisher, 50, 51 
 Gregory 0. Murrell, 233 
 
 0. Savage, 144, 147, 152
 
 XXX 
 
 TABLE OF CASES. 
 
 Gregory t>. Wattowa, 349 
 
 r. Wendell, 348. 349, 351, 336, 562 
 Greeley v. Dow, 247 
 Greening v. Patten, 342 
 Greenbaum v. Megibben, 412, 420 
 Greeneaux v. Wheeler, 18 
 Greenslade c Dowpr. 50 
 Grcci.luaf v. Luring. 250 
 Greenstock . Rozenback, 428 
 Greenwell v. Hayden, 15, 23, 43, 46, 
 
 65, 78, 109 
 
 Greenwood v. Tyler, 98 
 Grider v. Payne, 213 
 Grier v. Hood, 50 
 Griffith v. Dwight, 433 
 Griffin v. Kelleher, 238 
 Griffith v. Robertson, 261 
 Griffiths v. Owens, 22 
 Griggsby v. Hair, 160 
 Grimes v. Kiraball, 433 
 Gring's App., 214, 216 
 Grissell v. Bristowe, 263, 268, 363, 371 
 Grissom . Fite. 32 
 Grizewood v. Elaine, 348, 350 
 Griswold . Davis, 16 
 
 v. Haven, 312, 390 
 
 . Jackson, 239 
 
 v. Seligman, 282. 284 
 Grocer's Bank v. Penfield, 81, 34, 39, 
 
 43 
 
 Grosvenor v. Atlantic Fire Ins. Co. 
 426 
 
 . Phillips, 379 
 
 Grovanovich v. Citizen's Bank, 18 
 Grove v. Roberts, 114 
 Grover v. Hoppock, 220, 243 
 Gruman v. Smith, 306, 322, 331, 334, 
 
 837, 365 
 
 Guaton v. Matthews, 173 
 Guerriero v. Peile, 408 
 Gunn v. Bolckow, 433 
 Gumery . Olmstead, 204 
 Guilbert v. Guignon, 402 
 Guild v. Butler, 212, 228, 239 
 Gunnel v. McCue, 224 
 Gurney, in re, 421 
 
 Gurney v. Behrend, 263, 373, 375, 
 
 379, 397, 398. 
 Gwin v. Moore, 241 
 Gyger v. New Orleans. 47 
 Hackenstein p. Love, 140 
 Hackett v. Ottawa. 8, 43 
 Hague v. Dandeson, 61 
 Haille v. Smith, 379 
 Haines v. Forsham, 302 
 Haldeman v. Bank of Middleton, 51, 
 
 56 
 Hale v. Rider, 102, 104, 108, 129, 153 
 
 v. Walker, 282, 283 
 Hall, ex parte, 424 
 
 v. Denkla, 156 
 
 v. Featherstone, 7 
 
 t>. Hoxsey, 209, 213. 233 
 
 . Mutual Ins. Co., 180 
 
 v. Robinson, 230, 231, 233 
 Halliday v. Hamilton, 387 
 
 v. Hart, 247, 248 
 
 v. Holgate, 339, 342, 344, 408 
 Halsey v. Warden, 384. 405 
 Hambleton v. Cent. Ohio Ry. Co., 
 
 308 
 Hamilton v. Lubukee, 144 
 
 v. Summers, 51 
 
 v. State Bank, 334 
 Hammatt v. Wyman, 215 
 Hammer v. Kaufman, 206 
 Hammond v. Gilraore, 261 
 
 v. Wyman, 233 
 Hampton v. Levy, 241 
 Hancock's App., 158, 159 
 Hancock v. Franklin Ins. Co,, 90, 91, 
 
 97, 100, 120, 128, 181 
 Hanks v. Drake, 334 
 Hanna v. Holton, 90, 114 
 Hannah v. Guy, 229 
 
 t>. Wilson, 156 
 Harbeck v. Vanderbilt, 193, 214, 216, 
 
 233 
 
 Hardin t>. Eames, 212 
 Harding v. Tifft, 219 
 Hardy v. Jaudon, 327, 369 
 
 e. Norton, 32
 
 TABLE OF CASES. 
 
 XXXI 
 
 Hargreaves D. Hutckinson, 137 
 Harlati 0. Sweney, 212 
 Harper 0. Fairley, 100 
 
 v. Goodsell, 60 
 
 Harrington 0. Dow, 31, 41, 43 
 Harris 0. Birch, 404 
 
 v. Bradley, 413 
 
 v. Brooks, 203 
 
 v. Clapp, 221 
 
 v. Harlan, 158 
 
 0. Newell, 220 
 
 v. Pratt, 405 
 
 v. Rickett, 16 
 
 v. Smith, 384 
 
 0. Tunbridge, S55, 363, 368 
 Harrison v. Hamell, 135, 140 
 
 0. Hannah, 141 
 
 v. Sterry, 50 
 Hart v. Folger, 224 
 
 v. Frontino etc. Co., 310 
 
 v. Hudson, 243 
 
 0. Ten Eyck, 132 
 Harter v. Coleman, 422 
 Hartga v. Bank of England, 309 
 Hartley v, Russell, 127, 130 
 Hartman v. Duval, 23 
 Hartop v. Hoare, 407 
 Hartshorn v. Day, 422 
 Harvey 0. Towers, 53 
 Hasbrouck v. Vandervoort, 132, 269, 
 
 280, 340 
 
 Haselfoot's est., in re, 441 
 Haskell v. Board man, 258 
 
 v. Brown, 150, 170 
 
 v. Lamber, 3 
 Haskins 0. Kelly, 448 
 Hassell v. Long, 204 
 Hatch 0. Attleborough, 206 
 
 0. Douglass, 306, 348, 332, 370 
 
 0. Langdon, 26 
 
 Hathaway v. Fall River Nat. Bank, 
 97, 323, 340, 342 
 
 0. Haynes, 379, 382, 402 
 Hauck 0. Craighead, 251 
 Hausand 0. Robinson, 106 
 Hauser 0. King, 217 
 
 Haven 0. Hathaway, 100 
 
 0. Pippin, 254 
 
 0. Railroad Co., 8, 147 
 Hawke 0. Snydacker, 144 
 Hawks 0. Hinchliff, 79, 87, 96, 108 
 Hawkins 0. Bourne, 50 
 
 0. Hawkins, 394 
 
 0. Matly, 268 
 Hawtayne 0. Bourne, 52 
 Hayes 0. Frey, 156 
 
 0. Lewis, 144 
 
 0. Riddle, 11, 79 
 
 v. Ward, 85, 94, 212, 215, 220, 
 239 
 
 0. Wells, 242 
 Hayden 0. Snow, 143, 144, 149, 161 
 
 0. Weldon, 253 
 Hayward 0. French, 51, 56 
 
 0. Nat. Bank, 240, 343 
 Hazard 0. Fiske, 98, 415 
 Headlee 0. Jones, 247 
 Hearne 0. Keath, 228 
 Heath v. Erie Ry. Co., 295 
 
 0. Griswold, 283, 285, 288, 345 
 
 0. Mahone, 305 
 
 0. Sansom, 56 
 
 0. Silverthorne etc. Co., 28, 143, 
 
 150, 161, 264, 283 
 Heermans 0. Ellsworth, 192 
 Heffron 0. Hanaford, 57 
 Heffer 0. Covington, 44 
 Heidenheimer 0. Meyer, 260 
 Heilbut 0. Nevill, 54, 56 
 Hellanesi'. Abercrombie, 221,223,228 
 Heller 0. Meis, 171 
 Helms 0. Wayne Agricultural So- 
 ciety, 205 
 
 Hemery 0. Marksberry, 248 
 Hendershot 0. Pring, 156 
 Henderson 0. Case, 48, 69, 95 
 
 0. Comptoir, 375, 381 
 
 0. Herrod, 144 
 
 0. Palmer, 359 
 
 0. Pilgrim, 147 
 
 Hendrie 0. Berkowitz, 55, 57 
 Henry v. Davis, 175, 183
 
 XXXll 
 
 TABLE OF CASES. 
 
 Henry v. Eppinger, 153 
 
 t?. Maroni, 408 
 
 v. Philadelphia Warehouse Co., 
 
 379 , 398 
 
 Heppin t. Cooper, 204 
 Heritage v. Hedges, 431 
 
 t>. Paine. 371 
 Herman v. Maxwell. 280 
 Hern v. Nichols, 163, 390 
 Herr . Zarker, 413 
 Herrick v Attwood, 436 , 
 
 v. Borst, 220 
 
 Hermandez v. Stillwell. 253 
 Herrington v. McCullum, 158 
 Hestonville R. R. Co. v. Shields, 332 
 Hewer v. Prunyn, 156 
 Heyman v. Dubois, 98 
 Heywood v. Watson, 17, 22, 32 
 Hiatt v. Griswold, 323 
 Hibbert v. Carter, 374 
 Hibblewhite v. McMorine, 348 
 Hickman v. Hunkle, 54 
 
 0. Renieking, 54 
 Hickox v. Farmer's Bank, 220 
 Higgs v. Assam Tea Co., 43, 49 
 Higgins, ex parte, 202 
 High v. Cox, 244 
 Hill v. Beebe, 109 
 
 c. Bostwick, 243 
 
 v. Edwards, 144 
 
 v. Epley, 433 
 
 0. Martin, 258 
 
 0. Morse, 250 
 
 0. Mausen, 215 
 
 v. Newichawanick, 280 
 
 0. Pine River Bank, 272 
 
 0. Simpson, 302 
 Hillary v. Waller. 156 
 Hillegas v. Stephenson, 256 
 Hilton v. Waring, 90, 113, 128 
 Hilyard v. South Sea Co., 308 
 Hincklcy v. Kreitz, 215, 230, 233 
 Hinds v. Ingham, 248 
 Hinely v. Margaritz, 207 
 Hines . Keller, 233 
 Hinney 0. Phillips, 305 
 
 Hippins, ex parte, 203 
 Hobart v. Curtis, 381 
 Hobart . Penny, 57 
 Hobson v. Roles, 144 
 Hodges v. Harris, 50 
 
 v. Planter's Bank, 302 
 Hodgkinson v. Kelly, 371 
 Hodgson v. Bell, 222 
 Hodgson v. Shaw, 212, 213, 215, 219 
 Hoffley v. Maire, 144 
 Hoffman v. Noble, 414, 417 
 Hoff's App., 210 
 Hogarth v. Latham, 56 
 Hogg . Shene, 56 
 Holbrook v. Bassett, 16 
 
 v. New Jersy Zinc Works, 271, 
 273, 275, 314, 320, 322 
 
 v. Wright, 379 
 Holdsworth, ex parte, 50 
 Holl v. Hadley, 241 
 Holland <o. Turner, 258 
 Hollis t>. Ins. Co., 193, 448 
 Holmes, ex parte, 304 
 
 v. Bailey, 262, 373, 380 
 
 v. Day, 215, 237 
 
 0. German Security Bank, 373, 
 380, 382 
 
 0. Rhodes, 222 
 
 0. Smith, 23, 28 
 
 v. Winchester, 278 
 Home Savings Bank v. Traube, 204, 
 
 206 
 
 Holt v. Body, 203, 240 
 Holtz v. Belden, 184, 189 
 Holyoke Hank v. Burham, 282 
 Holzworth v. Koch, 27 
 Homer v. Savings Bank, 254 
 Hopkins v. Beebe. 423 
 Hood v. Leland, 230 
 Hooker v. Gooding, 261 
 
 0. Knab, 359 
 Hoover 0. Epkr, 214 
 Hoppin v. BulTum, 283 
 
 0. Quinn, 35 
 Hore v. Beecher, 142 
 Horton v. Morgan, 369
 
 TABLE OF CASES. 
 
 XXX111 
 
 Horn v. Baker, 413, 420 
 
 v. Coke, 138 
 
 0. Cole, 436 
 
 Hornblower 0. Proud, 27 
 Home v. Bodwell, 239 
 Homing's App., 210 
 Horton v. Bond, 212 
 
 v. Morgan, 306 
 
 0. Westminster Comm., 433 
 Hortsinan 0. Gerker, 186 
 Hosea v. Rowley, 247 
 Hosmer v. Campbell, 144, 147, 178 
 Hoss v. Williams, 278, 290 
 Hosteller v. Alexander, 144, 172 
 Hotchkiss v. Nat. Banks, 8, 16, 65, 
 
 75, 78 
 Hough v. Bailey, 156 
 
 v. Etna Life Ins. Co., 214, 220, 
 
 243 
 Houser . Houser, 87, 90 , 
 
 v. Lane, 128 
 Howard v. Davis, 328, 364 
 
 v. Entreken, 144 
 
 v. Gardner, 114 
 
 0. Ross, 147 
 
 v. Tucker, 392 
 
 Nat. Bank v. Loomis, 64, 144, 
 
 180 
 Howell v. Hall, 184, 189 
 
 v. James, 14 
 
 0. Jones, 247 
 Rowland v. Coffin, 30 
 Howry v. Eff enger, 161 
 Hoyt v. Martense, 183 
 
 0. Thompson, 44 
 
 Hubbard v. Gurney, 203, 242, 243, 
 247 
 
 v. Mo. Valley R. R. Co., 157 
 Hubbell v. Blakeslee, 195 
 
 v. Carpenter, 250, 339 
 
 v. Drexel, 264, 327, 328, 369 
 Hubbersty v. Ward, 388 
 Huck 0. Hager, 253 
 Hudelson v. Armstrong, 257 
 Hudson etc. Transfer Co. v. Nat. 
 Bank, 254 
 C 
 
 Huff v. Wagner, 92 
 
 Huffard . Gottberg, 158 
 
 Hughes v. Edwards, 156 
 
 Hallett v. Indian Mines Co., 228, 342 
 
 Hull v. Jackson, 423 
 
 v. Hoxsey, 240 
 
 v. Sherwood, 233 
 Humphrey v. Binson, 144 
 
 0. Morton, 158, 159 
 Hunnewell v. Lane, 278 
 Hunsaker v. Sturgis, 338 
 Hunt 0. Adams, 203 
 
 v. Brigham, 255 
 
 0. Chapin, 50 
 
 &. Mississippi R. R. Co., 386, 
 388, 392, 401 
 
 0, Mortimer, 16 
 
 0. Nevers, 4, 100, 120, 128 
 
 0. Purdy, 220 
 
 0. Rousmainer, 272 
 Hunter 0. Keller, 213 
 
 0. Moul, 29, 88, 105, 109, 113,261 
 
 0. U. S., 213 
 
 Hunterdon 0. Nassau Bank, 271 
 Huntington etc. Co. 0. English, 337 
 
 0. Smith, 144 
 Hurd 0. Little, 243 
 
 0. Spencer, 239 
 Hurt 0. Wilson, 144, 161 
 Hurst 0. Coley, 11, 12, 181, 182 
 Hutchins 0. Olcutt, 30, 109 
 
 0. State Bank, 147, 301 
 Hutchinson v. Crane, 144 
 
 0. Gill, 186, 189 
 
 0. Smith, 53 
 
 0. Swartsweller, 29, 109 
 Hutton 0. Crittwell, 16 
 Hyatt 0. Argenti, 334 
 Hyde 0. Woods, 446 
 Idaho, the, 387 
 Imperial Land Co., in re, 49 
 Imperial Bank 0. Dock Co., 433 
 Ingalls 0. Morgan, 239 
 Ingraham 0. Disborough, 185, 422 
 Inning v. Fielder, 220 
 Insurance Co., v. Bruce, 8
 
 XXXIV 
 
 TABLE OF CASES. 
 
 Insurance Co. 0. Eldridge, 151 
 
 0. Goodfellow, 273 
 
 0. Insurance Co., 312 
 
 v. Kiger, 407, 409, 412, 413 
 
 0. Smith, 192 
 
 0. Wright, 261 
 
 International Ins. Co., in re, 98 
 International Bank v. Barber, 27 
 
 0. Bowen, 170 
 
 0. German Bank, 425. 436, 447 
 
 0. Jenkins, 132, 143, 175 
 Iowa College v. Hill, 23 
 Ipswich Manfg. Co. v. Story. 154, 156 
 Irick 0. Black, 211, 212, 223 
 Irish v. Sharp, 422 
 Irving, in re, 423 
 Irwin v. Withers, 47 
 Isaac v. Clark, 280 
 Isett 0. Lucas, 158, 433 
 Ives 0. Farmer's Bank, 32 
 Jackson 0. Blodgett, 144 
 
 0. Bronson, 144 
 
 0. First Nat. Bank, 38, 66, 78 
 
 0. Foote, 260, 346, 348, 356-358 
 
 0. Railroad Co., 47 
 
 0. Sackett, 153 
 
 0. Willard, 107, 144, 195 
 Jacobs, ex parte, 106 
 Jacobson v. Dodd, 196 
 Jaffray v. Cornish, 109 
 James' App , 97, 441 
 James v. Corey, 192 
 
 0. Johnson, 147 
 
 0. Morey, 147, 185 
 
 0. Pike, 276 
 
 0. Smith, 161 
 Jaques 0. Marquand, 52, 53 
 
 v. Fackney, 212, 213 
 Jarvis 0. Rogers, 80, 81, 82, 84, 97, 
 265, 319 
 
 0. Woodruff, 156 
 Jasper County 0. Tavis, 422 
 Jaudon 0. Nat. City Bank, 296, 297, 
 
 298, 301 
 
 Jenkins 0. Schwab, 23 
 Jenkyns 0. Brown, 379, 400 
 
 Jenneiy v. Olmsted, 206 
 Jcnness v. Bean, 4. 23, 87, 164 
 Jennison v. Hafford, 27 
 
 0. Parker, 88, 90 
 
 0. Stafford, 247 
 Jermyn 0. Mofflt, 424 
 Jerome v. McCarter, 8, 16. 91, 120, 
 
 124, 125, 278 
 Jessell v. Bath, 386. 388 
 Jessopp 0. Lutwyche, 357 
 Jester v. Sterling, 247 
 Jesup 0. Bank, 92 
 
 0. City of Racine, 124 
 Jewan v. Whitworth, 384, 408 
 Jewett v. Warren, 327 
 John 0. Jones, 232 
 
 0. Riordon, 207-210 
 Johnson, v. Barney, 5 
 
 0. Belden, 215 
 
 0. Blasdell, 66 
 
 0. Brown, 145, 159 
 
 0. Bush, 191 
 
 0. Candage, 159 
 
 0. Carpenter, 144, 145, 147, 172, 
 19>, 194 
 
 0. Crichton, 54 
 
 0. Cornett, 144 
 
 0. Harvey, 252 
 
 v. Hart, 144, 163 
 
 0. Henry, 140 
 
 0. Lewis, 154 
 
 0. Stark County, 44, 47, 48 
 
 0. Sherman, 144 
 
 0. Stear, 82, 344, 409 
 
 0. Underbill 271, 282, 285 
 
 0. Watson, 154 
 
 Johnson's Adrar. 0. Vaughan, 233 
 Johnston 0. Dexter, 276 
 
 0. Houston, 154 
 
 0. Kimball, 204, 206 
 
 0. Laflin, 263, 265, 269, 271, 274, 
 304 
 
 Harvester Co. 0. McLean, 60 
 
 0. Renton, 308 
 
 Joliet Iron Co. 0. Scioto etc. Co., 87, 
 117, 120
 
 TABLE OP CASES. 
 
 XXXV 
 
 Jones v. Benedict, 97 
 
 v. Booth, 54 
 
 v. Broadhurst, 214 
 
 v. Davids, 215 
 
 t>. Esler, 186 
 
 0. Fincher, 212, 213, 215 
 
 . Guaranty etc. Co. 14, 144 
 
 0. Hawkins, 90, 93 
 
 0. Heffert, 42 
 
 v. Hicks, 88, 91, 114 
 
 0. Johnson, 192 
 
 D. Merchant's Bank, 115, 133 
 
 v. Nat. Bldg. Assn., 205 
 
 v. Portsmouth Ry. Co., 87, 286 
 
 v. Quinnipiack Bank, 79, 254 
 
 D. Shelby ville Ins. Co., 32 
 
 . Smith, 151, 193 
 
 0. Trimble, 228 
 Jordan, in re, 53 
 Joseph Grant, the, 386 
 Joseph v. Nat. Bank, 32, 66 
 Joseph Township v. Rogers, 42 
 Joslyn v. Dow, 260 
 Joy v. Adams, 156 
 Judge v. Vogel, 161, 165 
 Judson v. Corcoran, 422, 429 
 Kamena . Huelbig, 184, 186, 187, 
 
 192, 195, 200 
 
 Kammatt v. Wyman, 237 
 Kansas City etc. Co.. in re, 154, 161 
 Kansas City Savings Assn. v. Mastin, 
 
 144, 154 
 
 Kassing v. International Bank, 219 
 Kearsley v. Cole, 250 
 Kellock's Case, 111 
 Kelly v. Herrick, 217, 218, 236, 238 
 Kelley . Mobile etc. Assn., 135 
 Kellogg's Case, 154 
 Kellogg 0. Ames, 195 
 
 v. Curtis, 57 
 
 v. Smith, 197 
 
 . Stockwell, 271, 273, 280 
 Kelly v. Whitney, 144, 153, 161 
 Kelner n. Krolich, 161 
 Kelsey v. Bank of Crawford Co., 331 
 
 v. Hibbs, 32 
 
 Kemp D. Falk, 1, 405, 4(>6 
 
 v. Westbrooke, 132 
 Kendall, ex parte, 98, 397 
 Kennedy v. Strong, 407 
 Kennicott v. Supervisors, 44, 161, 
 
 162 
 Kendall v. Hamilton, 59 
 
 v. Wood, 54 
 Kennard . Knott, 241 
 Kent v. Miltenberger, 347 
 Kenworthy v. Sawyer, 207 
 Keohane v. Smith, 143, 144 
 Keokuk, the, 386 
 Ketcham v. Durfee, 53 
 Ketchell v. Burns, 253 
 Keyes v. Wood, 144 
 Kidd v. McCormick, 447 
 Kiff v. Old Colony Ry. Co., 394 
 Killian v. Hoffman, 105, 126, 332 
 Kimball, the, 29, 110 
 Kimber v. Barber, 332 
 Kimbro v. Bullitt, 50 
 
 v. Lytle, 23, 34 
 Kimmel v. Lowe, 215, 228 
 Kinderley v. Jervis, 428 
 Kindt's App. 241 
 King v. Baldwin, 220 
 
 v. Bennett, 213 
 
 v. Doolittle, 23, 27, 28 
 
 v. Faber, 54 
 
 v. Green, 135 
 
 v. Haynes, 220 
 
 v. Shepherd, 374, 386 
 Kingman v. Perkins, 425, 428 
 Kingsford v. Merry, 437 
 Kingsland v. Pryor, 23, 26, 27, 33 
 Kingston, ex parte, 62 
 Kinlock v. Craig, 405 
 Kirkpatrick . Bonsell, 349, 350, 353, 
 359 
 
 0. Hawk, 239, 240 
 
 v. Muirhead, 23, 28 
 Kiser v. Ruddick, 114 
 Kittera's Est., in re, 115,129 
 Kit Hill Tunnel Co., in re, 447 
 Klauber v. Biggerstaff, 424
 
 XiXVl 
 
 TABLE OF CASES. 
 
 Kleeman v. Frisbie, 170 
 Knatchbull v. Hallett, 63 
 Knauf's App , 215 
 Knight v. Cambers, 357 
 
 v. Hughes, 230 
 Knighton v. Curry, 212 
 Knights v. Palmer, 87, 191 
 
 v. Wiffln, 434 
 Knox v. Clifford, 23, 28 
 Knox County v. Aspinwall, 44, 47 
 Knox County Bank v. Lloyd, 33 
 Koester v. Burke, 158 
 Kortright D. Commercial Bank, 267, 
 
 270. 320, 321, 372 
 Krame's App., 217 
 Kramer v. Sandford, 258 
 Kreft v. Thompson, 381, 398 
 Krupp v. Kreuggel, 153 
 Kuhn v. McAllister. 344 
 Kuhns v. McGeach, 144 
 Kurtz v. Sponable, 144 
 Kyle v. Thompson, 158 
 Lacey . Hill, 329 
 Ladd v. Trustees, 244 
 Ladue v. Detroit R. R. Co., 165 
 La Purge v. Herter, 228 
 Lady Franklin, the, 386 
 Laing v. Burley, 271 
 Laler v. Jordan, 50 
 Lalfande v. Ingram, 276 
 Laloiret). Wiltz, 79 
 Lamberton v. Windom, 85, 86, 94, 
 
 114, 117 
 
 Lamsatt . Lippincott, 407 
 Lancaster Nat. Bank v. Taylor, 150 
 Lane's App., 293 
 Lane v. Bailey, 62, 97 
 
 v. Davis, 161, 164 
 
 v. Stacey, 212, 256 
 
 t>. Williams, 50, 56 
 Lang t>. Brevard, 240, 241 
 
 v. Waring, 57 
 Langan v. Hewett, 55 
 Langdon v. Duel, 104, 107 
 
 v. Keith, 144, 149, V* 
 Lange 0. Perley, 228 
 
 Langston v. S. C. Ry. Co., 46 
 Laugton v. Waite, 80, 81, 319, 820, 
 
 328, 368 
 
 Lapping v. Duffy, 424 
 Lash v. McCorinick, 156 
 Latham v. Chartered Bank of India, 
 
 62, 97, 426 
 Lathrop's App., 213 
 Lathrop v. Attwood, 222, 224 
 
 v. Kneeland, 286, 287 
 
 v. Morris, 34 
 Laudry v. Vicker, 210 
 Laverty v. Burr, 57 
 Lawrence v. Clark, 22, 23, 27 
 
 . Maxwell, 306, 327, 335, 338, 
 369 
 
 c. McCalmont, 86, 114, 260 
 
 v. Minturn, 382 
 Lawson v. Wright, 236 
 Lazear v. Nat. Bank, 259, 260 
 Lea v. Hinton, 217 
 Leabo v. Goode, 228 
 League v. Waring, 29 
 Leas v. James, 29 
 Leask v. Scott, 1, 384 
 Leather v. Simpson, 399 
 Leavitt v. Fisher, 267, 320, 321 
 
 v. Palmer, 191 
 Leazure v. Hillegas, 64 
 Lebanon Bank v. Hallenbeck, 180 
 Le Breton v. Pierce, 2, 18, 27 
 Lecroy v. Eastman, 369 
 Lee v. Baldwin, 86 
 
 v. Brown, 380 
 
 v. First Nat. Bank, 88 
 
 v. Griffin, 212 
 
 v. Hart, 16 
 
 v. Kimball, 373, 405 
 
 v. Smead, 23 
 Leese v. Martin, 61 
 Lefflngwell v. Fryer, 239 
 Leffler v. Rice, 50 
 Leggett v. Bank, 290 
 Lehman . Marshall, 413 
 
 v. Strassberger. 346, 350, 856,'358 
 
 v. Tallahasse Mang. Co., 17
 
 TABLE OF CASES. 
 
 XXXV11 
 
 Leitch v. Wells, 267, 270, 296, 301, 
 
 324 
 
 Lenheim v. Wilmarding, 23 
 Lenox v, Pratt, 255, 253 
 Leonard v. Cox, 134 
 Leonino v. Leonino, 61 
 Le Roy . Johnson, 50, 52 
 Lesassier v. Southwest. R. Co., 384 
 Leslie, in re, 68, 427 
 
 v. French. 427 
 Lestapies v. Ingraham, 303 
 Lethbridge v. Mytton, 222, 224, 225 
 Leury v. Cheshire, 230 
 Lever v. Bessenger, 144 
 Leverson v Lane, 54 
 Levi v. Earl, 207 
 Levy v. Loeb, 103, 327, 369 
 Lewis v. DeForest, 79, 254 
 
 v. Hinchraan, 203 
 
 v. Kirk, 143, 144, 147, 152, 181, 
 167, 175 
 
 v. Kramer, 258 
 
 v. Lawrence, 428 
 
 v. Mott, 79, 102, 125, 129 
 
 v. Palmer, 212, 213, 239 
 
 . Reilly, 50, 56 
 
 v. Varnum, 93 
 Lexington . Butler, 47 
 Liberty Bank v. Campbell, 54 
 Lickbarrow v. Mason, 382, 38(5, 395 
 
 397, 405, 413, 546 
 Lichty v. McMartin, 154 
 Lidderdale v. Triggs, 212 
 Liebbrandt v. Myron Lodge, 248 
 Lightner's App., 271 
 Lilly v. Quick, 193 
 Lincoln v. Bassett, 242 
 
 v. Stevens, 41 
 Lindley v. Chase, 95 
 Lindsay v. Jackson, 226 
 Liudsley v Reid, 221 
 Linn v. Neldon, 243 
 Linville v. Savage, 144 
 Lippold v. Held, 144 
 Liquidators v. Liquidators, 202, 2i)3, 
 242, 249, 230 
 
 Lithcap v. Wilt, 214 
 
 Litchfield Bank, in re, 108, 117, 120, 
 
 131 
 
 Little v. Barker, 140, 333 
 Littlefield v. Story, 430 
 Liverpool Co. . Atkinson, 204 
 Livingston v. Dean, 185 
 
 ID. Roosevelt, 54, 56 
 Lloyd v. Bair, 256 
 
 o. Dimmack, 228 
 
 v. Freshfleld, 50 
 
 t>. Howard, 5, 65 
 Lobdell v. Baker, 208 
 
 o. Merchant's Bank, 90 
 Lock v. U. S., 249 
 Locke v. Homer, 222, 224 
 Lockhart v. Hardy, 155 
 Lockwood v. Chaustilet, 132 
 
 v. Ewer, 132 
 
 v. The Banks, 290' 
 
 v. Mechanic's Nat. Bank, 274 
 Lochrane v. Solomon, 2 
 Loeb v. Peters, 263, 373, 384, 405 
 Logan v. Bond, 53 
 
 v. Musick, 348 
 
 v. Smith, 1, 4, 16, 23, 25, 31. 33 
 143, 144, 151, 161, 166 
 
 . Talcott, 230 
 Lombardo . Case, 370 
 London Ass. Co. v. Bold, 204 
 London & S. W. Bank v. Went- 
 
 worth, 66, 68 
 
 Long Island R. R. Co., in re, 283 
 Longley v. Griggs, 256 
 Longworth v. Flagg, 153, 154 
 Loomis v. Fay, 240, 246 
 
 v. Hudson, 142 
 
 . Ruck, 207 
 
 v. Stave, 90, 121 
 Loon, the, 386, 388 
 Loosemore v. Radford, 222, 224, 225 
 Lord v. Bigelow, 109, 110 
 
 v. Morris, 144 
 
 v. Ocean Bank, 23, 31, 34, 36, 42 
 Lord Southampton's Est., in re, 200 
 Losey v. Simpson, 186
 
 XXXV111 
 
 TABLE OF CASES. 
 
 Loughbridger v. Bowland, 228 
 Louisana State Bank v. Gaienne, 16, 
 
 42,90 
 
 Louisville Manf. Co. t>. Welch, 259 
 Loveland v. Shepherd, 261 
 Loving t>. Dixon, 245 
 Lover t>. Bessenger, 144 
 Lowe v. Newbold, 215 
 Loewenthal v. McCormick, 175, 181 
 Lowery v. McKinney, 239 
 Lo wry . Commercial Bank, 275, 298, 
 302, 309, 310 
 
 c. Murrell, 29 
 
 Lucas t>. Harris, 106, 107, 145, 156, 157 
 Ludington v. Bell, 228 
 Ludlow v. Simond, 204 
 Lynch v. Hancock, 228 
 
 . Keith, 144 
 
 v. Swayne, 157 
 
 Lyon v. Culbertson, 349, 351, 359, 
 363, 367 
 
 0. Ewings, 16 
 
 t>. Huntington Bank, 32, 36, 90, 
 
 114 
 
 Lytle v. Pope, 236 
 Mabbitt v. White, 50 
 Machinists Nat. Bank v. Field, 310 
 Mackintosh . Wyatt, 246 
 Macky v. Dillinger, 410 
 Macnee t>. Gorst, 384, 408 
 Macon Ry. Co. v. Georgia Ry. Co., 
 
 180, 260 
 Magee v. Badger, 7 
 
 v. Leggett, 212, 214, 215 
 Magin v. Dinsmore, 894 
 Magruder v. Admire, 236, 238 
 
 v. Colston, 282, 328 
 Mahone v. Central Bank, 32 
 Maier v. Canavan, 220 
 Maitland v. Bank, 7, 18, 31, 37, 38, 40, 
 
 66, 70 
 
 Major v. Holmes, 207 
 Malcolm t>. Scott, 423 
 Malrury v. Ring, 161, 168 
 Mandeville v. Welch, 424 
 Mandigo v. Mandigo, 231 
 
 Mangles v. Dixon. 428 
 Manhattan Co. v. Reynolds, 4, 81 
 Manhattan Bank v. Thompson, 207 
 Mann, in re. 423 
 Mann v. Eckford, 260 
 
 v. Sluffner, 407 
 Manning . Haight, 261 
 
 v. Hays, 51 
 
 v. McClure, 18, 19, 28 
 
 v. Shotwell, 209 
 Manten v. Sheen, 349 
 Manuf . Bank v. Dickerson, 206 
 
 v. Farmer's Bank, 390 
 
 v. Winship, 56 
 Manuf. Co v Bradley, 46 
 Manns v. Brockville Bank, 293, 294 
 Maples v. Wightman, 207 
 Marbled Iron Works v. Smith, 20 
 March v. R. R. Co , 280 
 
 v. Myers, 157 
 Marchand v. Frellson, 210 
 Marengo, the, 386 
 Marie Joseph, the, 379, 437 
 Marine Bank v. Biays, 159, 304 
 
 v. Fiske, 373, 400 
 
 v. International Bank, 159 
 
 v. Smith, 258 
 
 v. Wright, 379, 380, 382, 403 
 Mariner's Bank v. Abbott, 203 
 Marion Co. Comm v. Clark, 43 
 Markham v. Jaudon. 264, 280, 306, 
 
 331, 334, 337 
 Marks v. Bank, 248 
 
 v. McGhee, 135 
 Marnham, ex parte, 349 
 Marscliuetz v. Wright, 105 
 Marsh v. Dunkel, 241 
 
 o. Thompson Nat. Bank, 55 
 Marshall v. Mitchell, 258 
 Marston v. Allen, 65 
 
 v. Marston, 153, 369 
 Martin v. Cowles, 407 
 
 e. Creditors, 413 
 
 t>. Howard, 212 
 
 t>. McReynolds, 144 
 
 . Potter, 428
 
 TABLE OF CASES. 
 
 XXXIX 
 
 Martin v. Moulin, 144 
 
 9. Zellerback, 433 
 
 Martindalea.Burch, 144,151, 165,168 
 Marvin v. Treat, 228 
 Marye v. Strause, 332, 363, 370 
 Maryland Ins. Co 9. Dalrymple, 306, 
 
 331, 334 
 
 Mason v. Bogg, 154 
 Mass. Iron Co. v. Hooper, 289 
 Mass. Nat. Bank v. Law, 55 
 Mathews v. Aikin, 212 
 
 v. Finley, 32 
 
 Matteson v. Matteson, 106, 107, 199 
 Matthews v. Albert, 284, 286, 303 
 
 v. Nat. Bank, 263, 265, 267, 283, 
 310, 318 
 
 v. Rutherford, 31, 34, 38 
 
 9. "Walwyn, 148 
 Mattingly v. Sutton, 226 
 Matton v. Sheen, 349 
 Maxon v. Scott, 207 
 Maxted . Paine, 363, 371 
 May v. Chapman, 75 
 
 9. Hoagland, 349, 350, 417 
 
 9. Sharp, 90 
 Mays 9. Fritton, 16 
 Maybee v. Tregent, 399, 401 
 Mayer . Campbell, 144 
 
 9. Isaac, 259 
 
 Mayfield v. Douglas, 364 
 Mayflower, the, 386 
 Mayo v. Hutchinson, 207 
 
 9. Moore, 42, 112 
 Maygood 9. Railroad Bank, 298 
 Mayhew 9. Crickett, 230, 237, 239 
 Maynard v. Sixth Nat. Bank, 23 
 Meadow 9. Bird, 18 
 Mechanics' Assn. v. Ferguson, 16 
 Mechanics Bank 9. Bank, 312 
 
 9, Barnett, 42 
 
 9. Earp, 290 
 
 9. Farmer's Bank, 400, 403 
 
 9. Field, 308 
 
 9. Foster, 56 
 
 9. Griswold, 258 
 
 9. N. Y. & N. H. Co., 265 
 
 Mechanics Assn. 9. Con over, 264 
 
 Medberry 9. Soper, 28 
 
 Meed 9. Nelson, 254 
 
 Meghan 9. Mills, 192 
 
 Melchert v. American Union Tel. 
 
 Co., 348, 349, 351 
 Melohoir 9. McCarty, 359 
 Melendy 9. Keen, 148, 150, 170 
 Melledge . Boston Iron Co., 30, 144 
 Mellen 9. Goldsmith, 228 
 Menx 9. Bell, 428 
 Meppsfl. Sharpe. 1, 144 
 Merarlo 9. Hackett, 43 
 Merchant's Bank 9. Baker, 212, 239 
 
 9. Colt, 419 
 
 9. Cook, 283 
 
 9. Comstock, 35 
 
 9. Corliss, 39 
 
 9. Hall, 14. 17, 305 
 
 9. Hibbard, 413, 420 
 
 9. Livingston, 57, 320, 325 
 
 9. Maud, 98, 129 
 
 9. Phoenix Ins. Co., 436 
 
 9. Richards, 263, 265, 269, 280 
 
 9. State Bank, 65, 79, 312, 327 
 
 9. Trenholrn, 410, 419 
 
 9. Union R. Co., 382, 394 
 
 9. Wixen, 247 
 Merle 9. Wells, 259 
 Merrifleld 9. Baker, 426, 448 
 Merrill 9. Bank, 402 
 
 9. Town of Monticello, 44 
 Merritt 9. Bartholick, 144 
 Mersman v. Werger, 40 
 Merwin 9. Hamilton, 339 
 Mester 9. Hauser, 154 
 Meyer, ex parte, 56 
 
 9. Peck, 392, 393 
 
 . Wells, 109, 243 
 
 Meyers 9. United Guaranty Co., 423 
 Meyerstein 9. Barber, 373, 375, 380, 
 
 382, 395 
 
 Michael . Ware, 397 
 Michener v. Cavender, 186 
 Michigan Bank 9. Eldred, 1, 3, 16, 
 32, 50, 56, 175
 
 xl 
 
 TABLE OF CASES. 
 
 Michigan Cent. R R. Co. v. Phillips, 
 374, 879. 381, 382, 383, 404 
 Michigan Ins. Co. v. Leavenworth, 32 
 Michigan Bank v. Leavenworth, 27 
 Middlebrook p. Merchant's Bank, 341 
 Middlesex Bank 0. Minot, 121, 304 
 Midland Ry. Co. 0. Taylor, 309 
 Miffliu v. Swift, 51 
 Mifflin County Nat. Bank's App., 
 
 1<4, 186 
 Miles v Durnford, 302 
 
 0. Gorton, 29, 100 
 Miller v. Ege, 301 
 
 0. Jones, 421 
 
 0. Knight, 241 
 
 v. Lamed, 2, 18, 81, 32, 34. 147, 
 174, 175, 179, 181 
 
 0. Maurice, 51, 54 
 
 v. Ord, 239 
 
 0. Pollock, 1, 16 
 
 . Race, 65 
 
 0. Rutland R. R. Co., 47 
 
 0. Sawyer, 230, 233 
 
 0. Schneider, 407 
 
 0. Stewart, 204 
 
 0. Trustees, 156 
 
 0. Wack, 193 
 
 0. Williams, 75 
 
 0. Williamson, 73 
 Millard v. Thorn, 109 
 Milliken v. Dehon, 330, 334, 336, 337 
 
 v. Whitehouse, 28 
 Mills 0. Gilbrcth, 63 
 Mitchell v. Bass, 230 
 
 0. Burnham, 147, 192 
 
 0. De Witt, 215 
 
 0. Laden, 144, 158 
 
 0. Newhall, 363 
 Mix v. Muggy, 40, 50, 56 
 
 0. Nat. Bank, 18, 28 
 
 0. Singleton, 204 
 Moakley v. Briggs, 261 
 Mocatta v. Bell, 320, 369 
 Moellerfl. McLasan, 328, 367 
 Moffltt v. Roche, 159 
 Mohawk Valley v. Corey, 34 
 
 Mohawk Bank v. Van Home, 242 . 
 Moniteau Bank . Miller, 13.", 141 
 Monitor Ins. Co. v. Buffun, 178 
 Monongahela Nat. Bank v. Over- 
 
 holt, 139 
 
 Monson v. Drakeley, 230 
 Montclair v. Ransdell, 43 
 Montomery v. Elliott, 47 
 Montgomery Bank v. Albany City 
 
 Bank, 214 
 
 Montague v. Boston R. R. Co., 161, 
 167, 175, 183 
 
 0. Perkins, 32 
 
 Moodie 0. Nat. Bank, 270, 279 
 Moores v. Citizen's Nat. Bank, 317 
 Moore 0. Gray, 239 
 
 0. Hall, 5 
 
 0. Holcombe, 429 
 
 0. Metropolitan Nat. Bank. 185, 
 187, 289, 293, 390, 422, 432, 
 438, 439, 471 
 
 0. Toplifl, 214, 223 
 
 0. Ware, 158, 159 
 Moorehead v. Gilmore, 50 
 Moran v. Miami County, 47 
 Morehead v, Duncan, 217 
 Moreland v. State Bank, 220 
 Morgan, ex parte, 350, 352 
 
 0. Gregg. 337 
 
 a. Jaudon, 306 
 
 0. Martieu, 204 
 
 0. Mechanic's Banking Assn, 
 100, 135 
 
 0. Smith, 144, 161, 228, 236, 250 
 Morris 0. Bacon, 144, 161, 164, 175 
 
 0. Bethell, 437 
 
 0. Cheney, 430 
 
 0. Harvcys, 29, 109 
 
 0. Preston, 17, 18, 65, 72, 78 
 
 0. Timbridge. 348 
 
 0. Way, 141 
 
 0. White, 153, 175 
 Morris Canal Co. v. Fisher, 8 
 
 0. Lewis, 117, 120, 187,331 
 
 v. Van Vorst, 220 
 Morrison v. Kuntz, 98
 
 TABLE OF CASES. 
 
 Xli 
 
 Morrison v. Marion, 215 
 
 D. Mormon, 154 
 
 v. Poyntz, 231 
 
 D. Taylor, 231 
 Morse v Huntington, 250 
 Mortimer v. McCullan, 348, 352 
 Mortimer v. Morine, 348 
 Morton v. Burn, 27 
 Morton . Naylor, 424 
 Morton etc. Co. v. Wysong, 291 
 Moses t>. Comstock, 161 
 
 v. Ela, 258 
 
 v. Murgatroyd, 217 
 
 t>. Hall, 243, 247 
 
 v. Keesler, 144 
 Mott v. Clark, 138, 186, 190 
 
 v. Havana Bank, 257, 332 
 
 v. U. S. Trust Co., 180, 303 
 Motte v. Dorrell, 145 
 Mottram v. Heyer, 413 
 Mount Holly Turnpike Co. . Ferrie, 
 
 265, 267, 270, 320, 333 
 Mower's Trusts, in re, 98 
 Mowry v. Bishop, 141 
 
 v. First Nat. Bank, 111 
 
 v. Walsh, 417 
 
 Moynahan v. Hanford, 40, 57 
 Mozier's App., 214 
 Mueller v. Dobschuetz, 250 
 Muench v. Nat.Bank, 61 
 Muir v. Crawford, 250 
 
 v. Schenk, 428 
 Muirhead a. Kilpatrick, 15 
 Muldon v. Whitlock, 29, 109 
 Mullen v. Morris, 95 
 Muller v. Waddlington, 212 
 Munger . Albany City Bank, 104 
 Munn v. McDonald, 2, 4, 16 
 Munroe v. Cooper, 54, 56 
 Muutcr v. Moul, 88 
 Murdock v. Columbus Ins. Co., 330 
 
 . Ford, 158 
 Mure, ex parte, 111 
 Murphy, in re, 273 
 Murray v. Beckwith, 65 
 
 t>. Jones, 161 
 
 Murray v. Lardner, 8, 43, 57. 68, 69, 
 75 
 
 v. Lylburn, 429 
 Murtrie v. Twitchell; 184 
 Mutual etc. Ins. Co. v. Davies, 220 
 
 v. Norris, 188 
 
 Mutual Nat. Bank . Richardson, 54 
 Myett v. Bell 29 
 Myer v. City of Muscatine, 43 
 Myers v. Guarantee et*. Co., 426 
 
 v. Nat. Bank. 204 
 
 0. Railroad Co., 47 
 
 v. United Guaranty Co., 441 
 McAllister v. Kuhns, 263, 264, 271, 
 272 
 
 t>. Sprague, 250 
 McCall . Lennox, 144 
 McCalla v. Clark, 282, 287, 344, 346 
 McCandless v. Engle, 186 
 McCarthy v. "White, 144 
 McCarty v. Roots, 6, 18, 19, 25 
 McClelland . Remsen, 50 
 McClintic v. Wise, 158, 160 
 McCluer v. Ry. Co., 180, 260 
 McClure v. Burris, 151 
 
 v. Oxford, 48 
 McClurg v. Fryer, 261 
 McClusky v. Cromwell, 204, 206 
 McCollough 1). Sommerville, 50 
 McCollum v. Jobe, 144 
 McCombie . Davis, 407 
 McConnell v. Wenrich, 186, 190, 198 
 McCormick v. Irwin, 212 
 McCoy v. Hazlitt, 28 
 
 v. Lockwood, 220 
 McCracken v German Ins. Co., 143, 
 
 161, 175 
 McCrary v. Cashey, 32 
 
 . Slaughter, 50 
 McCready v. Rumsey, 290 
 McCreary v. Gaines, 407 
 
 v. McCreary, 228 
 McCrory v. Parks, 230 
 McCrum^.Corby, 144, 151, 161, 164, 
 
 175, 176, 181 
 McCune t>. Belt, 230, 233, 234
 
 xlii 
 
 TABLE OF CASES. 
 
 McCurdy's App , 124 
 
 McDaniels t>. Flower Brook Manf. 
 
 Co., 283 
 
 McDoal v. Yeoraans, 253, 261 
 McDonald v. Hulse, 144 
 McDougald v. Daugherty, 215 
 McDowell v. Bank, 290 
 
 v. Lloyd, 158 
 
 0. Phoenix Fire Ins. Co., 290 
 McElrath v. P. & S. R. Co., 43 
 McFarland v. Gilchrist, 186 
 McGregor v. Railway Co., 260 
 McHenry v. Jewett, 283 
 Mcllrain v. Mutual Ins. Co., 210 
 Mcllvaine v. Edgerton, 348 
 Mclntire v. Yates, 18, 170. 175 
 Mclntyre v. Kennedy, 29, 109 
 McKee v. Hamilton, 50, 52, 203 
 McKenny v. Waller, 241, 248 
 McKenzie v. Bank, 23 
 McKernan v. Robinson, 154 
 McKim v. King, 47, 48 
 McKinnell v. Robinson, 359 
 McKinster v. Bauk of Utica, 116 
 McKnight v. Kinsley, 28 
 McLane v. Paschall, 157 
 McLean v. Fleming. 393 
 
 v. Radsdale, 225 
 
 t>. Walker, 29, 129 
 McLellan's App., 210 
 McLellan v. Cumberland, 250 
 McLenore . Powell, 239 
 
 v. Hawkins, 88, 90, 91, 96, 
 
 If4, 119 
 McLeod v. Drummond, 296, 298, 
 
 301 
 
 McLughan v. Bovard, 88 
 McMahon v. Fawcett, 230 
 McMahon . Macy, 284, 236, 287 
 McMillan . Richards, 144 
 McMillen v. Bank, 2->3 
 McMurtrie . Twitchell, 189 
 McNaghten's App., 50, 52, 54 
 McNamarav. Condon, 144 
 McNeilly v. Cooksey, 241 
 McNeil t>. Hill, 412, 413, 416 
 
 McNeil v. Tenth Nat. Bank, 263. 
 265, 267, 270, 271, 275, 306, 
 814, 316, 320, 321, 390, 436 
 438 
 
 McNulty v. Hurd, 249 
 McPherson v. Talbott, 234 
 McQuil v. Peay, 144 
 McVee v. Frost, 62 
 McVey, in re, 97 
 
 Naglee v. Pacific Wharf Co., 273, 295 
 Nagley v. Lyman, 27 
 Nahriug v. Bank of Mobile, 293, 294, 
 
 328, 339 
 
 Nally . Long, 230 
 Napier v. Elam, 23 
 Natal Investment Co., in re, 49, 432 
 Nathan v. Giles, 382 
 National Bank v. Bailey, 380 
 
 v. Bigler, 143, 219, 222, 225, 250 
 
 c. Case, 282, 283, 285, 303 
 
 v. Crocker, 379 
 
 v. Day, 52 
 
 v. Dearborn, 263, 374, 3S2, 383 
 
 0. Faut, 3, 102, 106, 129, 257 
 
 v. Graham, 312 
 
 \ Grand Lodge, 90 
 
 JL Hall, 279, 303 
 
 0. Ins. Co., 62 
 
 0. Lavielle, 388 
 
 v. Matthews, 143, 144, 161, 163, 
 175, 180 
 
 9. Mears, 64 
 
 0. Nat. Bank, 289 
 
 o. Newburgh, 254 
 
 0. Place, 248 
 
 0. Rowell, 64 
 
 0. Savery, 75, 76 
 
 0. Small, 254 
 
 v. Smith, 241 
 
 v. Thomas, 52 
 
 v. Walibridge, 382, 413, 420 
 
 v. Watsontown Bank, 263, 264, 
 269, 270, 273, 283, 289, 813 
 
 0. Whitney, 143, 144, 180 
 Nat. Exchange Bank a. Hartford 
 etc. Ry. Co., 8, 47
 
 TABLE OF CASES. 
 
 xliii 
 
 Nat. Exchange Bank v. Slillman, 
 254 
 
 v. Drew, 312 
 
 Nat. Bank of Erie v. Brown, 139 
 Nat. Mech. Bank Assn. v. Conkling, 
 
 204. 206 
 
 Nat. Sav. Bank v. Tranah, 109, 110 
 Nat. Security Bank v. McDonald, 76 
 Nat. Union Bank v. London, 50 
 Nat. Bank of U. A. v. Kirby, 46 
 Natona Water Co. . Clarkin, 180 
 Nauman . Caldwell, 337 
 Navigation Co. v. Roll, 245 
 Navulshaw v. Brownrigg, 407, 409 
 Neal 0. Freeman, 220 
 Neff. Miller, 212 
 Neff's App., 239 240 
 Negus, in re, 222, 224 
 Neiler v. Kelly, 264, 344, 369, 377 
 Neilson v. James, 363, 372 
 Nelson v. Dunn, 160 
 
 v. Eaton. 4, 86, 87. 90, 93, 118 
 
 9. Edwards. 90, 117, 118 
 
 9. Fry, 215 
 
 . Hurford, 141 
 
 v. Mclntyre, 418 
 
 9. Meunch, 230 
 
 9. Wellington, 4, 90, 117, 118 
 Neponset Bank v. Leland, 62, 97 
 Neptune Ins. Co. v. Dorsey, 214 
 Nesbit 9. Bank, 264, 276, 278 
 
 9. Worts, 223 
 
 Nesmith v. Washington Bank, 289 
 Neustadt v. Hall, 260 
 Nevitt v. Bacon, 156 
 New Bedford Savings Inst. . Fair- 
 haven Bank, 217, 234, 254 
 Newberry v. Rand, 42 
 Newbold v. Wright, 407 
 Newcomb v. Blakeley, 247 
 
 9. Railroad Co., 374 
 
 v. Raynor, 239 
 Newell 0. Fowler, 261 
 Newhall v. Farges, 405 
 N. H. Savings Bank v. Colcord, 239 
 
 Gill, 14 
 
 New Bank v. Brocklebank, 290 
 
 9 Lee. 217, 239. 254 
 New London County Bank v. Mitch- 
 
 . ell, 204 
 
 New Orleans Canal Co v. Montgom- 
 ery. 144, 149, 161, 163 
 N. O. Nat. Bank Assn. v. Wiltz. 276. 
 
 289, 29J, 293 
 Newport Bridge Co. 9. Douglas, 120, 
 
 125, 332 
 
 Newsom 9. Thornton, 407, 408 
 Newton, ex parte, 9i 
 Newton 9. Fay, 276, 287, 340, 342 
 New York Guaranty Co., v. Water 
 
 Co., 446 
 
 N. Y. Life Ins. Co. 9. Smith, 192 
 New York Nat. Exchange Bank v. 
 
 Jones, 241 
 
 N. Y. & N. H. R. R, Co. 9. Schuy- 
 ler, 44, 263, 271, 273, 275, 
 811, 312, 314, 365, 390 
 New York etc. Works v. Smith, 27 
 Nichol 9. Bates, 23, 32, 65 
 Nichols 9. Bellows, 139 
 
 9. Fearson, 134 
 Nicholls 9. Merry, 363. 371 
 Nicholson 9. Revill, 250 
 Nickerson v. Ruger, 35 
 Niemcewicz v. Gahn, 203, 207, 210 
 Nightingale 9. Chaffce, 254 
 Noland 9. Clark, 95, 114 
 Norris 9. Beatty, 158 
 
 9. Caledonian Ins. Co., 427 
 North 9. Phillips, 337, 346, 349, 350, 
 355, 359 
 
 9. Wakefield, 250 
 Northampton Co.'s App., 303 
 Northern Assam Tea Co., in re, 282 
 N. W. M. L. Ins. Co. 9. Ins. Co., 90 
 Norton 9. Abercrombie, 227 
 
 9. Burns, 22 
 
 9. Cooms, 230, 233, 237- 
 
 9. Cooper, 233 
 
 9. Piscataqua Ins. Co., 428 
 
 9. Plumb, 219 
 
 9. Reid, 223
 
 xliv 
 
 TABLE OF CASES. 
 
 Norton 0. Rose, 186 
 
 9. Soule, 243 
 
 v. Waite, 28 
 
 Norwalk D. Nat. Bank, 28, 52 
 Nourse 0. Pope, 205 
 
 v. Prime. 306, 369 
 Noyes 0. Spaulding, 348, 352, 369 
 
 i>. White. 144, 160 
 Nuerbach 0. Le Sueur, 180 
 Nutter v. Stover, 14, 23 
 Gates 0. Bank, 4, 18, 19, 21, 27, 139 
 Oathwite 0. Peters, 28 . 
 Ober v. Gallagher, 107/111, 144, 154 
 O'Brien 0. Gilchrist, 392 
 Ocliorne v. Maxey, 407 
 Odlin v. Gove, 433 
 O'Dougherty v. Remington Paper 
 
 Co., 195. 200, 382 
 
 Ogden v. Lathrop, 320, 327, 334, 369 
 Ogle 9. Turpin, 147 
 Ognum 0. Reynolds, 156 
 Ohio Life Ins. Co. 0. Ledyard, 217, 
 
 238, 254 
 
 Ohio R. R. Co. v. Kerr, 382, 394 
 Oil Creek Co. 0. Penn. Co., 303 
 Oldershaw v. Knowles, 372 
 Olds v. Cummings, 147. 169, 174 
 O'Mulcahy 0. Holley, 147, 172 
 Onondago Bank v. De Puy, 51 
 O'Neill . Wightman, 115, 335 
 Ontario Rank v. N. J. Co.. 403 
 
 v. Worthington, 23 
 Ord v. McKee, 144, 161 
 
 0. White, 422 
 Oregon v. Allison, 245 
 Orm v. Merchants' Bank, 64, 180 
 Orme v. Young, 220, 241 
 Ormsbee D. Davis, 50 
 Ormsby v. Fortune, 88 
 Orr 0. Churchill, 447 
 Orrick v. Vahey, 204 
 Osbornu v. Stone, 54, 55 
 
 0. Mancure, 35 
 
 9. Noble, 212, 213 
 Osgood v. Artt. 150 
 Ostcrhout v. Shoemaker, 422 
 
 Otis 0. Gardner, 264. 267, 269, 316 
 Ottawa v. Carey, 43 
 
 . National Bank, 8, 43 
 Ould v. Stoddard, 154 
 Oulds v. Harrison, 357 
 Overholt v. Nat. Bank, 135, 141 
 Overlook v. Hills, 90, 129 
 Overstreet v. Munn, 128, 129 
 Owen's App., 212, 215, 216 
 Owen. Davis, 356 
 
 0. Roman, 202 
 
 v. Long, 207 
 
 0. Miller, 217 
 Oxford Bank v. Bunnell, 273 
 
 v. Hay ues, 88 
 
 v. Lewis, 242 
 
 Oxford Turnpike Co. v. Bunnell, 295 
 Oxley v. Stover, 250 
 Pacific Bank v. Mitchell, 314 
 Paddon 9. Taylor, 397 
 Paige 0. Chapman, 161, 164 
 Paine v. French, 144 
 
 9. Furnas, 18 
 
 9. Hutchinson, 268 
 
 v. Packard, 220 
 Palmer v. Harris, 153, 154 
 
 0. Hendric, 155 
 
 9. Merrill, 424 
 
 9. Purdy, 203, 250 
 
 v. Richards, 4, 5, 6, 65 
 
 v. Yates, 175, 195 
 Pancoast v. Trav. Ins. Co., 180 
 Pannell v. Hurley, 62 
 Partlee v. Fish, 425 
 Paris Bank v. Beard, 159 
 
 0. Hulett, 212 
 Park Bank v. Watson, 35 
 Parkam Co. 9. Brock, 29, 144 
 Parker, in re, 29 
 Parker v. Burgess, 58 
 
 v. Cousins, 58 
 
 . Leigh, 254 
 
 0. Watson, 249 
 Parmelee . Lawrence, 250 
 Parrott v. Colby, 28 
 Parshall 0. Eggert, 420
 
 TABLE OF CASES. 
 
 xlv 
 
 Parsons v. Clark, 214 
 
 v. Jackson, 46, 48, 69 
 
 v. Martin, 332, 363, 368 
 
 9. Welles, 145 
 Partee v. Bedford, 29 
 Partie v. Corning. 6, 9 
 Partridge v. Davis, 253 
 Paterson v. Tash, 407, 408 
 Patent File Co.. in re, 22 
 Patterson v. Hitchcock, 433 
 
 v. Johnson. 14 
 
 9. Pope, 212 
 Pattison v. Hull, 97, 144 
 Poughkeepsie v. Hasbrouck, 4 
 Paul v. Berry, 230, 234 
 Paulette v. Brown, 27, 65, 77 
 Paulin v. Kaighn, 230-232, 238, 243 
 Paw Paw v. Eggleston, 204, 206 
 Payne v. Beasley, 18, 27 
 
 v. Burnham, 435 
 
 v. Cutler, 23 
 
 v. Elliott, 344 
 Peabody v. Speyers, 349 
 Peacock v. Jeffrey, 228 
 
 9. Purcell, 4, 22, 109, 110 
 
 v. Rhodes, 66 
 Pearl 9. Deacon, 202 
 
 v. Williams, 241 
 Pearsall v. Sumniersett, 204 
 Pearson v. Scott, 296, 299, 373 
 
 9. Stpddard, 32 
 Pease, ex parte, 61 
 Pease 9. Rush, 425 
 Peck v. Bligh, 150 
 
 9. Davis, 228 
 Pelzer v. Campbell, 207 
 Pendergast v. Bank, 290 
 Pendleton Co. v. Amy, 44 
 Pendleton v. Fay, 191, 298 
 Penn v. Borman, 260 
 Penn Bank v. Frankish, 23, 28 
 Pennell v. Deffell, 62, 402 
 
 r>. Miller, 427 
 
 v. Reynolds, 16 
 
 Pennsylvania R. R. Go's App., 184, 
 189, 315, 316, 320 
 
 Penn. R. R. Co. 9. Pemberton R. R. 
 
 Co., 218 
 
 P. R. R. Co. v. Thompson, 43, 174 
 Pennsylvania v. Delaware Co., 210 
 Penny v. Crane Mnfg. Co., 261, 262 
 Penny 9. Foy, 222 
 People v. Brown, 433 
 
 9. Devin, 295 
 
 v. Elmore, 295 
 
 v. James, 239 
 
 v. Johnson, 422, 446 
 
 v. Tompkins, 204 
 
 v. Vilas, 206 
 People's Bank v. Cutler, 273 
 
 v. Finney, 158 
 
 9. Gayley, 412, 417, 419 
 
 v. Gridley, 271, 275, 295 
 Percival . Frampton, 22, 38, 66 
 Perfect v. Musgrave, 242 
 Peril v. Dallis, 221 
 Perkins v. Catlin, 261 
 
 v. Kershaw, 229 
 
 9. Sterne, 144, 157 
 Perrin 9. Poulson, 135 
 Perrine 9. Firemen's Ins. Co., 240 
 Perry's App., 159 
 Perry v. Green, 258 
 Persch v. Nat. Bank, 296, 297 
 Peter 9. Beverly, 109 
 Peters 9. Barnhill, 228 
 
 9. Elliott, 379, 382, 384, 404 
 
 v. Jamestown Bridge, 144 
 
 9. Linenischmidt, 220 
 
 9. Mortimer, 135 /. 
 
 Peterson v. Mayor, 44 
 
 9. Roach, 52 
 Petillon 9. Noble, 170 
 Petrie 9. Clark, 23, 27, 71, 73 
 
 9. Hannaway, 357 
 Pettee 9. Prout, 7, 8, 47 
 Pettibone v. Stevens, 154 
 Pettit v. First Nat. Bank, 379, 382 
 Phares v. Barbour, 209, 212, 213, 
 
 239, 247 
 
 Pharr 9. McHugb, 241 
 Phelan 9. Olney, 144, 145
 
 xlvi 
 
 TABLE OF CASES. 
 
 Phene v. Gillhim, 238 
 Philadelphia Ry. Co. v. Quigly, 312 
 Philbrook v. McEwan, 240, 241 
 Philip v. Barker, 341 
 Philips v. Austin, 89 
 
 ex parte, 91, 92, 353 
 
 t>. Im. Thorn, 437 
 
 t>. Mariner, 159 
 
 t>. Singer Mnfg. Co.. 204 
 
 v. Thompson, 198, 217 
 Philpot v. Briant, 239. 241, 247 
 Phoenix Ins. Co. v. Church, 23, 27 
 Pickard v. Sears, 440 
 Pickene v. Webster, 118 
 
 v. Yarborough, 86, 88 
 Pickering v. Cease, 349, 351, 355, 359 
 
 v. Demeritt, 332, 372 
 
 v. Ilfracombe Ry. Co., 428 
 Pickersgill v. Lahcns, 251 
 Picket v. Jones, 144 
 Pidgeon v. Burslcm, 357 
 Pier v. Bullis, 11, 67 
 Pierce v. Boston Saving's Bank, 425 
 
 v. Faunce, 143, 144, 149, 164 
 
 v Kearney, 127 
 
 v. Kibbee, 176 
 
 v. Shaw, 158, 159 
 Pilot u. Jackson, 289 
 Pine v. Smith, 35 
 
 Pinkerton v. Manchester R. R. Co., 
 264. 271, 273, 287, 295, 340 
 Pinkett v. Wright, 427 
 Pinnell v. Boyd, 140 
 Piper v. Piper, 422 
 Pippin T. Bond, 220 
 Pitts v. Foglesong, 23, 26, 31, 33,34,36 
 Pittsburgh v. Thompson, 240 
 Pittsburgh Ry. Co. . Schaeffer, 220 
 
 v. Stewart, 286, 287 
 Pixley v. Boynton, 346, 348, 350, 355 
 Place v. Mcllwain, 243 
 Plain v. Roth, 153 
 Plant's Manf. Co. v. Favey, 91, 113 
 Platt v. Birmingham Axle Co., 276 
 
 v. Hawkins, 276 
 Pledge v. Buss, 212, 250 
 
 Poe v. Darrah, 237 
 Poirier v. Morris, 22 
 Polhill v. Walter, 208 
 Police Jury v. Donaldo, 100. 343 
 Pollaid v. Vinton, 263, 311, 373, 375, 
 330, 385, 388, 389, 392, 394 
 Pollock v. Macon, 157 
 
 v. Nat. Bank, 309, 318 
 Pomeroy v. Rice, 14 
 
 v. Tanner, 240 
 Pond v. Clarke, 144, 254 
 
 v. Eddy, 175 
 
 . Lockwood, 28 
 Pool v. Dooter, 217 
 Pope v. Jacobus, 148 
 Port v. Jackson, 222, 224 
 Portage County Bank v. Lane, 33 
 Portalis v. Tetley, 9, 384, 385 
 Porter v. Blood, 100 
 
 v. Gunnison, 54 
 
 v. Parks, 317 
 
 v. Viets, 348 
 
 v. White, 50 
 
 Portland Bank v. Stubbs, 392 
 Post v. Dart, 140 
 
 v. Tradesman's Bank, 225, 254 
 Postlewait v. Garrett, 134 
 Postmaster v. Reeder, 220 
 Potter v. McDonald, 143 
 
 v. Stevens, 144 
 
 v. Thompson, 95 
 Potts v. Blackwell, 161, 175 
 
 v. Nathans, 213, 237 
 Poughkeepsie v. Hasbrouck, 81 
 
 City Bank v. Phelps, 259 
 Powell v. Conant, 157 
 
 v. Henry, 94, 114 
 
 v. Messer, 54 
 
 v. Rogers, 433 
 
 v. Smith, 228, 251 
 
 t>. Waldron, 446 
 
 v. Waters, 141, 241 
 Prall v. Hamill, 302 
 
 v. Tilt, 263, 265, 270, 296, 297, 
 
 301, 302, 320, 333 
 Pratt's App., 23
 
 TABLE OP CASES. 
 
 xlvii 
 
 Pratt's Case, 239 
 Pratt v. Bank, 144 
 v. Coman, 27 
 v, Huggins, 156 
 v. Machinists Nat. Bank, 308, 
 
 310 
 
 Preble v. Portage Co., 46 
 Prentice v. Graves, 23 
 Prescott v. Hull, 144, 195 
 Preston v. Case, 143, 161, 175 
 Price, ex parte, 14 
 Price v. Barker, 250 
 0. Grover, 327, 369 
 v. Lyons Bank, 141 
 v. Price, 22 
 v. Truesdell, 217 
 Priest v. Watson, 209, 239, 258 
 
 v. Wheelock, 157 
 Pring v. Clarkson, 242 
 Pringle v, Phillips, 75 
 
 v. Pringle, 76 
 Priors Wood, 186 
 Providence Thread Co. v. Aldrich, 9 
 Public Schools V. Heath, 424 
 Pugh v. Durfee, 18 
 Pullian v. Taylor, 228 
 Pullman v. Upton, 282, 283 
 Pulsifer, in re, 221 
 Purcell v. Peacock, 22 
 Purchase v. N. T. Exch. Bank, 341 
 Purdy v. Doyle, 229 
 
 v. Powers, 54 
 Putnam v. Clark, 186 
 0. Lewis, 109, 243 
 0. Story, 18, 428 
 v. Sullivan, 89 
 Pybus v. Gibbs, 204 
 Quillon v. Peterson, 53 
 Quincy v. White, 332 
 Quinebang Bank v. French, 144 
 Quinn 0. Hard 28 
 liable 0. Newman, 240 
 Raddick v. Jones, 23 
 Railroad Co. 0. Dane, 353 
 0. Freed, 405 
 t>. Howard, 180, 260 
 
 Railroad Co. 0. Nat. Bnnk, 1, 3, 4 
 6, 17, 18, 21, 65, 70, 75, 81, 
 88, 267 
 
 0. Selinger, 267 
 0. Sewell, 272 
 0, Sprague 75 
 . 0. Stewart, 282, 283 
 
 0. Thomason, 271 
 Rainbow v. Juggins, 240 
 Raley 0. Williams, 189 
 Ralston 0. Davis, 238 
 Ramsdell v. Morgan, 135 
 Ramsey 0. Lewis, 231 
 Randolph v. Sherwood, 261 
 Ranger 0. Great Western Ry. Co., 
 
 312 
 Rankin 0. Alford, 423, 424 
 
 0. McCullogh, 328, 331, 338 
 0. Major, 144 
 
 Raphael 0. Bank of England, 65, 75 
 Rasch 0. Creditors, 328 
 Rashdall 0. Ford, 433 
 Rathmore Ins. Co. 0. Dalrymple, 306 
 Raust 0. Hanselt, 54 
 Rawles v. Deshler, 379, 397, 405 
 Ray 0. Smith, 258 
 Real Est. Trust Co. 0. Leech, 248 
 Reddick 0. Jones, 28 
 Reddish 0. Watson, 14 
 Redfield 0. Haight, 222, 224 
 Redmayne 0. Foster, 329 
 Reed 0. Boardman, 219 
 0. Lambert, 121 
 0. Marble, 192 
 0. Norris, 215 
 0. Smith, 141 
 
 Reedlon 0. Churchill, 56, 57, 58 
 Rees 0. Barrington, 239, 240 
 Reeves 0. Plough, 88, 90, 114, 442 
 0. Pullian, 220, 238 
 0. Scully, 151, 161 
 Regina v. Salter, 213 
 Reid 0. Furnival, 87, 91 
 Reigart 0. White, 253 
 Reilly v. Mayer, 199 
 Reineman 0. Robb, 186
 
 XiVlll 
 
 TABLE OF CASES. 
 
 Relyea v. N. H. Rolling Mills Co., 
 392, 393 
 
 t>. N. H. Ry. Co., 397 
 Remsen v. Beck man, 220 
 
 . Graves. 242 
 Renard v. Fuller, 228 
 Reunie v. Morris, 371 
 Rex v. Westwood, 291 
 Reynolds v. Douglas, 89, 259, 261 
 
 v. Tapp, 203 
 
 D. Ward, 241, 248. 268 
 Rhett v. Roe, 89 
 Rice, ex parte, 6 
 Rice's App., 124, 217, 218 
 Rice v. Benedict, 88, 95, 128 
 
 . Cutler, 413 
 
 . Dewey, 109, 217 
 
 . Dillingham, 1, 102, 175, 183 
 
 v. Downing, 212 
 
 v. Peet, 129 
 
 v. Railroad Co., 207 
 
 v. Railt, 23 
 
 v. Southern R. R. Co., 124 
 Rich v. Boyce, 288 
 
 v. Boys, 104 
 
 D. Hathaway, 253 
 
 . Noble. 272 
 
 t>. Starbuck, 32 
 Richards . Smith, 428 
 Richardson v. Campbell, 16 
 
 t>. Hadsall, 151 
 
 0. Ins. Co., 241, 335 
 
 v. McKim, 158. 160 
 
 v. Mann, 175, 182 
 
 . Rice, 1. 17, 23, 32, 81. 113 
 
 v. Washington Bank, 219 
 
 v. Crawford, 212, 213 
 Richmond . Allen, 158 
 Richter v. Cummings, 215 
 Rickert v. Madiera. 144 
 Ricord v. Central R. R, Co., 312 
 Riddle v. Bowman, 217 
 Rideout v. Bristow, 27 
 Ridley v. Taylor, 56 
 Riggs v. Pursell, 184, 189, 19 
 Rigney v. Lovejoy, 144 
 
 Riley v. Johnson, 33 
 Rindge t>. Judson, 259 
 Singling v. Kohn, 12, 65, 73 
 Risley v. Brown, 251 
 
 v. Phoenix Bank, 424 
 Robbins v. Bacon 424 
 
 D. Richardson, 27, 31, 34, 41, 42 
 Roberts . Bolles, 8 
 
 v. Hay, 184 
 
 v. Sykes, 343 
 Robert's App , 273 
 Roberts v. Berdell, 337 
 
 v. Colvin,254 
 
 v. Hall, 18 
 
 v. Halsted, 151 
 
 v. Mansfield, 144, 158, 160 
 
 v. McCauley, 217 
 
 v. Sayer, 231 
 
 . Thompson, 86, 90, 114 
 Robertson v. Detherage, 230, 238 
 
 v. Hay, 189 
 Robinson v. Aldridge, 54 
 
 u. Frost, 62, 97 
 
 t>. Hurley, 104, 335, 443 
 
 c. Lyle, 203 
 
 . Lyman, 95 
 
 v. Magee, 239 
 
 t>. Memphis R. R. Co., 373, 375, 
 386, 387. 394 
 
 v. Mollett, 332, 363, 372 
 
 v. Nesbitt, 428 
 
 v. Reynolds. 399 
 
 v. Robinson, 224 
 
 . Smith, 18 
 
 . Weeks, 207 
 
 Rochester Bank v. Elwood, 204, 206 
 Rock v. Nicholls, 273 
 Rock fellow v. Donnelly, 223, 225 
 Rodger . Comptoir, 384, 397 
 Rodgers v. Grothe, 407 
 Rodriquez v. Hefferman, 407, 408 
 Rogers v. Abbott, 254 
 
 c. Batchelor, 54 
 
 t>. Gould, 369 
 
 v. Hosack, 423 
 
 v. McClellan, 241
 
 TABLE OF CASES. 
 
 xlix 
 
 Rogers v. Odom, 206 
 
 v. School Trustees, 212, 213, 239 
 
 v. Stevens, 271, 294 
 
 v. Tapp, 203 
 
 v. Thomas, 405 
 
 v. Trader's Ins. Co., 144 
 Rohrle v. Stidger, 128 
 Rollins v, Stevens, 54, 55 
 Rollock v. Mason, 157 
 Rolston v. Brockway, 144 
 Romaine . Allen, 337 
 Root v. Bancroft, 213 
 
 t>. French, 279, 417 
 Roper v. Sangamon Lodge, 244 
 Rosa v. Brotherson, 23 
 Rosborough v. McAliley, 240 
 Rose v. Kimball, 186 
 Rosenback v. Bank, 289 
 Rosenberg v. Bitting, 28 
 Rosenfield v. Express Co., 394 
 Rosenstock v. Torney, 331 
 Rosevelt v. Brown, 282, 283 
 Rosewarner v. Billings, 357 
 Ross t>. Howell, 50 
 
 t>. Jones. 239, 241, 253, 255 
 
 v. Mitchell, 157 
 
 v. Southwestern Ry. Co., 263, 265 
 
 . Union Pacific Ry. Co., 340 
 Rothwell v. Humphries, 50 
 Rountree v. Smith, 346, 350, 356 
 Rowan v. Sharp Rifle Mnfg. Co., 239 
 Rowland v. Smith, 256 
 Rowley v. Boll, 106 
 
 c. Bigelow, 387, 405 
 
 v. Stoddard, 250 
 Roxborough . Messick, 23, 26, 27, 
 
 36, 279 
 Royal Bank 9. Grand June., 8, 113 
 
 v. Payne 239 
 
 v. Railroad Co., 104 
 Royer v. Keystone Nat. Bank, 14, 23, 
 
 26, 71 
 
 Rozet 9. McClellan, 240, 335 
 Rucker v. Robinson, 247, 250 
 Ruchizky . Dellavan, 315, 363 
 Ruckman . Ryan, 359 
 D 
 
 Rudolph n. Winters, 349, 355 
 Ruhling v. Hackett, 144 
 Rumball v. Metropolitan Bank, 43 
 Rumsey v. Berry, 346, 348, 349, 356 
 Runals v. Harding, 442 
 Runyan t>. Coster, 64 
 Runyon v. Mesereau, 195 
 Russell v. Carr, 159 
 
 v. Clarke, 253, 259 
 
 v. Hadduck, 28, 61 
 
 . Hester, 88, 257 
 
 v. Langstaffe, 66 
 
 v. Leland, 50 
 
 9. Place, 73, 301 
 
 v. Weintzer, 220 
 Rutland Bank c. Buck, 34 
 Rutledge v. Squires, 54 
 Ryall v. Rowles, 138, 435 
 Ryan 9. Chew, 23, 27 
 
 v. Shaw, 239 
 Ryner v. Ryner, 214 
 Sabin v. Bank of Woodstock, 271, 
 
 273, 290, 295 
 Sackatt c. Johnson, 18 
 Safford v. Wade, 217 
 Saline County v. Bail, 240 
 Salisbury Mills v. Townsend, 278, 
 
 310 
 
 Baiter v. Baker, 149 
 Saltmarsh v. Bower, 50 
 
 9. Tuthill, 135 
 
 Saltus v. Everett, 316, 397, 399, 401 
 Salyers v. Ross, 230, 238 
 Sample v. Rowe, 144 
 Sampson v. Shaw, 349, 361 
 Samuel v. Howarth, 239 
 Sanders v. Davis, 9, 95, 127 
 
 C.Maclean, 373, 379, 395 
 Sanderson v, Brooksbank, 56 
 Sands v. Church, 140 
 Sanford v. Allen, 261 
 
 v. Maclean, 214 
 
 v. Wheeler, 141 
 Sanger v. Bancroft, 145 
 Sangster v. Love, 144 
 Sargent, ex parte, 80, 81, 269, 319
 
 1 
 
 TABLE OF CASES. 
 
 Sargeant v. Ins. Co., 272, 289, 293 
 Sargent v. Essex Marine Ry. Co., 293 
 
 v. Howe, 144, 158 
 Sassard n. Hinman, 348 
 Saunders v. 'McCarthy, 100 
 Savage v. Evorman, 228 
 
 v. Murphy. 190 
 Savings' Aau. c. iluut, 4, 17 
 Savings' Bank v. Bates, 18 
 
 . R. R. Co., 390, 397 
 
 n. Town of Roscoe, 43 
 Savings' Inst. v. Holland, 25 
 Sawyer v. Prickett, 18, 28, 144, 101, 
 162, 175 
 
 . Taggart, 348, 350, 417 
 
 0. Turpin. 15, 16 
 Say v. Dascorab, 192 
 Sayles v. Sims, 230, 233 
 Sayre v. King, 243, 249 
 Scarlett v. Vanlnwagen, 370 
 Schank v. Arrowsmith, 29, 109 
 Schaefer v. Reilly, 185, 189, 195, 199 
 Schepeler v. Eisner, 331 
 Schepp v. Carpenter, 34, 35 
 Schmidt v. Coutler, 231 
 
 v. Frey, 144, 153, 173 
 Schnitzel's App., 213, 237 
 Schoole c. Sail, 129 
 Schooner Freeman v. Buckingham, 
 
 386, 388, 389, 392, 399 
 Schrocppel v. Corning, 137, 191 
 
 v. Shaw, 209, 220, 2il 
 Schufeldt v. Pease, 23 
 Schultz v. Astley, 66 
 
 v. Crane, 253 
 Schwartz <o. Leist, 147 
 Schofield. ex parte, 305 
 Scholcfield v. Templer, 243 
 Scofield v. Deschcr, 154 
 Scott's App., 215 
 Scott v Belts, 71 
 
 0. Featherstone, 212 
 
 v. Franklin, 61 
 
 v. Lifford, 448 
 
 0. Ocean Bank, 5 
 
 . Tyler, 73, 301 
 
 Scribner v. Adams, 234, 320 
 Seacord v. Miller, 258 
 Sears a. Leforce, 21 - 2 
 
 v. Wingate, 388, 332, 393 
 Security Bank v. Luttgren, 263, 375, 
 
 379, 381 
 
 Seeley v. People, 205 
 Seibert v. True, 217 
 Seipplc's App., 261 
 Selden v. Nat. Bank, 54, 97, 505 
 Seligman v. Nat. Bank, 63 
 Seller v. Jones, 15 
 Selser v. Brock, 246 
 Semenza v. Brinsley, 371 
 Semmes v. Boykin, 340 
 Sewall v. Boston Water Power Co., 
 
 265. 309, 315 316, 318, 
 Seybel 0. Nat. Currency Bank, 38, 
 
 68, 75, 76 
 Seymour v. Burrow, 144 
 
 v. Ives. 336 
 
 0. Mickey, 32 
 
 0. Norton, 374 
 Sexton v. Graham, 421 
 Shafer v. Reily, 184 
 Shales v. Seignoret, 348, 369 
 Shand v. Handley. 190 
 Shannon v. Marselis, 186, 
 Shapley v. Abbott. 390 
 Sharp v. Bailey, 89 
 
 v. Philadelphia Wareh. Co., 418 
 Sharse, ex parte, 16 
 Shaver v. Tyson, 54 
 Shaw v. Browurig, 408 
 
 v. Carpenter, 173, 176 
 
 v. Ferguson, 4C3 
 
 0. Fisher, 340 
 
 V. Loud, 2'25 
 
 a. Nat. Bank, 401, 402 
 
 v. Newsom, 158 
 
 v. Platt, 250 
 
 9. Railroad Co., 263, 873, 378 
 879, 381, 412 
 
 D. Spencer, 178, 265, 298, 838, 
 
 0. Stone, 407 
 Sheffield, ex parte, 423
 
 TABLE OF CASES. 
 
 li 
 
 Sheldon v. Haxtun, 134, 141 
 Shelton v. French, 84 
 Shepard v. Ogden, 228 
 
 . Shepard, 225 
 Shephard . Allen, 29 
 Shepardson v. Gary, 420 
 Shepheard v. Phcar 261 
 Shepherd v. Gillcspie, 371 
 
 v. Harrison, 379, 381 
 Sherman . Niagara Fire Ins. Co., 426 
 
 . Trader's Nat. Bank, 420 
 Sherwood v. Dunbar, 153 
 Shine v. Central Savings Bank, 253 
 Shinn v. Budd, 214 
 Shipman v. Etna Ins. Co. 273, 278 
 Shoemaker v. Mech. Bank, 2, 303 
 Short v. Simpson, 381 
 Shropshire Unions Ry. Co. v. Queen, 
 263, 264, 272, 273, 277, 296, 
 297, 299 
 
 Shufelt v. Shufelt, 140 
 Shutton v. Wigg'ns, 158 
 Sibley 0. Quinsigamond Bank, 271, 
 
 273, 278, 293 
 Sibree v. Tripp, 29 
 Sickles v. Richardson, 113, 126 
 Sickmonw. Wood, 149 
 Siebert v. Thompson, 230 
 Seigert v. Hamel, 134 
 , Sigourney v. Lloyd, 25 
 
 0. Wetherell, 242, 262 
 Silver Lake Bank v. North, 64, 180 
 Silverman v. Bullock, 31, 32, 41, 147 
 Simms v. Anglo-American Tel. Co., 
 
 272, 273, 308, 310, 320 
 Simonds v Goodman, 25 
 Simpson . Hall, 6, 95 
 
 . Hart, 226 
 
 Singer . Troutmau, 220 
 Singer Manf. Co. v. Hester, 261 
 
 v. Littler, 253 
 
 Sioux City Bank v. Bank, 390, 391 
 Sistare v. Best, 303 
 Sitgreaves v. Bank, 23 
 Skillctt v. Fletcher, 206 
 Skilling a. Bollman, 381, 382, 384, 396 
 
 Skowhegan Bank v. Cutler, 271, 273 
 Slee0. Bloom, 221 
 
 v. Manhattan Co., 175. 183, 194 
 Blevin v Monovv, 90, 114 
 Sloman v. Bank of England, 309 
 Slotts v. Byers, 16 
 Small v. Franklin Ins. Co., 30 
 
 v. Franklin Mining Co., 109, 110 
 
 0. Smith, 31, 37, 75 
 Smedes v. Iloughtaling. 221 
 Smith v. Alexander, 237 
 
 v. Ayer, 73, 75 
 
 v. Aylesworth, 35 
 
 v. Bartholomew, 250 
 
 0. Braiue, 7, 56 
 
 t>. Bouvier, 348. 350, 352, 356 
 
 0. Burgess, 143, 175, 176, 178 
 
 0. Clayton, 220 
 
 v. Cloptou, 240 
 
 v. Coale, 119 
 
 v. Collins, 50 
 
 . Conrad, 230 
 
 v. Crescent City, 263, 264, 265 
 
 v. Cunningham, 159 
 
 v. Day, 159 
 
 v. Dennison, 50 
 
 0. Dickinson, 253 
 
 v. Felton, 93, 102, 115, 129 
 
 v. Foster, 156 
 
 v. Harrison, 213 
 
 v. Harvie, 51 
 
 v. Hiscock, 23 
 
 v. Hodson, 213 
 
 0. Howcll, 222, 224 
 
 v. Kcohane, 147 
 
 v. Knox, 42 
 
 v. Livingston, 57 
 
 v. Lusher, 56 
 
 t>. Lynes, 397 
 
 v. Martin, 251 
 
 . McLeod, 219, 239 
 
 v. Munroe, 138, 435 
 
 v. Pond, 222, 224 
 
 0. Prmgle, 441 
 
 v. Rice, 258 
 
 v. Rockwell, 106
 
 lii 
 
 TABLE OF CASES. 
 
 Smith v. Rumsey, 215 
 
 9. Slaughterhouse Assii. 276, 289 
 
 9. Smith, 256 
 
 9. Stevens, 151 
 
 9. Strout, 108 
 
 v. Washington Co , 156 
 Smouse v. Bail, 114, 442 
 Snitz v. Thompson, 237 
 Snow v. Chandler, 250 
 
 9. Fourth Nat. Bank, 6 
 Snowden, ex parte, 204, 236 
 Bnyder v. Van Deuren, 32, 66 
 Society v. New London, 43, 44 
 Sohler v. Loving, 250 
 Solly v. Forbes, 250 
 Solomons v. Bank of England, 5, 65 
 Somersall v. Barnaby, 261 
 Sonoma Valley Bank v. Hill, 104, 108 
 Soule v. Union Bank, 86, 426 
 South, ex parte, 424 
 South R R. Co. v. Chappell, 312 
 Southern Exp. Co. v. Dickson, 394 
 Southerin v. Mendum, 144, 153 
 South Ottawa v. Perkins, 44 
 Southwick v. First Nat. Bank, 31, 34 
 Spalding v. Bank, 102, 106, 129, 257 
 
 v. Barr. 114 
 
 9. Ruding, 397, 405 
 
 v. Thompson, 441 
 Sparhawk v. Drexel, 118. 331 
 Spear c. Crawford, 283 
 
 . Hart, 370 
 Spears v. Hartley, 156 
 Speiglemeyer v. Crawford, 210, 215 
 Spencer v. Ballon, 35, 65 
 
 v. Clarke, 426, 428 
 
 v. Harvey, 258 
 Spitlcr v. James, 32 
 Spoouer v. Holmes, 75 
 Spraguc v. Cocheco Manf. Co., 298 
 Sprig v. Bossier, 173 
 Springer v. Toothaker, 239, 240 
 Stafford v. Yatcs, 241 
 Stalker v. McDonald, 23, 24, 65, 71 
 Stall 9. Catskill Bank, 54, 57 
 Stanbury v. Smythe, 424 
 
 Stanton v. Eager, 405 
 
 v. Jerome, 322 
 
 9. Small, 348, 353 
 
 9. Thompson, 144 
 Starr v. Earle 260 
 
 9. Ellis, 142 
 
 9. Hasbrouck, 186 
 State 9. Baker, 205, 246 
 
 9. Berning, 73, 230 
 
 9. Blackmore, 206 
 
 9. Boatman's Saving Assn., 134 
 
 9. Cutting, 204, 206 
 
 9. Delafleld, 8 
 
 9. Franklin Bank, 304 
 
 9. Lake, 144 
 
 9. Leete, 283 
 
 9. Manning, 248 
 
 9. North L. Ry. Co., 263, 264 
 
 9. Sandusky, 206 
 
 9. Waggoner, 208 
 
 9. Watts, 156 
 State Bank v. Gardner, 401 
 
 9. Jones, 400 
 State Ins. Co. *. Jennett, 289, 293 
 
 9. Olmstead, 276 
 State Savings Assn. 9. Hurst, 16 
 Steamship Dock Co. 9. Heron, 289 
 Stearns . Bates, 79 
 
 9. Marsh, 121 
 Stebbins v. Phoenix Fire Ins. Co., 
 
 265, 293 
 
 Stedman v. Gooch, 22, 243 
 Steel v. Dixon, 230, 231, 233, 234 
 Steele 9. Brown, 114 
 
 9. Lord, 107, 113 
 
 9. Mealing, 230, 234 
 Stcere 9. Benson, 42, 113 
 Steers 9. Sashley, 359 
 Steger v. Bush, 115 
 Steiger 9. First Nat. Bank, 409 
 
 9. Third Nat. Bank, 409 
 Stenton 9. Jerome, 306, 331, 334, 365, 
 
 366, 377 
 
 Stephen v. Daniel. 249 
 Stephenson v. Primrose. 258 
 Sterling v. Forrester, 203, 211
 
 TABLE OP CASES. 
 
 liii 
 
 Sterling 0. Marietta etc. Co., 241 
 Stern 0. Germania Nat. Bank, 46, 
 47, 48, 69, 95 
 
 v. People, 205, 246 
 Stetson 0. Gurney, 407 
 Stettheimer 0. Meyer, 65 
 Sevens 0. Bank, 336 
 
 v. Boston R. R. Co., 384, 402 
 
 v. Blanchard, 15 
 
 0. Campbell, 23, 28 
 
 v. Dedham Inst., 181, 164, 175 
 
 v. Foster, 75 
 
 v. Hartley, 132 
 
 v. Hurlburt Bank, 96, 118, 328 
 
 v. Moore, 233 
 
 V. Pratt, 180 
 
 0. Eeeves, 140, 199 
 
 0. Stevens, 428 
 
 v. Wilson, 410 
 Stevenson v. Austin, 243 
 
 v. Black, 144, 145, 159, 160 
 
 0. Hyland, 28 
 
 v. O'Neal, 153 
 Stewart 0. Crosby, 144 
 
 v. Davis, 239 
 
 0. Drake, 327, 331, 369 
 
 v. Farmers' Ins. Co., 302 
 
 v. Phoenix Ins. Co., 412, 416 
 
 v. Preston, 144 
 Stiles 0. Davis, 394 
 
 v. Eastman, 237 
 Still v. Vance, 204 
 Stinson v. Brennan, 228 
 
 v. Thornton, 301 
 Stirewalt v. Martin, 250 
 Stirling v. Forrester, 250 
 Stocks v. Dobson, 193 
 Stockton etc. Co., in re, 291 
 
 i). Johnson, 144 
 Stockwell v. Dillingham, 52 
 Stoddard 0. Kimball, 7, 18, 31, 87, 
 
 38, 42, 66, 70, 78, 92, 177 
 Stokes v. Frazier, 121, 123, 125, 132, 
 
 136, 332 
 
 Stothoff 0. Dunham, 252 
 Stollenwerck v. Thatcher, 263, 373 
 
 Stone v. Bond, 260 
 
 v. Brown, 77, 180, 431 
 
 v, Marze, 31G, 320 
 
 v Miller, 29 
 
 v. Seymour, 219 
 
 0. Vance, 33 
 
 v. W. St. Louis etc. Co., 386, 
 388, 404 
 
 0. West, 373, 375, 382 
 Stoner v. Miliiken, 205, 246 
 Stoops 0. Wittier, 221 
 Storey 0. Dutton, 422, 447 
 Storms v. Storms, 213 
 Story v. Solornan, 355 
 Stout v. Folger, 222, 224 
 
 v. Stout, 29 
 
 v. Yaeger Co., 425, 426 
 Stowell v. Raymond, 261 
 Straff oras etc., in re, 283 
 Strange 0. Adams, 129 
 
 0. Blake. 129 
 
 0. Houston & T. C. Ry. Co., 264, 
 271, 273, 275, 293, 309, 316, 
 
 0. Tooks, 239, 240 
 Strasbourg v. Echternact, 340 
 Straughan v. Fairchild, 18 
 Straut v. Natona Co.. 273, 295 
 Stratton 0. Wiggins, 159 
 Strong 0. Blake, 102 
 
 0. Foster, 241, 247 
 
 0. Jackson, 76, 153, 164, 175 
 
 0. Nat. Bank, 121, 122, 126 
 
 0. Smith, 283 
 
 0. Worcester, 210, 220 
 Stuart v. Bigler, 102, 103, 106, 114, 
 129, 257 
 
 0. School District, 44 
 Stultz 0. Silva, 3 
 
 Sturtevant 0. Jaques, 75, 145, 178 
 St. Alban's Bank 0. Dillon, 208 
 St. Joseph 0. Rogers, 44 
 St. Louis v Sickles, 204 
 St. Louis Bldg. Assn. 0. Clark. 146 
 St. Louis Bank 0. Ross, 410, 413 
 Succ. D'Meza, 426 
 Supervisors 0. Clarke, 206
 
 liv 
 
 TABLE OF CASES. 
 
 Supervisors v. Otis, 239 
 
 v. Schenk, 43, 44 
 Button v. Kcttcll, 392 
 
 v. Tatham, 363 
 Suydam v. Eartle, 154 
 Swan v. N. B. Aust. Co., 309, 316 
 
 v. Produce Bank, 76/298, 431 
 
 v. Steele, 56, 53 
 Swain v. Frazier, 29 
 
 v. Wall, 230 
 Swartz's App., 349 
 Swartze. Lcist, 144, 145, 158, 193 
 Sweet v. Barney, 382 
 Sweetzer . French, 54, 55, 57 
 Swenk, in re, 15 
 Swcnson v. Plow Co , 144, 157 
 Swift v. Smith, 1, 65, 70, 75, 77, 81, 
 143, 144, 161, 162, 175. 177 
 
 v. Tyson, 18, 19, 21, 27, 28, 65 
 Swope v. Leffingwell, 166, 185, 214 
 Sykes v. Gerber, 29 
 Sylverstein v. Atkinson, 50, 51 
 Taber v. Hamilton, 14 
 Tabor v. Foy, 148 
 Taft v. Bowker, 425, 428 
 
 v. Boyd, 30, 144 
 
 v. Chapman, 23 
 Taggard v. Courtenius, 335 
 Taggart v Sawyer, 348 
 Tahiti Cotton Co., in re, 268, 282, 
 
 288, 320, 321 
 Talbott r>. Frere, 441 
 
 v. Wilkins, 212 
 Talcott, ex parte, 221 
 Tallmadge v. Pennoyer, 52, 53 
 Tall man v. Hoey, 431 
 Talmage v. Pell, 191 
 Talmadge v. Bank, 99, 341, 370 
 Talty v. Frecdmuu's Savings and 
 Trust Co., 79, 82, 129, 132, 
 333, 443 
 
 Tapley . Butterfield, 50 
 Tarbell v. Sturtevant, 16, 42, 90, 91 
 
 v. West, 429 
 Tash o. Adams, 44 
 Tate v. Fletcher, 157 
 
 Tate 0. Wymand, 249 
 
 Tator v. Thayer, 253 
 
 Taussig v. Hart. 322, 337, 338, 369 
 
 Taylor v. Bank of Kentucky, 220 
 
 v. Bullen, 261 
 
 . Cheever, 104 
 
 0. Daniels, 42 
 
 v. Ely, 433 
 
 v. Gitt, 18G 
 
 v. Jester, 212, 240 
 
 0. MiamaExp. Co., 304 
 
 v. Morrison, 230, 231 
 
 v. Page, 148, 161, 164, 176 
 
 v. Peninsular Co., 308 
 
 v. Plummer, 299 
 
 v. Sticklaml, 32 
 
 v. Turner, 374, 379, 404, 409 
 
 v. Williams, 4 
 Teekes . Saloman, 349 
 Telegraph Co. v. Davenport, 309,318 
 Tenant v. Elliott, 357 
 Ten Eyck v. Brown, 253 
 Ten Eyck v. Holmes, 217, 238 
 Tenny v. Foote, 349, 355, 359 
 
 v. Lyon, 215 
 Terry v. Hickmau, 25 
 
 D. Tuttle, 161 
 
 v. Woods, 144 
 
 Teutonia Nat. Bank v. Locb, 97 
 Texas v. Hardenbergh, 46, 48, 69 
 
 v. White, 46, 48, 69 
 Thacher v. Dunnsmore, 30 
 Thacker v. Hardy, 348, 356, 357 
 Thames, the, 263, 373, 381, 382, 392, 
 
 396, 404 
 Thayer v. Barlow, 312 
 
 v. Daniels, 425, 428, 446 
 
 v. Manley, 337 
 
 v. Mann, 91. 128, 156 
 
 . Putnam, 96 
 Third Nat. Bank v. Blake, 207 
 
 . Boyd, 8, 63 
 
 v. Harrison, 17. 18, 90, 111, 118, 
 349, 356. 358, 359 
 
 v. Seneca Falls, 43, 47, 48 
 Thomas v. Mann, 220
 
 TABLE OF CASES. 
 
 IV 
 
 Thomasson t>. Brown, 73 
 Thomburg v. Harden, 244 
 Thompson . Bowne, 243, 247 
 
 v. Doming, 381 
 
 v. Hall, 241 
 
 v. Hall, 56 
 
 v. Hewitt, 127 
 
 v. Ketchum, 158 
 
 v. Lee County, 7, 8, 43, 47 
 
 v. HcClelland, 226 
 
 v. Percival, 58 
 
 c. Robinson, 241, 247, 248 
 
 v. Shoemaker, 170 
 
 v. Simpson, 424 
 
 v. Toland, 265, 298, 300, 316, 
 
 320, 329, 369 
 Thome v. Bank, 419 
 Thornton v. Court, 155 
 
 v. Freeman, 220 
 
 v. Nat. Ex. Bank, 64, 180, 217 
 
 v. Pegg, 154 
 Thrall . Newell, 208 
 
 v. Spencer, 254 
 Thurston v. James, 242 
 Tibbetts v. George, 424 
 Tiedman v. Knox, 263, 373, 378, 384, 
 
 386, 388, 404 
 Tierman v. Jackson, 424 
 Tiffany . Boatman's Inst., 11, 15, 
 
 16, 135, 139 
 Tigress, the, 395 
 Tilford v. Ramsey, 54 
 Tindal v. Brown, 202 
 
 v. Taylor, 393 
 Tingle v. Fisher, 144 
 Tinsley's Case, 356, 359 
 Toby v. Smith, 48 
 Tobey v. Barber, 109 
 Todd v. Morehouse, 427 
 Toledo Ry. Co. v. Gilvin, 382 
 Toles v. Adee, 220 
 Tome v. Parkersburgh Ry. Co., 265 
 Tompkins v. Colthurst, 98 
 Tompkyns v. Woryard, 54 
 Tonica R. R. Co. v. Stein, 286, 287 
 Tooke 0. Newman, 91, 140, 175 
 
 Toplis v. Baker, 156 
 Torrey v. Baxter, 109 
 
 v. Dearth, 145 
 
 t>. Grant, 141 
 Torriugton v. Lowe, 371 
 Torn v. Goodrich, 251 
 Town of Colona v. Eaves, 43 
 Town of Eagle v. Kohn, 43, 47, 48 
 Town of Genoa v. Woodruff, 47 
 Town of Thompson . Perrine, 7, 
 
 47, 48 
 
 Towne . Rice, 3 
 Tovvnsend v. Mclver, 275 
 
 v. Newell, 104 
 
 v. Whitney, 212 
 Tracy v. Yates, 283 
 Tradesmen's Bank v. Woodward, 
 
 206 
 
 Traun v. Kiefer, 433 
 Treasurer *. Mining Co., 340, 341 
 Tregouing . Altenborough, 137 
 Trenton Banking Co. v. Woodruff, 
 
 193 
 
 Treuttel v. Barandon, 72, 75, 76, 78 
 Trimble v. Thome. 241, 255 
 Trinity Church v. Higgins, 222, 224 
 Tripp v. Brownell, 424 
 
 . Vincent, 144 
 Trist v. Child, 423, 424 
 Trotter v. Erwin, 156 
 
 v. Shippen, 23 
 
 v. Strong, 228 
 
 Troutrnan v. People's Bank, 419 
 True v. Fuller, 253 
 Trumper v. Colthurst, 98 
 Trustees of Union College v. 
 Wheeler, 185, 192, 193, 422, 
 432, 439 
 Tucker v. Bank, 164 
 
 v. Peasley, 52 
 Turner v. Nat. Bank, 64 
 
 t>. Treadway, 23 
 Turnpike Co. . Ferree, 271 
 Tuthill v. Davis, 141 
 Tutt v. Adams, 57 
 Tuttle v. Tuttle, 228
 
 Ivi 
 
 TABLE OF CASES. 
 
 Tuttle 0. Walton, 290 
 Twinlick Oil Co. 0. Marburg, 74 
 Twitchill v. McMurtrie, 186 
 Twogood, ex parte, 5 
 Twopenny 0. Young, 343 
 Tyler 0. Bussey, 33 
 Uhler v. Browning, 54 
 Uley v. Guirich, 50 
 "Oilman 0. Barnard, 404 
 Union Bank 0. Edwards, 314 
 
 t>. Ewan, 239 
 
 0. Laird, 210, 211, 255, 271, 273, 
 289. 290 
 
 0. Ridgeley, 391 
 
 0. Smith, 53 
 
 v. Stafford, 156 
 Union Nat. Bank v. Barber, 23 
 
 v. Carr, 346, 348-850 
 
 0. Crowley, 340 
 
 9. Roberts, 90 
 
 0. Underbill, 57 
 
 v. Warner, 190 
 
 Union Central Ins. Co. 0. Curtis, 171 
 Union College v. Wheeler, 163 
 Union Sav. Assn. v. St. Louis Elev. 
 
 Co., 416 
 Union Trust Co. D, Rigdon, 87, 95, 
 
 96, 117, 118, 135 
 United States 0. Allsbury, 221 
 
 0. Arnold, 221 
 
 v. Boyd, 204 
 
 0. Herron, 213 
 
 0. Hodge, 242 
 
 v. Kirkpatrick, 206 
 
 v. Murphy, 250 
 
 0. Preston, 213 
 
 0. Rice, 251 
 
 0. Simpson, 341 
 
 0. Stansbury, 241 
 
 0. State Bank, 402 
 
 0. Sturgess, 161 
 
 0. Vaughan, 389, 398, 428 
 
 0. Villalonga, 408 
 United States Bank 0. Binney, 50 
 
 0. Covert, 158, 159 
 U. S. Mortgage Co. 0. Gross, 147 
 
 Updegraft v. Edwards, 161, 165 
 Urquhart 0. Mclver, 407 
 Upton v. Trebilick, 383 
 Uthcr v. Rich, 75 
 Vail 0. Foster, 317, 354 
 
 0. Hamilton, 381, 283, 328, 339 
 Vallette v. Mason, 18, 90, 113 
 Valpy v. Gibson, 405 
 
 0. Oakley, 39, 110 
 Van Allen v. Nat. Bank, 62, 403 
 Van Amrige 0. Peabody, 407 
 Van Blarcom v. Bank, 9, 16 
 Vance 0. Erie Ry. Co., 312 
 
 0. Lancaster, 237 
 Vanderbilt 0. Schreyer, 362 
 Vandercook 0. Baker, 144, 165, 168 
 Vanderkemp 0. Shelton, 147 
 Vanderzee 0. Willis, 61, 133 
 Van Duzer 0. Howe, 66 
 Van Etten 0. Trouden, 242 
 Vanhorne 0. Gilbough, 331, 364 
 Van Keuren 0. Corkins, 192 
 Van Norman 0. Jackson, 394 
 Van Orden 0. Durham, 217 
 Van Sands v. Middlesex Co. Bank, 
 
 264, 275, 239, 303 
 Vansant 0. Allmon, 154, 158 
 Van Wyck 0. Baker, 191 
 Varnum 0. Bellamy, 27 
 Vartie 0. Underwood, 210 
 Vaughau, the, 394 
 Veach 0. Wickershara, 215 
 Veil v. Mitchell, 402 
 Ventress 0. Creditors, 159 
 Vermilye 0. Adams, 46, 48, 69, 95 
 Verner 0. Johns, 144 
 Vernon 0. Manhattan Co., 58 
 Vertue 0. Jewell, 405 
 Vest 0. Green, 227 
 Vickers 0. Hertz, 436 
 Vickey 0. Dickson, 141 
 Vicle 0. Judson, 185, 433 
 Vieley 0. Hoag, 250, 
 Vilas 0. Jones, 248 
 Villars v. Palmers, 241 
 Vincr v. N. Y. etc. Ry. Co., 394
 
 TABLE OF CASES. 
 
 Ivii 
 
 Violet v. Patton, 32, 66 
 Vose v. Florida Ry. Co., 331 
 Voss v. International Bank, 241 
 
 v. Robertson, 375, 408 
 Vredenburgh 0. Burnett, 186 
 Wade v. Stanton, 242 
 Wadsworth 0. Tyler, 16 
 Wagner 0. Freschell, 51 
 
 0. Peterson, 337 
 
 V. Simmons, 23 
 Wait v. Baker, 381 
 
 v. Brewster, 30, 109 
 
 v. Green, 397 
 
 0. Thayer, 56 
 
 v. Dennison, 239, 240 
 Wakefield Bank, ex parte, 61 
 Wakeman v. Goudy, 95, 114 
 Waldring v. Harring, 253 
 Waldo Bank v. Greeley, 56 
 
 V. Lambert, 51 
 Waldron . Romaine, 413 
 
 v. Young, 32 
 
 v. Zacharie, 108 
 Walker v. Bartlett, 265, 268 
 
 D. Bennett, 285 
 
 v. Bank of Montgomery, 203 
 
 v. Bank of Washington, 141 
 
 v. Carleton, 117 
 
 0. Castle, 126 
 
 v. Dement, 158, 170 
 
 t>. Detroit Transfer Co., 315, 316 
 
 0. Jones, 129, 144, 155 
 
 e. Lee, 17, 56, 143, 144, 161, 175 
 
 0. Railroad Co., 312 
 
 v. Schreiber, 144, 158 
 
 v. Taylor, 73 
 Wallace's est., 214 
 Wallace v. Agry, 243 
 
 v. Foreman, 29 
 
 v. Hardacre, 68 
 
 v. Jewell, 32 
 
 v. McConnell, 47 
 Wain v. Bank, 289, 290 
 Walnut v. Wade, 8, 47 
 Walter v. Ross, 381, 382, 405 
 Waltermire v. Westover, 156 
 
 Walters v. Munroe, 258 
 Wanzer v. Carey, 144, 198 
 Ward, ex parte, 370 
 Ward v. Central R. R. Co., 308 
 
 v. Howard, 24, 28 
 
 v. Morgan, 95 
 
 0. Stahl, 204 
 
 v. Stout, 203, 220 
 Wardell v. Howard, 23 
 Warner v. Beardsley, 209, 255 
 Warren v. Brandon Co., 294, 331, 333 
 Warner v. Campbell, 247 
 
 v. De Witt Nat. Bank, 180 
 
 0. Martin, 407, 408 
 
 0. Morrison, 238 
 Warren v. French, 56 
 
 0. Hewitt, 356 
 
 0. Homestead, 147 
 Warrington 0. Furber, 89 
 Warwick 0. Richardson, 222, 224 
 Washburn 0. Pond, 120, 123 
 Washington Bank 0. Lewis, 72 
 Washington Co. 0. Slaughter, 144 
 Washington Cottrt 0. St. Clair, 205 
 Waterman 0. Brown, 343 
 
 0. Buckland, 349 
 
 0. Hunt, 145, 159 
 Waters 0. Carroll, 206 
 
 v. Riley, 252 
 Watkins 0. Hill, 14 
 
 v. Inglesby, 228 
 Watson 0. Cabot Bank, 66, 78 
 
 0. Hawkins, 144 
 
 0. McLaren. 433 
 
 0. Mid. Wales Ry. Co., 422 
 
 0. Russell, 37, 70 
 
 0. Taylor, 15, 16 
 
 0. Turpley, 21 
 Watts v. Kinney, 213, 215 
 
 0. Porter, 428 
 Way 0. Richardson, 7 
 Waydall 0. Luer, 109, 228 
 Wayne etc. Society 0. Cordwell, 205 
 Weakly v. Bell, 242 
 Weaver 0. Barden, 265, 279, 309, 316, 
 317, 324
 
 Iviii 
 
 TABLE OF CASES. 
 
 Webb v. Haselton, 161 
 
 v. Hcrne Bay Comm., 440 
 Webster's App., 214. 237, 255 
 Webster v. Emp. Ins. Co., 426, 446 
 
 0. Cobb, 253 
 
 v. Sturges, 348 
 
 t>. Upton, 270, 271, 283 
 Weed v. Adams, 328, 364 
 
 v. Richardson, 54 
 
 Weed Machine Co. v. Maxwell, 208 
 Weeks, in re, 221 
 Wegh 0. Boylan, 138. 184, 189, 190, 
 
 433, 435, 439 
 Weikersheim's Case, 50 
 Weinser v. Shelton, 136 
 Weirick v. Mahoning Co Bank, 425 
 Welch v. Mandeville, 446 
 
 0. Sage! 75. 76 
 Welsh v. Priest, 147 
 Welker v. Wallace, 52 
 Welkinson v. Dodds, 140 
 Welborn v. Williams, 144 
 Wcllock v. Constantine, 68 
 Wells v. Abrahams, 68 
 
 0. Mann, 220 
 
 . Masterman, 54 
 
 0. Miller, 230, 233 
 
 0. Smith, 254 
 
 v. Wells, 85, 115, 143, 175, 227 
 Wellsburg Bank T>. Kimberlands, 424 
 Welton v. Scott, 253, 261, 262 
 Wemet v. Mississquoi, 30 
 Weonston v. State, 206 
 Werder, in re, 446 
 West 0. Carolina Ins. Co., 426, 448 
 
 v. Bank of Rutland, 223 
 West Branch Bank v. Armstrong, 291 
 West Boston Savings Bank 0.Thomp- 
 
 son, 209, 256 
 
 Western Reserve Bank0. Potter, 135 
 Western Un. R. R. Co. t>. Wagner, 
 
 381, 397 
 
 Westervelt 0. Scott, 198 
 Weston's Case, 274 
 
 0. Bear River etc. Co. 278, 295 
 
 . Wiley, 144 
 
 Westphal v. Ludlow, 88, 114 
 Westzinthus, in re. 373, 397, 405 
 Wetherell's App., 186 
 Wharn v. Irvin, 210 
 Whartley . Tricker, 254 
 Wharton v. Woodburn, 203 
 Wheeler v. Faurot, 28 
 
 v. Guild, 7 
 
 v. Miller, 283 
 
 t>. Newbould, 85, 87, 90, 93, 117, 
 118, 363, 366 
 
 v. Rice, 54 
 
 0. Slocum, 27 
 
 Wheelock v. Kost, 282, 283 
 Whicher v. Hall, 245 
 Whipple v. Blackington, 11, 95, 100, 
 102, 120, 129 
 
 0. Briggs, 233, 234, 235 
 Whistler v. Foster, 22, 24, 150 
 White v. Ault, 239 
 
 v. Banks, 232 
 
 0. Bass, 359 
 
 v. British Emp. Ins. Co., 488 
 
 v. Knapp, 214 
 
 v. Langdon, 433 
 
 v. Phelps, 90 
 
 v. Platt, 11 
 
 v. Railroad Co., 43, 47 
 
 0. Salisbury, 264 
 
 0. Schuyler, 341 
 
 0. Springfield Bank, 27 
 
 c. Sutherland, 170 
 
 0. Walker, 244 . 
 
 v. Wright, 134, 141 
 Wliitehead 0. Root, 348 
 White Mountain R. R, Co. 0. Bay 
 State Iron Co., 79, 120, 125, 
 132 
 
 Whitfield 0. Savage, 258 
 Whitin 0. Paul, 118, 143, 175 
 Whiting 0. Beebe. 229 
 
 v. Town of Potter. 43 
 Whitlock v. Hay, 412, 416, 419 
 Whitney v. Beckford, 409, 553 
 
 0. Cowan, 424 
 
 0. French, 156
 
 TABLE OF CASES. 
 
 lix 
 
 Whitney v. M. U. Express Co., 116 
 
 v. Tibbitts, 413 
 Whitaker v. Kirby, 244 
 
 . Sumner, 127 
 Whittaker v. Brown, 51, 52 
 
 v. Charleston Gas Co., 114, 117, 
 
 119, 442, 444, 446 
 Whittemore t>. Gibbs, 144 
 Whitten . Wright, 114, 257 
 Whitwell v. Brigham, 104, 105, 108, 
 
 109, 110 
 
 Wicker v. Hoppack, 224 
 Wickham v. Morehouse, 75, 422, 431 
 Wichita Savings Bank v. A. T. & S. 
 
 F. R. R. Co., 391 
 Wicks v. Hatch, 334, 366 
 
 v. Mitchell, 207 
 Wiggin's App., 207, 208 
 Wiggin. Dorr, 98 
 Wilber v. Lynde, 74 
 Wilcocks, ex parte, 283 
 Wilcox v. Fairhaven Bank, 217, 219, 
 238, 239 
 
 . Todd, 207, 210 
 Wild, in re, 135 
 Wild v. Howe, 248 
 Wildrich v. Swain, 29, 109 
 Wildes v. Savage, 88, 257, 259 
 Wiley v. Knight, 240 
 
 v. Starbuck, 139 
 Wilhelm v. Carr, 346, 349, 350 
 
 v. Schmidt, 109 
 Wilkes v. Ferris, 413 
 Wilkinson v. Flowers, 156 
 
 v. Jeffers, 91, 95 
 
 v. Simpson, 146 
 Williams v. Bosson, 33 
 
 v. Gilchrist, 54 
 
 v. Hancock, 207 
 
 v. Ingersoll, 423, 425, 430 
 
 . Ins. Co., 312 
 
 v. Jackson, 147, 152 
 
 . Little, 23, 28, 87, 164 
 
 v. Mechanics' Bank, 275, 295 
 
 v. Norton, 90 
 
 v. Owen, 212 
 
 Williams v. Price, 442 
 
 e. Smith, 16, 37, 42, 66, 78, 112 
 
 . Sorrell, 192 
 
 v. Tiedeman, 348, 349, 356 
 
 v. Tilt, 140 
 
 v. Walbridge, 54 
 Williamson v. Champlain, 154 
 
 v. Ellis, 372 
 
 . McClure, 130, 335 
 Willis v. Farley, 144, 161 
 
 v. Phila. & Darby Ry. Co., 265, 
 
 312, 314, 318 
 
 Willoughby v. Comstock, 3, 331 
 Wilmerding v. Hart, 97 
 Wilson v. City, 16 
 
 v. Green, 203 
 
 v. Hayward, 158 
 
 v. Little, 4, 90, 93, 118, 129, 264, 
 276, 334, 337, 369 
 
 v. Murphy, 214 
 
 v. Moore, 302 
 
 . Mason, 410 
 
 v. Richards, 50, 58 
 
 v. Salamanca, 48 
 
 v. Senier, 258 
 
 v. Troup, 195 
 
 v. Williams, 54 
 
 v. Wright, 237 
 Winans v. Hassey 370 
 Winchell v. Doty 253 
 Winne v. McDonald 383, 414 
 Winship v. Bank, 51 
 Winslow v. Vermont Ry. Co., 394 
 Winsmith v. Winsmith, 151 
 Winsted v. Bingham, 144 
 Winston v. State, 204 
 Wise D. Charlton, 3 
 Wiseman v. Vanderpat, 382 
 Wiswell v. Baxter, 156 
 Winters v. Belmont Mining Co., 263, 
 265, 273, 295, 298, 300, 310 
 Winters v. Franklin Bank, 158 
 Witherby v. Mann, 228 
 Winthrop Savings Bank v. Jackson, 
 
 63, 104, 105 
 Wintle v. Crowther, 56
 
 Ix 
 
 TABLE OF CASES. 
 
 Winton 0. Little, 180, 241 
 Witmer 0. Ellison, 249 
 Wellington v. Sparks. 215 
 Wolcott v. Heath, 348 
 Wood's App., 263, 265, 296, 302, 321, 
 
 322, 333 
 Wood v. Augustine, 156 
 
 0. Bank, 239 
 
 v. Fiske, 251 
 
 . Hayes, 307, 369 
 
 v. Jefferson Co. Bank, 243 
 
 0. Leland, 238, 252 
 
 0. Mathews, 87, 93, 96, 114 
 
 v. People's Nat. Bank, 64 
 
 v. Robinson, 242 
 
 0. Sherman, 253 
 
 0. Smith, 301, 320 
 
 0. Trask, 158 
 
 v, Wallace, 424 
 Woodruff 0. Dcpue, 186 
 
 0. King, 144 
 
 c. Morristown Inst. 184, 186, 189 
 Woodward v. Matthews, 157 
 Woods v. Nat. Bank, 180 
 Woolford 0. Dow, 247, 248 
 Woolridge v. Norris, 223 
 Woolsey v. Brown, 207 
 Woolen v. Buchanan, 209, 210 
 Wooters v. Hollingsworth, 158 
 Worcester Corn Ex. Co., in re, 52 
 Worcester Bank v. Bank, 75 
 Worcester Nat. Bank 0. Cheeney, 14, 
 
 27, 175 
 
 Word 0. Morgan, 442 
 Worden v. Salter, 260 
 Work v. Bennett, 337 
 
 0. Brayton, 18 
 
 v. Kase, 34. 36 
 
 Worner 0. Waterloo etc. Society, 214 
 Worthington v. Torney, 369 
 Wren Pierce, 261 
 Wright's App., 312, 815, 316 
 Wright 0. Antwerp Pipe Co., 303 
 
 0. Austin, 207. 210, 211 
 
 0. Campbell, 381 
 
 0. Crabbs, 361 
 
 0. Eaves, 144, 173 
 
 Wright 0. Hooker, 52 
 
 0. Hunter, 238 
 
 0. Lang, 245 
 
 0. Morley.217, 239, 255 
 
 0. Nat. Bank. 139 
 
 0. Northern Cont. Ry. Co., 394 
 
 0. Ross, 143, 175, 332 
 
 0. Simpson, 89, 153 
 
 0. Soloman, 407 
 
 0. Troutman, 144 
 
 0. Whiting, 224 
 Wrotten 0. Armat, 64 
 Wyckoff 0. Anthony, 62, 97, 131 
 Wyeth 0. Bank. 12 
 Wylie 0. Bank, 63 
 Wyman 0. Cochrane, 107 
 Wyman 0. Robinson, 221 
 Wyne 0. Macdonald, 397 
 Wynkoop 0. Leal, 306, 327, 369 
 Wythes 0. Laboucherc, 203 
 Wulff 0. Jay, 239, 240 
 Yarborough v. Bank of England, 312 
 Yarnell 0. Anderson, 58 
 Yates 0. Donaldson, 203 
 Yeatman 0. Savings Inst., 278, 329 
 Yenni 0. McNamee, 412, 421 
 Yerger 0. Barz, 168 
 
 0. Jones, 302 
 
 Yerkes 0. Salomon, 349, 350, 355 
 York 0. Landis, 212 
 York County Ins. Co. 0. Brooks, 246 
 Yorkshire Ry. Co. 0. Maclure, 295 
 Young, ex parte, 221, 348, 355 
 Young 0. Northern 111. Assn., 16, 17 
 
 0. Grote, 315, 316 
 
 0. Hobbs, 28. 29 
 
 0. Lee, 23. 27, 65, 92 
 
 0. Miller, 145, 147, 160 
 
 0. Morgan, 214 
 
 0. Scott, 407 
 Youngc, ex parte, 202 
 Zabriskie 0. Railroad Co.. 44, 180, 260 
 Zimplcman 0. Vcedcr, 87, 90, 96. 117. 
 
 118, 125. 175. 183 
 Zook Clcmmcr, 212 
 Zuchter 0. Boehm, 154 
 Zuel v. Bowen, 55
 
 PART I. 
 
 NEGOTIABLE COLLATERAL SECURITIES, 
 
 CHAPTER I. 
 
 NEGOTIABLE COLLATERAL SECURITIES. 
 
 1. The use of negotiable instruments as collateral security. 
 
 2. Definition of the terms " collateral security" and " collateral." 
 
 3. Recital of collateral securities in principal note. 
 
 1. THE USE OF NEGOTIABLE INSTRUMENTS AS COLLAT- 
 ERAL SECURITY. The use of negotiable instruments, as bills 
 of exchange and promissory notes made by third persons, as 
 collateral security for the payment of the negotiable promis- 
 sory note or other obligation of the pledger, where the same 
 are indorsed, where required, or by delivery merely, where 
 indorsed in blank and made payable to bearer, so that the 
 pledgee becomes a party thereto, conveys the absolute legal 
 title to such collateral securities, and if such transfer be 
 made bona fide, before maturity, for value, without notice of 
 equities, and in the usual course of business, the pledgee's 
 title cannot be impeached. Holding the legal title to the 
 negotiable collateral securities, a bona fide pledgee for value 
 stands in the same position as to rights, privileges and 
 equities, as a bona fide purchaser for value of negotiable 
 instruments. The pledgee, with title, is a purchaser for 
 value, and is entitled as any bona fide holder for value to 
 enforce the collection of such negotiable collateral secu- 
 rities as against the parties to such notes for the full
 
 2 NEGOTIABLE COLLATERAL SECURITIES. 
 
 
 
 amount of their face. The presumption of law in favor of 
 the pledgee is, that he gave full value for them, or that he 
 received them from some holder for value, to collect them, 
 and to pay the principal debt at maturity from the proceeds, 
 and hold any surplus for the benefit of the pledger, or 
 persons beneficially interested in such proceeds. The 
 transaction by which the negotiable collateral securities 
 pass to the lender, vests the legal title, and the only right 
 of the pledgor is to redeem his collateral securities upon 
 payment of the debt, or to be paid any surplus arising from 
 their collection, after satisfaction of the pledgee's claims. 
 By commercial usage, not only negotiable instruments, but 
 also documents of title, quasi or non-negotiable in character, 
 are available as collateral security for loans of money, or dis- 
 counts of paper. The terms adopted, both in commercial cir- 
 cles and by jurists, describing such transactions " collateral 
 security" and " collateral," as distinguished from a mere 
 pledge illustrate the development of this special branch of 
 the law, and emphasize the importance of the questions 
 relative to the rights, duties, and liabilities incurred by 
 parties to such contracts of loan, secured by collateral. 1 
 
 2. DEFINITION OP THE TERMS "COLLATERAL SECU- 
 BITY" AND "COLLATERAL." "Collateral security" is a 
 separate obligation, as the negotiable bill of exchange or 
 promissory note of a third person, or document of title, or 
 other representative of value, indorsed where necessary, and 
 
 1 Railroad Co. v. National Bank, Dillingham, 73 Me. 59 ; Pierce v. 
 102 U.S. 14; Swift v. Smith, Ib. 442; Faunce, 49 Mo. 507; Miller v. Pol- 
 Collins v. Gilbert, 94 U. S. 753 ; lock, 99 Pa. St. 202 ; Richardson v. 
 Michigan Bank v. Eldred, 9 Wall. Rice, 9 Tenn. 290 ; Currie v. Misa, 
 544, 553 ; Gibson v. Stevens, 8 How, L. R. 10 Ex. 153 ; B. c. aff. 1 App. 
 384; Manhattan Co, v. Reynolds, 2 554; Leask v. Scott, L. R. 2 Q. B. 
 Hill, 140; Bank of New York c. D., 376 ; Gill v. Continental Gas Co. 
 Vanderhorst, 32 N. Y. 553; Crocker L. R. 7 Ex. 332; ex parte Golding, 
 . Crocker, 81 Ib. 507, 510; Farwell L. R. 13 Ch. D. 634; France v. 
 9. Importers' Bank, 90 Ib. 483; Chic- Clark, L. R. 22 Ch. D. 830; General 
 opee Bank v. Chapin 8 Met. 40 ; De- Credit Co. v. Glegg, Ib. 549 ; Kemp 
 Wolft>.G!irdner,|12Cush. 19, 25; Lo- t>. Falk, L. R. 7 App. 582 (Black- 
 gan v. Smith, G2 Mo. 455 ; Rice v. burn, Lord).
 
 DEFINITION AND RECITAL. 3 
 
 delivered by a debtor to his creditor, to secure the pay- 
 ment of his own obligation, represented by an independent 
 instrument. Such collateral security stands by the side of 
 the principal promise as an additional or cumulative means 
 for securing the payment of the debt .* The transfer, 
 however, of the debtor's own negotiable promissory 
 notes as collateral security for the payment of other notes 
 made by him, does not come within any definition of collat- 
 eral security; 2 nor where the proposed collateral security 
 is a negotiable promissory note of a person already liable on 
 a bill of exchange, the payment of which is to be secured. 3 
 " Collateral," in the commercial sense of the word, is a 
 security given in addition to a principal obligation, and sub- 
 sidiary thereto ; and is used as generally descriptive of all 
 choses in action, as distinguished from tangible personal 
 property, including the usual negotiable instruments of 
 commerce; the quasi-negotiable securities, as certificates of 
 stock, bills of lading, and warehouse or cotton receipts; and 
 the divers non-negotiable choses in action and equitable 
 assignments available as collateral. 
 
 3. RECITAL OP COLLATERAL SECURITIES IN PRINCI- 
 PAL NOTE. The regular course of banks and bankers in dis- 
 counting commercial paper, to receive the promissory notes 
 of third persons as collateral security for the payment of the 
 principal note given by their customers, is a recognized form 
 of collateral security. 4 Upon asking for such discount, it is 
 
 Judge Redfield, in his note to 120; Shoemaker v. National Bank, 2 
 
 LeBreton v. Pierce, 1 Am. Law Reg. Abb. (U. S.) R. 416,423; Loclirane v. 
 
 (N. S), 38, says: "The etymology Soloman. 38 Ga. 292; in re Athill, 
 
 of collateral security indicates that L. R. 16 Ch. D. 223. Bouv. Law 
 
 it is something running along with, Diet. 331. 
 
 and as it were parallel to, something * Miller v. Lamed, 103 111. 562. 
 
 else of a similar character. It is col- Atlantic Bank . Boies, 6 Duer, 
 
 lateral to the original indebtedness." 583. 
 
 Other definitions are found in Munn 4 Michigan Bank v. Eldred, 9 Wall. 
 
 v. McDonald, 10 Watts, 273; Kram- 544, 553; Railroad Co. v. National 
 
 er v. Sandford, 4 W.& S. 328; Cham- Bank, 102 U. S. 14.; ex parte Scho- 
 
 bersburg Ins. Co. . Smith, 11 Pa. St. field, L. R. 12 Ch. D. 337, 348.
 
 NEGOTIABLE COLLATERAL SEC^HITIES. 
 
 usual for the pledger in his principal note to recite therein 
 the collateral securities deposited, and the terms and manner 
 in which the same may be sold or made otherwise available, 
 upon default. 1 Such a recital does not affect the negotia- 
 bility of the principal note, as the amount to be paid, the 
 time, and the person to whom, remain certain. 2 Where a 
 note, pledged as collateral security, recites on its face that 
 it is " to be held as collateral security for the payment of 
 certain notes " of third persons, it is non-negotiable, even 
 in the hands of a bona fide indorsee, for value, lacking cer- 
 tainty in amount, and being a contingent promise. 3 
 
 i$ 188. * 
 
 * * after date * * promise to 
 pay to the order of * * * at its 
 office in the city of * * * State 
 of * * * * * * dollars for 
 value received, with interest at the 
 rate of * * * per cent, per an- 
 num after due. As collateral security 
 for the payment of this note, * * * 
 have deposited with, and hereby 
 pledge to said bank * * * and 
 ****** hereby give the 
 said * * * , its assign or assigns* 
 authority to sell the same, or any 
 part thereof, on the maturity of this 
 note, or at any time thereafter, or 
 before, in the event of the said se- 
 curities depreciating in value, at 
 public or private sale, without ad- 
 vertising the same, or demanding 
 payment, or giving notice, and to 
 apply so much of the proceeds there- 
 of to the payment of this note as 
 may be necessary to pay the same, 
 with all interest due thereon, and 
 also to the payment of all expenses 
 attending the sale of the said * * * 
 and in case the proceeds of the sale 
 of the said * * * shall not cover 
 
 the principal, interest and expenses, 
 
 * * * promise to pay the defi- 
 ciency forthwith after such sale; 
 and * * hereby waive and release 
 the holder of this note from all duty 
 and diligence to sell, enforce, or 
 collect any collateral held with this 
 note. And it is hereby understood 
 and agreed that the collateral upon 
 this note shall be applicable to any 
 other note or claim held by the said 
 
 * * or the legal holder hereof, 
 against * * , and in case of the 
 exchange of or addition to the col- 
 lateral above described, the pro- 
 visions of this note shall extend to 
 such new or additional collateral. 
 
 * * /> 
 
 * Willoughby t>. Comstock, 3 Hill, 
 389; Cook <c. Satterlee, 6 Cow. 108; 
 Arnold v. Rock River R. R. Co. 5 
 Duer, 207; National Bank v. Faut, 
 50 N. Y. 475 ; Banning v. Markham, 
 12 Gray, 454; Stultz . Silva, 119 
 Mass 139; Towwe v. Rice, 122 Ib. 
 67. Fancourt v. Thome, 9 A. & E. 
 812; Bolton v. Dugdale, 4 B & Ad. 
 619; Wise v. Charlton, 4 A & E. 786. 
 
 Haskell v. Lamber, 16 Gray, 592.
 
 THE ACT OF PLEDGE. 
 
 CHAPTER II. 
 
 THE ACT OP PLEDGE OF NEGOTIABLE COLLATERAL 
 
 SECURITIES. 
 
 4. By indorsement of negotiable bills and notes. 
 
 5. Where indorsed for collection or for a special purpose. 
 
 6. Pledge of negotiable instruments unindorsed. 
 
 7. By delivery when payable to bearer, or indorsed in blank. 
 
 8. And in the case of negotiable bonds and coupons. 
 
 9. Delivery of negotiable instruments in pled*e essential. 
 
 10. Delivery may be to third party, by agreement. 
 
 11. The possession of collateral securities necessary to sustain pledge. 
 
 12. Applications of the rule as to possession. 
 
 13. Casey v. Cavaroc. 
 
 14. Collateral securities follow renewals of principal note. 
 
 15. Exchange or substitution of collateral securities. 
 
 4. BY INDORSEMENT OP NEGOTIABLE BILLS AND 
 NOTES. The bona fide indorsee of negotiable bills and 
 notes, receiving the same in the usual course of business, 
 before maturity, as collateral security, for a valuable consid- 
 eration, without notice, or if indorsed in blank or payable to 
 bearer by mere delivery, is a holder for value, and as 
 much Avithin the protection and benefits of the law-mer- 
 chant as if the transfer were by way of absolute sale. 1 The 
 
 'Railroad Company v. National 500; Taylor v. Williams, 11 Met. 44; 
 
 Bank, 102 U. S. 14, 87; Oates v. Na- Logan v. Smith, 62 Mo. 455 ; Sav- 
 
 tional Bank, 100 Ib. 239, 247, 248; ings Assn. v. Hunt, 17 Kan. 532 ; 
 
 Manhattan Co. v. Reynolds, 2 Hill, Best v. Crall 23 Ib. 484; Allen v. King, 
 
 140; Poughkeepsie v. Hasbrouck, 6 4 McLean C. C. 128. The only cases 
 
 N. Y. 230; Nelson . Eaton, 26 Ib. contra are in New Hampshire: Jen- 
 
 410; City Bank v. Perkins, 29 Ib. ness v. Bean, 10 N. H. 266 ; Williams 
 
 554; Nelson v. Wellington, 5 Bos. v. Little, 11 Ib. 60; Clement v. Ever- 
 
 W. 187 ; Munn v. McDonald, 10 ett, 12 Ib. 317 ; see Tucker v. Bank, 
 
 Watts, 273 ; Hunt . Nevers, 15 Pick. 58 Ib. 83. Peacock v. Purcell, 14 C. B.
 
 6 NEGOTIABLE COLLATERAL SECURITIES. 
 
 holder of such bill and notes negotiated as collateral, secur- 
 ity in either case, assumes the responsibility, if not paid 
 when due and payable, of making demand of payment and 
 of giving notice of non-payment, as may be necessary. 
 The assumption of this liability by the holder of negotiable 
 paper as collateral security, is a valuable consideration 
 of itself to support his position as a holder for value, 
 in the usual course of business, in cases where there 
 has been a present advance, or a surrender of other secur- 
 ities, or a valid antecedent debt, or other valuable consider- 
 ation. 1 
 
 5. WHERE INDORSED FOR COLLECTION, OR FOR A 
 SPECIAL PURPOSE. The indorsement of a bill of exchange, 
 or note of a third persoh, deposited in a bank, may be shown 
 to have been made conditionally, or for a special purpose, 
 and not with the intention to convey the title. It may be 
 shown that such indorsement was made simply to enable 
 the bank, or other agency, to make collection thereof for 
 the customer. In such cases, the title to the securities 
 remains in the customer, and in the event of the bank's 
 insolvency, the specific notes may be recovered, or the avails 
 thereof. 2 The negotiation, however, of bills or notes, for 
 value, before maturity, by the person or bank holding the 
 same for purposes as stated, to persons paying value therefor 
 in good faith, without notice of equities, defeats the claim 
 of the owner to recover his property. 3 If the paper be 
 
 N. S. 728 ; in re European Bank, L. Bon v. Barney, 1 la., 531 ; Atkinson 
 
 R. 8 Ch. 41; Collins v. Martin, 1 B. . Brooks, 26 Vt. 584 ; Moore . 
 
 & P. 648; Palmer v. Richards, 15 Hall, 48 Mich. 143; Boyd v. Corbitt, 
 
 W. Jur. 41. 37 Ib. 52 ; Balback v. Frelinghuysen, 
 
 1 Railroad Co e. Nat. Bank, 102 15 Fd. Rep. 675. s. c. 15 Rep. 518. 
 
 U. S. 14. Ex parte Twogood, supra ; ex 
 
 * Ex parte Twogocd, 19 Ves. 231 ; parte Schofield, L. R. 12 Ch. D. 337. 
 
 In re Boys, L. R. 10 Eq. 467; Solo- Palmer v. Richards, 1 E. L. & E. 
 
 mon v. Bank of England, 15 East. 529; 15 Jur. 41 ; Lloyd . Howard 
 
 135; DC La Chaumette v. Bank of 20 L. J. Q. B. 1 ; Balback v. Freling- 
 
 England, 9 B. & C. 208; Scott v. huysen, supra. 
 Ocean Bank, 23 K Y. 289 ; John-
 
 THE ACT OP PLEDGE. 7 
 
 taken after maturity, although value is paid therefor, it 
 is subject to equities. 1 The presumption is that a bill of 
 exchange given for a certain sura, and payable at a certain 
 day, was negotiated for a present advance, and a banker is 
 not allowed to retain the bill of exchange as a continuing 
 guaranty, without proof that such was the agreement. 3 
 
 6. PLEDGE OF NEGOTIABLE INSTRUMENTS, UNIN- 
 DORSED. A simple delivery of negotiable promissory notes 
 or bills of exchange as collateral security, where indorse- 
 ment is required, so that the title to the securities still 
 remains in the pledgor, vests in the pledgee a contingent 
 equitable interest only, or in the proceeds thereof, subject 
 to the prior equities of third persons as against the pledger. 3 
 The pledgee, under such circumstances, is the mere agent 
 of the pledgor, and no reason exists for excluding equities 
 existing against the pledgor. 4 Such collateral securities 
 stand upon the same footing as non- negotiable paper, 
 subject to all defenses, equities and infirmities existing at 
 the time of assignment between the payee and the maker, 
 whether attached to the instrument or not. 5 Where a bill 
 of exchange was deposited as collateral security, without 
 proper indorsement, and the pledgor became bankrupt, the 
 pledgee was given the aid of equity to require the pledger's 
 assignee to make the necessary indorsement. 6 Under the 
 Louisiana statutes, delivery of negotiable securities is suffi- 
 cient to constitute a valid act of pledge, and a deposit of 
 bills of exchange, bills receivable, notes, and other securities, 
 unindorsed, is supported. 7 
 
 1 Foley v. Smith, 6 Wall. 493. Simpson . Hall, 47 Conn. 
 
 * In re Boys, L. R. 10 Eq. 467. 417. 
 
 . Snow D. Fourth Nat Bank, 7 Ex parte Rice, 3 M. D. & D. 
 
 Robt. 479. 586. 
 
 4 Palmer v. Richards, 1 E. L. & E. ' Casey v. Schneider, 95 U. S. 497; 
 
 529 ; De La Chaumette v. Bank of Partee v. Corning, 9 La. Ann. 539 ; 
 
 England, 9 B & C. 208; Atkinson v. Act of Louisiana, March 15, 1855; 
 
 Brooks, 26 Vt. 569; Allen t>. King, Rev. Stats. Lou. 1876, 2904. 
 4 McLean, 128.
 
 8 NEGOTIABLE COLLATERAL SECURITIES. 
 
 7. BY DELIVERY WHEN PAYABLE TO BEARER, OR 
 INDORSED IN BLANK. The possession of valid negotiable 
 instruments indorsed in blank, or made payable to bearer, 
 is prima f;icie evidence that the holder has full title thereto. 
 This rule is applied in favor of the holder of negotiable in- 
 struments, so drawn or indorsed, as collateral security. 1 
 "A note (as said by Judge Story, in Bullard v. Bell) 2 is 
 often said to be assignable by delivery ; but, in correct lan- 
 guage, there is no assignment in the case. It passes by 
 mere delivery ; and the holder never makes any title by or 
 through any assignment, but claims merely as bearer. The 
 note is an original promise by the maker to pay any person 
 who shall become the bearer ; it is therefore payable to any 
 person who successively holds the note bona fide, not by 
 virtue of any assignment of the promise, but by an original 
 and direct promise, moving from the maker to the bearer." 
 
 8. AND IN THE CASE OP NEGOTIABLE BONDS AND 
 COUPONS. Negotiable bonds, payable to bearer or " holder," 
 issued under statutory authority, by municipalities or cor- 
 porations, are negotiable instruments, the title to which 
 passes by delivery. The delivery of such bonds by the 
 pledgor to the pledgee, as collateral security, before ma- 
 
 1 Railroad Company 0. Nat. Bank, 259; Coopers. Thompson, ISBlatchf. 
 
 supra, p. 38 ; Bank of Kentucky v. 434 ; Coe t. Railroad Co., 19 Ib. 
 
 Wister, 2 Pet. 326 ; Goodman v. 522 ; Fitch v. Jones, 5 1. & Bl. 
 
 Simomls, 20 How. 343, 365 ; Wheel- 238; Smith v. Braine, 16 A. & EL 
 
 er t>. Guild, 20 Pick. 545; Magee v. N. S. 242 ; Hall v. Featherstone, 3 H. 
 
 Badger, 34 N. Y. 247; Maitland *>. & N. 282 ; Chitty, Bills, 229, says: 
 
 Citizens Nat. Bank, 40 Md. 540, 564; "A blank indorsement constitutes 
 
 Blanchard v. Stevens, 3 Cush. 162, by itself a complete and perfect 
 
 167; Stoddard v. K initial 1, 6 Ib. transfer of the interest in the bill or 
 
 469; Pettee . Prout, 3 Gray, 502; note, and without the addition of 
 
 Way v. Richardson, Ib. 412; Stone any other words will vest the right 
 
 v. Brown, 54 Tex. 330; Thomson t. of action and all other rights in the 
 
 Lee County, 3 Wall. 881; Bushncll transferee and subsequent holders." 
 . Kennedy, 9 Ib. 391; City of Lex- ' 1 Mason, 251; Town of Thomp- 
 
 ingtou v. Butler, 14 Ib. 293 ; Town son t>. Perrine, 106 U. S. 259. 
 of Thompson . Perrine, 106 U. S.
 
 THE ACT OF PLEDGE. 9 
 
 turity, for a valuable consideration, vests the full legal and 
 equitable title in the latter. 1 The same rule applies to 
 dissevered coupon notes or warrants issued with bonds pay- 
 able to bearer. When separated from the bond, such cou- 
 pons cease to be mere incidents of the bonds, and become 
 independent negotiable instruments, the title to which 
 passes by delivery. 2 
 
 9. DELIVERY OP NEGOTIABLE INSTRUMENTS IN 
 PLEDGE ESSENTIAL. Delivery of negotiable instruments, 
 to be held as collateral securities, is an essential condition 
 of the validity of the act of pledge. In this respect there 
 is no difference between a pledge of personal property and 
 one of negotiable securities. 3 This rule is enforced under 
 the Louisiana code, where a firm, having made certain ac- 
 commodation indorsements upon the promise of receiving 
 security, were asked to call at the office of the obliged 
 party for the bills, but neglected to do so until the pledgor 
 deceased. There having been no delivery, the accommoda- 
 tion indorsers, although liable upon the bills, had no claim 
 
 Goodman v. Simonds, 20 How. * Walnut v. Wade, 103 U. S. 696; 
 
 452; Murray v. Lardner, 2 Wall. Clark . Iowa City, 20 Wall. 583; 
 
 110; Jerome v. McCarter, 94 U. S. Aurora City v. West, 7 Ib. 82; 
 
 734; Hotchkiss v. National Banks, Thompson v. Lee County, 3 Ib. 327; 
 
 22 Wall. 354; Hackett v. Ottawa, 99 Cromwell v. County of Sac, 94 U. S. 
 
 U. S. 86; Ottawa v. National Bank, 351, 362; Brooklyn v. Ins. Co 99 U. 
 
 105 Ib. 342; Robert v. Bolles, 101 Ib. S. 362; County of Beaver v. Arm- 
 
 119; Ins. Co. v. Bruce, 105 Ib. 328; strong, 44 Pa. St. 63; Nat. Exch. 
 
 State of Illinois v. Delafield, 8 Paige, Bank v. Hartford, etc., Ry. Co. 8 R. 
 
 527; s. c. 2 Hill, 159, 177; Bank of I. 375; Johnson v. Stark Co., 24 111. 
 
 Rome v. Village, 19 N. Y. 20; 75; Town of Eagle v. Kohn, 84 Ib. 
 
 Brainard v. N. Y. etc. R. R. Co. 25 292; Pettee . Prout, 3 Gray, 502; 
 
 N. Y. 496; Royal Bank v. Grand Evertson v. National Bank, 66 N. Y. 
 
 Junction Ry. Co. 100 Mass. 444; 14; Haven v. Railroad Co., 109 Mass. 
 
 Morris Canal and Banking Company 88. 
 
 c. Lewis, 12 N. J. Eq. 322; same v. Casey v. Schneider, 96 U. S. 497; 
 
 Fisher, 9 Ib 667; Johnson v County Huker v. Bullard. 2 La. Ann. 338; 
 
 of Stark, 24 111. 75; Third National Partie c. Corning, 9 Ib. 539. 
 Bank v. Boyd, 44 Md. 47; Gorgier v. 
 Mieville, 3 B. & C. 45.
 
 10 NEGOTIABLE COLLATERAL SECURITIES. 
 
 upon the proposed securities. 1 Delivery in pledge, where 
 the securities are already in possession of the person by 
 whom the loan is to be made, may be provided for by ver- 
 bal agreement. 2 A promissory note having been pledged 
 as collateral to secure the payment of a debt, which was af- 
 terwards paid, the collateral note remaining in the hands of 
 the pledgee, a letter from the pledger stating that he had 
 arranged for an extension of time, and asking the pledgee 
 for time upon another debt, to hold the collateral note 
 as security therefor, is an actual pledge, and not a mere 
 offer to pledge, delivery and possession to the pledgee hav- 
 ing theretofore been made. 3 And notice to a pledgee, 
 holding securities for a debt less than the value thereof, of 
 a pledge of the surplus, is sufficient to make a valid con- 
 tract. 4 
 
 10. DELIVERY MAY BE MADE TO THIRD PERSON, BY 
 AGREEMENT. Such delivery of negotiable instruments as 
 collateral security may, by agreement of the parties, be 
 made to a third person. Such delivery is sufficient to 
 constitute a valid pledge. 5 The negotiable collaterals 
 should be properly indorsed before delivery to such third 
 person, so that upon default in payment of the principal 
 debt, the pledgee may be able to enforce their payment. 6 
 Where bills receivable were thus placed in posession of a 
 third party, to hold as collateral security for the benefit of 
 the pledgee, and exchanges of such collaterals were made, 
 and a new note given, and upon the insolvency of the pled- 
 ger the collaterals were handed to the pledgee, his right of 
 
 1 D'Meza's Succ. 26 La. Ann. 35; Portal is t>. Tctlcy, L. R. 5 Eq. 
 
 Lou. Ilev. Stats. 1,876. 2 904. 140. 
 
 * Van Blarcom v. Broadway Bank, ' Rev. Civ. Code, Lou. Art. 
 87 N. Y. 540; Brown v. Warren, 43 3162. 
 
 N. H. 430; Sanders v. Davis, 13 B. 'Bank of Chenango 0. Hyde, 4 
 
 Monr. 432. Cow. 567. 
 
 Providence Thread Co. t>. Al- 
 drick, 12 R. I. 77.
 
 THE ACT OF PLEDGE. 11 
 
 recovery against- the parties thereto was fully sustained, 
 notwithstanding a claim that the loan itself was illegal. 1 
 
 11. THE POSSESSION OF COLLATERAL SECURITIES 
 NECESSARY TO SUSTAIN PLEDGE. The holder of negotia- 
 ble instruments as collateral security, receiving the same so 
 as to become a party thereto, does not lose his right and 
 title thereto, nor to the proceeds thereof, by a redelivery of 
 the same to the pledgor where such a delivery is made with 
 the intention or upon the agreement that the pledgor shall 
 proceed, for and on behalf of the pledgee, to make collec- 
 tion thereof, or do some other proper and necessary act in 
 respect thereto. Where collection of collaterals is the ob- 
 ject, the pledgor is regarded as the representative or agent 
 of the pledgee. He acts in a fiduciary character, and the 
 funds which he may collect upon such collaterals, are the 
 property of the pledgee, to be credited upon the principal 
 debt. 2 The redelivery of negotiable securities to the pled- 
 gor, with the intention not only to facilitate collection 
 thereof, but also under an agreement authorizing him upon 
 redelivery to exchange or substitute other collaterals, the 
 exchange being made several times, and the principal notes 
 being also renewed, does not affect the title to the securities 
 vested in the pledgee by proper indorsement. 3 
 
 1 City Bank v. Perkins, 29 N. T. by parties in Ohio, were pledged as 
 554. collateral security in New York, 
 
 2 White v. Platt, 4 Dcnio, 269; properly indorsed. They were re- 
 Hays V. Riddle, 1 Sandf . 248 ; Pier delivered to the pledgor, to be taken 
 . Bullis, 48 Wis. 429; Whipple v. to Ohio, there to be collected if pos- 
 Blackington, 97 Mass. 476; Tiffany sible, or to obtain security for their 
 . Boatmen's Inst. 18 AVall. 375 ; payment. A delivery for such pur- 
 Clark 1). Iselin, 21 Ib. 360 ; Dodge v. pose did not affect the pledgee's 
 Bank, 2 MacAr. 420; Hurst v. Coley, claim to the notes, or the money 
 15 Fed. Rep. 645; Stern v. Germania collected, to the extent of the debt 
 Nat. Bank, 34 La. Ann. 1119. In for which the notes were pledged. 
 White i\ Platt, supra, promissory Clark v. Iselin, 21 Wall. 860. 
 no'es, some of them overdue, mado
 
 12 NEGOTIABLE COLLATERAL SECERITIES. 
 
 12. APPLICATIONS OF THE RULE AS TO POSSESSION. 
 Tlie title acquired by a bona fide pledgee for value of ne- 
 gotiable collateral securities, such as coupon bonds, is not 
 defeated although the act of pledge itself was a misappro- 
 priation, where the repossession of the securities was ob- 
 tained by the pledger by false representations. The equity 
 of the pledgee, who has advanced funds in good faith, is 
 preferred as against the real owner of the securities. 1 But 
 the claims of a pledgee were denied in a case where 
 collateral securities, held by a bank as general security for 
 all liabilities, were at different times, with permission of the 
 cashier, allowed to be removed and others substituted, and 
 in one instance a negotiable security so received was 
 sold by the pledger to a bona fide purchaser for value, with- 
 out notice. The security thus sold was retained by the 
 pledgor under an agreement to collect the interest thereon, 
 and was returned by him to the bank, and placed in a 
 package with the other securities. Other loans were made 
 upon the securities, but without regard to this particular 
 security. Upon default, the bank's claim upon the collat- 
 eral securities as against the bona fide purchaser, for value, 
 without notice of the agreement appropriating all collater- 
 als deposited by the pledgor as security, was not favored. 2 
 And the pledgee, who has redelivered the collateral securi- 
 ties held by him to the pledgor, for the purpose that he may 
 collect the same, may, upon a failure of the pledgor, upon 
 demand, to return such collaterals or to account for the pro- 
 ceeds thereof, bring an action of trover, and recover the 
 value of his interest therein, which will be the amount oi 
 his debt where the collaterals are greater in value, or the 
 whole value where less. 8 
 
 13. CASEY vs. CAVAROC. The importance of con- 
 tinued possession, as well as delivery, of negotiable instru- 
 
 Ringlingt>. Kohn,4Mo. App.59. "Hurst . Coley, 15 Fed. Rep. 
 Wycth t>. Bank. 132 Mass. 597. 645.
 
 THE ACT OF PLEDGE. 13 
 
 merits used as collateral security, in order to constitute a 
 valid act of pledge as against third parties, is illustrated in 
 the case of Casey v. Cavaroc, 1 although the decision itself 
 was based particularly upon the provisions of the Louisiana 
 Code. A New Orleans bank arranged for the acceptance of 
 its bills of exchange, the obligation being guaranteed by its 
 president, and secured payment thereof by a pledge of its 
 bills receivable, under an agreement that they were to be 
 held by a banking firm of which the president was principal. 
 A formal delivery of the securities, unindorsed, was made, 
 but they were at once placed in a separate envelope, and 
 returned to the cashier of the bank. Collections were made 
 of the securities, under the agreement, by the bank for its 
 own benefit, other bills being substituted, and renewals and 
 changes made, the securities continuing to be kept sepa- 
 rately from others. No entry of the pledge was made on 
 the books of the bank, and the securities were included in 
 the daily and monthly official statements of its condition. 
 The bank stopped payment, and after the failure the pres- 
 ident took possession of the package of securities, obtained 
 the indorsement of the bank upon the bills, and then form- 
 ally placed the securities in the possession of his firm. The 
 United States Supreme Court regarded the act of pledge as 
 not completed, and as against creditors of the pledger, or a 
 receiver appointed under the National Bank Act, the con- 
 tinued possession and control of the securities by the pledger, 
 the representations contained in the official statements of 
 its officers, and the other facts stated, defeated any claims 
 arising under the contract of pledge. 
 
 1 96 U. S. 467; Casey v. National sociation as security for the pny- 
 
 Bank, Ib. 492, and Casey v. Schuch- ment of clearing bouse certificates 
 
 ardt, Ib. 494, are to like effect, re- issued to the bank, and were held in 
 
 versing same cases. 2 Woods C. C. continued possession by the trus- 
 
 77. In Casey v. Schneider, 96 U. S. tees. In this case the claims of the 
 
 497, securities were deposited with pledgee were preferred, 
 the New Orleans clearing house as-
 
 14 NEGOTIABLE COLLATERAL SECURITIES. 
 
 14. COLLATERAL SECURITIES FOLLOW RENEWALS OF 
 PRINCIPAL NOTE. The renewal of a negotiable bill or note 
 representing the principal indebtedness, for the payment of 
 which collateral securities have been deposited, does not 
 affect the right of the creditor to retain or enforce the col- 
 laterals. He is equally entitled to the benefit of the collat- 
 eral securities as a means of obtaining payment of the note 
 or bill given in renewal as in the case of .the original evi- 
 dence of indebtedness. 1 Where "short" paper is taken as 
 collateral security, it involves rather its renewal, or the sub- 
 stitution of other securities than its collection. 2 But where 
 a note is pledged as collateral security, under circumstan- 
 ces as to the original debt which fails to make the pledgee a 
 holder for value, a renewal of the note is subject to the same 
 objection. The transaction is regarded simply as a prolon- 
 gation of the original contract. 8 
 
 1-5. EXCHANGE OB SUBSTITUTION OF COLLATERAL 
 SECURITIES. The exchange or substitution of other secur- 
 ities for those originally delivered as collateral, has no effect 
 upon the rights of the pledgee, as founded upon the original 
 contract. The surrender of the securities originally depos- 
 
 1 Jones v. Guaranty Co., 101 U. S. Bank, 37 Ohio St. 208; Reddish v. 
 
 G22 ; Worcester Nat. Bank v. Chee- Watson, 6 Ham. (Ohio) 510 ; N. H. 
 
 ney, 87 111. 702; Cherry v. Frost, 7 Saviugs Bank t>. Gill, 16 N. H. 578; 
 
 Lea. 11 ; Collins v. Dawle, 4 Col. 138; First Nat. Bank v. Bates, 1 Fed. Rep. 
 
 Burton v. Peterson, 12 Phila. 397; 502; s.c. 19 A.L. R (N. S.) 560 ; Ex 
 
 Shaw v. Clark, 49 Mich. 384; Cover parte Price, 3 M. D. and D. 586 ; 
 
 v. Black, 1 Barr, 493; Lytle's App. Combe v. Wolff, 8 Bing 156: Howell 
 
 36 Pa. St. 131; Shrewsbury Sav- v. James, 1 Cr. M. and R. 97. The 
 
 ings Inst. App. 94 Pa. St. 309 ; Brin- renewal of a note given as collateral 
 
 kerhoff v. Lansing, 4 Johns. Ch. 65, security for a pre-existing debt, does 
 
 73; Merchants' Nat. Bank v. Hall, not, in Maine, constitute the pledgee 
 
 83 N. Y. 338 ; Agawam Bank v. Stre- a holder for value in the usual course 
 
 ver, 18 Ib. 502; Davis v. Mnynard, 9 of business. Nutter v. Storer, 48 Me. 
 
 Mass. 242; Watkins v. Hill, 8 Pick. 163; Bramhall v. Beckett, 81 Ib. 265. 
 
 522; Pomeroy v. Rice, 16 Ib. 22; Girard Fire Ins. Co. v. Marr, 4(5 
 
 Taber r>. Hamilton, 97 Mass. 489; Pa. St. 504. 
 
 Patterson v. Johnson^ 7 Ohio, 225; ' Roger v. Keystone Nat. Bank, 93 
 
 Dayton Nat. Bank v. Merchants' Nat. Pa. St. 248.
 
 THE ACT OF PLEDGE. 15 
 
 ited is a valuable consideration for the giving of the new 
 securities, and the pledgee is as to the latter a holder 
 for value, in the usual course of business. 1 Such ex- 
 change and substitution is sometimes of the utmost bene- 
 fit to the pledger, and is supported as against creditors, for 
 the reason that they are not harmed thereby.* Even after 
 a pledger is known to be insolvent, such exchange and sub- 
 stitution of securities is valid, if made bona fide, the pledgee 
 receiving securities of no greater value than those surren- 
 dered. 3 The pledgee of negotiable securities, made by third 
 parties, and holding the title thereto, may exchange them 
 for other securities of like value from sucli parties, without 
 the consent of the pledgor, although if this be done, the 
 pledgee assumes an increased responsibility. Taking a 
 security for a less amount, unless explained, renders the 
 pledgee liable. 4 All that is required of the pledgee in such 
 exchange of securities, is proper care and diligence. 5 
 
 'Clark v. Iselin, 21 Wall. 360; St. 504. The court say: " The mere 
 
 Green well v. Hayden, 78 Ivy. 534; exchange of the securities is not suffi- 
 
 Cherry v. Frost, 7Lea,l, 11; Black- cient to establish loss to the owners 
 
 burn Bldg. Society v. Cunliff, L. R. of the collaterals by the exchange." 
 
 22 Ch. D. 61. One of the pledgers informed the 
 
 8 Sawyer v. Turpin, 91 U. S. 114, pledgee that if the securities were 
 
 121. exchanged by them, they "would 
 
 8 Cook v. Tullis, 18 Wall. 340; have to renew them at their risk, 
 
 Tiffany . Boatmen's Saving Inst., and take them as cash." The court 
 
 Ib. 375; Clark . Iselin, 21 Ib. 360; say: " This warning does not estab- 
 
 Watson v. Taylor, Ib. 378; Burnhisel lish ipse facto a loss by reason of the 
 
 v. Firman, 22 Ib. 170; Sawyer v. exchange. They could not thus 
 
 Turpin, 91 U. S. 114, 121; in re change the terms of the pledge." 
 
 Swenk, 9 Rep. 643; Stevens v. Elan- * Bank of U. S. v. Peabody, 20 Pa. 
 
 chard, 3 Cush. 169; Abbott v. Pom- St. 454; Muirhead v. Kilpatrick, 21 
 
 fert, 1 Bing. N. C. 462. Ib. 237; Seller v. Jones, 22 Ib. 423; 
 
 4 Girard Ins. Co. v. Marr, 46 Pa. Girard Life Ins. Co. v. Marr , supra.
 
 16 NEGOTIABLE COLLATERAL SECURITIES. 
 
 CHAPTER III. 
 
 16. The pledgee of negotiable collateral securities for present advance a 
 holder for value. 
 
 17. Negotiable securities as collateral for future advances. 
 
 18. The pledgee of negotiable collateral securities, for an antecedent debt, 
 
 without more, a holder for value. 
 
 19. The decisions of the United States Supreme Court. 
 
 20. Railroad Company v. National Bank. 
 
 21. The contra state rule not followed. 
 
 22. The rule in England. 
 
 23. The contra rule the pledgee for an antecedent debt, without more, 
 
 not a holder for value. 
 
 24. The New York rule as to pledge for antecedent debt. 
 
 25. The rule in Missouri. 
 
 26. The rule in Ohio and other states. 
 
 27. The pledgee for antecedent debt, with new consideration, a holder for 
 
 value. 
 
 28. Transfer in payment of antecedent debt. 
 
 29. Such transfer is prima facie as collateral security. 
 80. The rule in Massachusetts and Vermont. 
 
 16. THE PLEDGEE OP NEGOTIABLE COLLATERAL SE- 
 CURITY FOR PRESENT ADVANCE, A HOLDER FOR VALUE. 
 The pledgee of negotiable instruments, as bills of ex- 
 change and promissory notes, before maturity, by indorse- 
 ment and delivery, so that he becomes a party thereto, for 
 a present advance, and as a part of the transaction of loan, 
 and without notice of antecedent equities, is a holder for 
 value in the due course of business. 1 
 
 1 Lehman v. Tallahassee Man. Co. 803; Slate Savings Assn. 0. Hurst, 
 64 Alu. 567; Miller v. Pollock, 99 17 Kan. 532; Best t>. Crall, 23 Ib. 
 Pa. St. 202; Plotts t>. Byera, 17 la. 482; Logan t>. Smith. 62 Mo. 455;
 
 TFIE PLEDGEE A HOLDER FOR VALUE. 
 
 17 
 
 While such collateral security is not regarded as the 
 principal foundation for the advance, yet the pledgee parts 
 with liis money upon the faith that the collateral notes will 
 be paid in the event that the principal note is not ; and, 
 having parted with value upon receiving such collateral 
 notes, is a holder for value thereof. 1 A loan of money to 
 one insolvent upon collateral securities pledged at the time 
 of the loan, if the same be free from fraud, and even if the 
 lender has reason to believe the borrower is insolvent, is a 
 valid transaction, and the pledgee may retain the securities 
 until the debt is paid. The power to raise ready money 
 under such circumstances may be of great value to the bor- 
 rower. 3 
 
 Buncombe v. R. R. Co., 84 N. Y. 
 190; Richardson v. Campbell, 48 N. 
 Y. 348; Williams v. Smith, 2 Hill, 
 301 ; Ferden v. Smith, 2 E. D. Smith 
 106; Bank of N. Y. v. Vanderhorst, 
 32 N. Y. 533; Farwell v. Importer's 
 Bank, 90 N. Y. 483; Tlolbrook v. 
 Bassett, 5 Ducr. 147; Brookman v. 
 Metialf, Ib. 429; Van Blarcum v. 
 Broadway Bank, 37 N. Y. 540; 
 Munn D. McDonald, 10 Watts, 270; 
 Brown v. Warren, 43 N. 11. 430; 
 Chicopee Bank v. Chapin, 8 Met. 40; 
 Tarbell v. Sturtevant, 26 Vt. 513; 
 Griswold v. Davis, 31 Vt.390; Bond 
 v. Wiltze, 12 Wis. 611; Crosby v. 
 Roub, 16 Ib. 616; Lyon v. Ewings, 
 17 Ib. 61 ; Curtis v. Mohr, 18 Ib. 615 ; 
 Bowman v. VanKuren, 29 Ib. 219; 
 Louisiana State Bank v. Gaienne, 21 
 La. Ann. 555; Mechanics' Assn. v. 
 Ferguson, 29 La. 549; Hotchkiss v. 
 Nat. Banks, 22 Wall. 354; Tiffany v. 
 Boatmen's lust. 18 Ib. 375; Michi- 
 gan Bank v. Eldrcd, 9 Ib. 544, 553; 
 Railroad Co. v. National Bank. 102 
 U. S. 14 25. The Court (Harian, J.) 
 say: "It may be regarded as set- 
 tled in commercial jurisprudence 
 2 
 
 there being no statutory regula- 
 tion on the subject that where ne- 
 gotiable paper is transferred by in- 
 dorsement, as collateral security for 
 a debt created, or a purchase made, 
 at the time of the transfer * * * 
 the holder who takes the transferred 
 paper, before its maturity, and with- 
 out notice, actual or otherwise, of 
 any defence thereto, is held to 
 have received it in due course of 
 business, and, in the sense of the 
 commercial law, becomes a holder 
 for value, entitled to enforce pay- 
 ment, without regard to any cquily 
 or defence which exists between 
 prior parties to such paper." 
 
 1 Bank of New York v. Vander- 
 horst, 32 N. Y. 553; Miller v. Pol- 
 lock, 99 Pa. St. 202. 
 
 8 Tiffany v. Boatmen's Irst. 18 
 Wall. 376, 388; Cook v. Tullis, Ib. 
 340; Wilson v. City, 17 Ib. 375; 
 Mays v. Fritton, 20 Ib. 414; Clark v. 
 Iselin, 21 Ib.360; Watson B.Taylor, 
 Ib. 378; Burnhisel v. Finnan, 22 Ib. 
 170; Sawyer v. Turpin,91 U. S. 114; 
 Jerome v, McCarter, 94 Ib. 734 ; 
 Hutton v. Crittwell, 1 El. & Bl. 15;
 
 18 NEGOTIABLE COLLATERAL SECURITIES. 
 
 The rule that the pledgee of negotiable instruments, 
 properly indorsed and delivered, receiving the same as col- 
 lateral security for a present advance, is a holder for value, 
 is illustrated by the favor shown him in common with other 
 holders for value of negotiable paper. Payments made by 
 an acceptor of a bill of exchange to the pledger thereof, who 
 had previously indorsed the bill as security for a present 
 advance, do not affect the right of the pledgee to recover 
 the whole amount of the bill. 1 Nor will the fact that notes, 
 tainted with illegality, were pledged as collateral security 
 for other notes discounted, the money on which was paid 
 over, and the indorsement of the notes was made for the 
 purpose of cutting off the equities of the maker, be any de- 
 fence against the pledgee, without notice, and claiming un- 
 der a bona tide advance. 9 Pledges of negotiable bonds by 
 a corporation to its directors and also to bankers, for pres- 
 ent advances, constitute them holders for value. 3 A 
 pledgee of bills of exchange, made for approximate amounts, 
 upon which advances were made, and for which drafts for 
 the actual amounts were afterwards substituted, is preferred 
 to a representative of other creditors, appointed before the 
 drafts were actually paid. 4 Upon an agreement to deposit 
 securities at the time the advance is made, a subsequent de- 
 livery of them is enough to make the pledgee a holder for 
 value upon a present advance. 6 
 
 17. NEGOTIABLE SECURITIES AS COLLATERAL FOR 
 FUTURE ADVANCES. The pledgee of negotiable instru- 
 
 Bittleston v. Cook, 6 Ib. 296; Harris Third Nat. Bank V. Harrison, 10 
 
 t>. Rickett, 4 H. & N. 1; Bell t>. Fed. Rep. 243. 
 
 Simpson, 2 Ib. 410; Hunt v. Morti- * Lehman v. Tallahassee Man g. Co. 
 
 mer, 10 B. & C, 44; ex parte Sharse, 64 Ala 567; Buncombe v. R. R. Co., 
 
 Crabbe,482; Wadsworth t>. Tyler, 2 88 N. Y. 1; B. c. 84 N. Y. 190; 
 
 B. R. 101 ; Lee v. Hart, 11 Exch. Claflin t>. South Carolina R. R. Co., 
 
 880; Pennell v. Reynolds, 11 C. B. 4 Hughes, 12. 
 
 N. S. 709. * Young v. Northern 111. etc. Assn. 
 
 1 Savings Assn. t>. Hunt, 17 Kan. 9 Biss. 300. 
 
 632. * Fenby c. Pritchard, 2 Sandf . 151.
 
 THE PLEDGEE A HOLDER FOB VALUE. 19 
 
 ments as collateral security under valid agreements stipu- 
 lating for future advances or loans, receiving the same so as 
 to become a party thereto, before maturity, without notice, 
 is a holder for value in the usual course of business. 1 Such 
 contracts of collateral security for the payment of future 
 advances are regarded as in the nature of equitable mort- 
 gages, and are binding, as between the parties, for any and 
 all advances made thereon prior to notice of claims of third 
 parties. 2 An exception to the general rule is found in a 
 Tennessee decision, where the same rule is applied to nego- 
 tiable paper taken as collateral security for future advances, 
 as when given for antecedent indebtedness, the holder re- 
 ceiving it as though he were a transferee of over-due paper, 
 subject to the equities existing at the time of the transfer, 
 but not those arising subsequent thereto.* 
 
 The rule in favor of the pledgee receiving such securi- 
 ties before maturity for future advances, without notice of 
 equities, is supported in cases where the act of pledge is a 
 misappropriation. A banker holding promissory notes 
 simply for the purpose of collecting interest thereon, but 
 which were indorsed in blank, pledged the same with his 
 Chicago correspondent, as security for his then indebtedness 
 and future advances, and subsequently became insolvent. 
 The pledgee having acquired the same in good faith, in the 
 usual course of business, from one invested with the 
 evidence of .title, the owner must suffer the loss resulting 
 from misplaced confidence. 4 One of several partners in- 
 dorsed a promissory note payable to the firm, as security for 
 future advances to another firm, of which he was a mem- 
 ber, with others, the transfer being an act of misappropria- 
 tion. The first firm subsequently became insolvent. In a 
 
 1 Dayton Nat. Bank v. Merchants 16 Conn. 287; Buchanan v. Interna- 
 
 Nat. Bank, 37 Ohio St. 208, 217; tional Bank, 78 111. 500; Heywooda. 
 
 Davis v. Randall, 115 Mass. 547 ; Watson, 4 Bing. 496. 
 
 Merchants' Nat. Bank . Hall, 83 Walker v. Lee, 15 S. C. 142. 
 
 N. Y. 338; Agawam Bank t>. Strev- * Richardson v. Rice, 9 Baxt. 290. 
 
 er, 18 Ib. 502; Calkins v. Lockwood, * Morris v. Preston, 93 111. 215.
 
 20 
 
 NEGOTIABLE COLLATERAL SECURITIES. 
 
 contest between its creditors and the holders of the note as 
 collateral, the claims of the latter were enforced. 1 
 
 18. THE PLEDGEE OP NEGOTIABLE COLLATERAL SE- 
 CUIUTIKS FOR AN AXTKCEDENT DEBT, WITHOUT MORE, A 
 HOLDER FOR VALUE. The pledgee of negotiable instru- 
 ments, properly indorsed and delivered (where indorse- 
 ment is required) or by delivery only where indorsed in 
 blank or made payable to bearer, so that he becomes a party 
 theieto, receiving the same before maturity, in good faith, 
 and without notice of equities, as collateral security for a 
 valid antecedent debt, without more, is a holder for value 
 in the usual course of business.* Such pledgee, holding 
 
 1 Walker v. Lee, supra. 
 
 Swift v. Tyson, 16 Pet. 1 ; Good- 
 man v. Simonds, 20 How. 373; Mc- 
 Carty v Roots, 21 How. 430 ; Saw- 
 yer v. Prichctt, 19 Wall. 166 ; Gates 
 v. Nat. Bank, 100 U S. 239 ; Rail- 
 road Co. v. Nat. Bank. 102 U. S. 14; 
 Pugh v. Durfee, 1 Blatch. 412; Third 
 Nat Bank v. Harrison. Cir. Ct. E. D. 
 Mo. 1882, 10 Fed. Rep. 243 ; Allen 
 e. Dallas etc. Ry. Co., 3 Woods, C. 
 C. 316, 325 ; Robinson v. Smith, 14 
 Cal. 94; Payne v. Beasley 8 Ib. 266; 
 Davis v. Russell, 52 Ib. 611 ; Sackett 
 v. Johnson, 54 Ib. 107; Roberts v. 
 Hall, 37 Conn. 205; Bridgeport City 
 Bank v. Welch, 29 Ib. 475; Savings 
 Bank v. Bates, 8 Ib. 505 ; Brush v. 
 Scribner, 11 Ib. 388; Gibson v. Con- 
 ner, 8 Ga. 47; Meadow v. Bird, 22 
 Ib 246; Bond v. Central Bank, 2 
 Kelly. 106; Manning v. McClure, 36 
 111. 490 ; Butters v. Haughwert, 42 
 III. 18; Doolittle v. Cook, 75 Ib. 354; 
 Mix e. Bank, 91 111. 20; Morris v. 
 Preston 93 Ib. 215: Miller v. Lar- 
 ned, 103 Ib. 562; Mclntire v. Yatcs, 
 104 111. 491; First Nat. Bank t>. 
 Beard, 8 Bradw. 239; Valletta a 
 
 Mason, 1 Ind. 89; Work v. Bray ton, 
 5 Ib. -96; Babcock v. Jordan, 24 Ib. 
 14; Straughan v. Fairchild, 80 Ib. 
 598; Grovanovich v. Citizen's Bank, 
 26 La. Ann. 15. Maryland: Mailland 
 . Citizens Nat. Bank, 40 Md. 540; 
 Fisher v. Fisher, 90 Mass 303; Paine 
 v. Furnas, 117 Mass. 290; Chicopce 
 Bank v. Chapin, 8 Met. 40; Blanch- 
 ard v. Stevens, 3 Gush. 16; Gardner 
 v. Guagcr, 1 Allen, 502; LeBrcton 
 v. Pierce, 2 Ib. 14; Stoddard v. Kim- 
 ball, 6 Cush. 469; Culver v. Bene- 
 dict, 13 Gray, 11; Putnam v. Stoiy, 
 132 Mass. 205 ; Allaire v. Harts- 
 horne, 21 N. J. L. 665 ; Amos v. 
 M'Michacl, 36 Ib. 92; Bank v. Car- 
 rington, 5 R. I. 515; Cobb v. Doyle, 
 7 Ib. 550; Bank t>. Chambers, 11 
 Rich. (S. C.) 657; Grecneaux v. 
 Wheeler. 6 Tex. 515 ; Alexander Ry. 
 Co. v. Burke, 22 Gratt. 254. The 
 paper must be taken in good faith, 
 and without notice of anything to 
 impeach its validity. Chicopee 
 Bank v. Chapin, 8 Met. 40; Stoddard 
 v. Kimball, 6 Cush. 469; Culver v. 
 Benedict, 13 Gray, 11; Stevens . 
 Blanchard, 8 Cush. 162. And the
 
 THE PLEDGEE A HOLDER FOR VALUE. 21 
 
 negotiable instruments as collateral security for a valid in- 
 debtedness, payment of which he is at once entitled to 
 enforce, and receiving such negotiable collateral securities 
 so as to become a party thereto, is charged with the respon- 
 sibilities and liabilities of making proper dejnand and of 
 giving notice of non-payment of them uuoii default. The 
 assumption of this duty and the implied promise of delay in 
 the enforcement of the original indebtedness by the receipt 
 thereof, furnishes a valuable consideration to support such 
 transfer of negotiable instruments as collateral .security for 
 an antecedent debt, and brings the transaction clearly with- 
 in the ordinary and usual course of business. The rule, as 
 above stated, is approved by the Supreme Court of the 
 United States and the Federal Courts, and by the courts of 
 last resort in the following States: California, Connecticut, 
 Georgia, Illinois, Indiana, Louisiana, Maryland, Massachu- 
 setts, New Jersey, Rhode Island, South Carolina, Texas, 
 and Virginia ; and in England and Canada. 1 
 
 19. THE RULE, AS ANNOUNCED BY THE UNITED 
 STATES SUPREME COURT. The first leading case in the 
 Supreme Court of the United States, in which the title of 
 the holder for value of negotiable instruments as collateral 
 security for a pre-existing debt, without more^ was discussed, 
 was Swift v. Tyson, 2 in which Swift, an indorsee of a bill of 
 exchange, received the same in payment of a pre-existing 
 debt, without notice of any equities existing between the 
 
 same rule is applied to negotiable mercial world has a common inter- 
 coupon bonds. Culver v. Benedict, est, uniformity and certainty of de- 
 13 Gray, 7; Lehman v. Tallahasse cision is greatly to be desired; and 
 etc Co., 64 Ala 567; Allen v. Dallas since the highest tribunals in this 
 Ry. Co. 3 Woods, 316, 325. country and iti England are ruling 
 1 In Straughan v. Fairchild, in harmony upon this point, a state 
 80 Ind. 598, the Court say: "On court can hardly be justified in 
 a subject of such general im- adopting, if indeed in adhering to, a 
 portance, and concerning which different rule." 
 there can not properly be a * 16 Peters, 1. (Catron. J. diss.) 
 local rule, and in which the com-
 
 22 NEGOTIABLE COLLATERAL SECURITIES. 
 
 drawer and Tyson, the acceptor, arising from want of con- 
 sideration. In this case, the opinion was delivered by Mr. 
 Justice Story, who, after insisting that the receiving of a 
 negotiable instrument in payment of, or as security for a pre- 
 existing debt, is according to the known usual course of trade 
 and business, u&ked, "And why upon principle should not 
 a pre-existing debt be deemed such a valuable considera- 
 tion? It is for the benefit and convenience of the commer- 
 cial world to give as wide an extent as practicable to the 
 credit and circulation of negotiable paper, that it may pass 
 not only as security for new purchases and advances, made 
 upon the transfer thereof, but also in payment of and as 
 security for pre-existing debts. The creditor is thereby en- 
 abled to realize or to secure his debt, and thus may safely 
 give a prolonged credit, or forbear from taking any legal 
 steps to enforce his rights. The debtor also has the advan- 
 tage of making his negotiable securities of equivalent value 
 to cash. But establish the opposite conclusion, that negotia- 
 ble paper can not be applied in payment of or as security for 
 pre-existing debts, without letting in all the equities between 
 the original and antecedent parties, and the value and cir- 
 culation of such securities must be essentially diminished, 
 and the embarrassment of making a sale thereof, often at a 
 ruinous discount, to some third person, and then by circuity 
 to apply the proceeds to the payment of his debts." ' 
 
 1 la Railroad Co. v. Nat. Bank, of as belonging to the case, until the 
 
 102 U. S. 14, 24, the Court (Harlan, principal opinion was presented last 
 
 J.) say: " The brief dissent of Mr. evening, and therefore I am not pre- 
 
 Justice Catron was solely upon that pared to give any opinion, even if it 
 
 ground, which renders it quite cer- was called for by the record." Mr. 
 
 tain that the whole court was aware Chief Justice Lawrence, of the Illi- 
 
 of the extent to which the opinion of nois Supreme Court, in Manning v. 
 
 the court carried the doctrines of the McClure, 36 111. 494, referring to the 
 
 commercial law upon the subject of subject says: " The note in the case 
 
 negotiable instruments transferred of Swift v. Tyson was taken as pay- 
 
 or delivered as security for antcced- ment and not merely as collateral 
 
 ent indebtedness." Mr. Justice Ca- security, and therefore what was 
 
 Iron says, in his dissentient opinion : said is only dicta; but attention was 
 
 " I never heard this question spoken directed to this by Mr. Justice Ca-
 
 THE PLEDGEE A HOLDER FOR VALUE. 23 
 
 The question was next referred to by the Court in the 
 case of Goodman v. Simonds, 1 in which there was a settle- 
 ment of antecedent indebtedness, the surrender of securities, 
 and making of new notes, payment of the latter being 
 secured by a bill of exchange. There having been a full 
 present consideration for the transfer as collateral security 
 of the bill of exchange, the Court declared the question 
 whether a transfer of negotiable instruments as collateral 
 security for an antecedent debt, without more, would make 
 the pledgee a holder for value in the usual course of busi- 
 ness, did not arise. 
 
 In McCarty v. Roots, 8 the question was squarely pre- 
 sented. The suit was brought .against an indorser by a 
 pledgee holding accommodation bill of exchange as collateral 
 security for an antecedent indebtedness, without any other 
 consideration. The Court (McLean, J.) held that the 
 fact that the bills were indorsed as stated did not impair the 
 pledgee's right of recovery, and that such indorsement and 
 delivery of the bills as collateral security for a pre-existing 
 debt was a valid transaction, within, the usual course of 
 business. 
 
 In a later case, Gates v. National Bank, 8 an extension of 
 time in the payment of the antecedent indebtedness was 
 granted, which of itself was sufficient to constitute a pledgee 
 of a negotiable promissory note, properly indorsed, receiv- 
 ing the same before maturity, a holder for value, in the 
 usual course of business. In that case the Court (Harlan, 
 J.) stated that the question " whether the taking of such 
 note merely as collateral security for antecedent debts, 
 without any binding contract for indulgence, would con- 
 
 tron, so that the language of Judge Notes, p. 215, n. I, reiterates and 
 
 Story can not be considered as inad- supports the doctrine announced in 
 
 vertently used, and may be regarded Swift t>. Tyson. 
 
 as receiving the implied assent of the * 20 How. 243. 
 
 court, with the exception of Judge * 21 How. 432. 
 
 Catron." And Judge Story, after- 100 U. S. 239. 
 
 wards, in his work on Promissory
 
 24 NEGOTIABLE COLLATERAL SECURITIES. 
 
 stitute a valuable consideration within the established rules 
 of commercial law, protecting the creditor against defenses 
 or equities between antecedent parties, of which he had no 
 notice, it is not necessary now to decide. That precise 
 question is not presented in this case, and we forbear to 
 express any opinion upon it." 
 
 20. RAILROAD Co. v. NATIONAL BANK. The title 
 and interest of a pledgee of negotiable instruments receiv- 
 ing the same as collateral security for an antecedent debt, 
 without more, was finally settled in the Supreme Court of 
 the United States in the leading case, The Franklin City 
 and Newtown Railroad Company v. National Bank of the Re- 
 public. 1 Negotiable securities, indorsed in blank, entrusted 
 to brokers for negotiation or sale, were misappropriated by 
 them as collateral security for an antecedent debt, without 
 any further consideration. The Court (Harlan, J.) an- 
 nounced the rule, that " the transfer before maturity of ne- 
 gotiable paper, as security for an antecedent debt merely, 
 without other circumstances, if the paper be so indorsed that 
 the holder becomes a party to the instrument, although the 
 transfer is without express agreement by the creditor for 
 indulgence, is not an improper use of such paper, and is as 
 much in the usual course of commercial business as its trans- 
 fer in the pa} r ment of sucfi debt. In either case the bona 
 fide holder is unaffected by equities or defences between 
 prior parties, of which he had no notice."* The Court 
 
 1 102 U. S. 16. the indorsers to the indorsee, and the 
 * Railroad Co. v. National Bank, obligation to pay or secure such 
 102 U. S. 28. Mr. Justice Bradley, in debt. Had any other collateral se- 
 his opinion, while concurring in the curity been given, as a mortgage, or 
 judgment, said (p.58): "I do not re- a pledge of property, it would have 
 gard the obligation assumed by the been equally sustained by the con- 
 indorsee to present the note for pay- sideration referred to, namely, ths 
 mcnt and give notice of non-payment debt., and the obligation to pny it or 
 as the only, or the principal, consid- to secure its payment. * * Secur- 
 eration of such transfer. The true ity for the payment of a debt actual- 
 consideration was the debt due from ly owing is a good consideration.
 
 THE PLEDGEE A HOLDER FOR VALUE. 25 
 
 (Hai-lan, J ) say : (p. 24) " The bank did not take the note 
 in suit as a mere agent to receive the amount due when it 
 suited the convenience of the debtor to make payment. It 
 received the note under an obligation imposed by the com- 
 mercial law, to present it for payment, and give notice of 
 non-payment, in the mode prescribed by the settled rules 
 of that law. We are of opinion that the undertaking of the 
 bank to fix the liabilities of prior parties, by due presenta- 
 tion for payment and due notice in case of non-payment, 
 an undertaking necessarily implied by becoming a party to 
 the instrument was a sufficient consideration to protect it 
 against equities existing between the other parties, of which 
 it had no notice. It assumed the duties and responsibilities 
 of a holder fo*r value, and should have the rights and privi- 
 leges pertaining to that position. The correctness of this 
 rule is apparent in ca^es like the one now before us. The 
 note in suit was negotiable in form, and was delivered by 
 the maker for the purpose of being negotiated. Had it been 
 regularly discounted by the bank, at any time before matu- 
 rity, and the proceeds either placed to the credit ot the 
 pledgers, or applied directly to the discharge, pro tanto, of 
 any one of the call loans previously made to them, it would 
 not be doubted that the bank would be protected against the 
 equities of prior parties. Instead of procuring its formal 
 discount, the pledgors used it to secure the ultimate pay- 
 ment of their own debt to the bank. * * * It was, un- 
 der the circumstances, the duty of the pledgor to make such 
 payment, or to secure the debt. It was important to them, 
 and was in the usual course of commercial transactions, to 
 furnish such security." 
 
 It was urged that nothing having been surrendered by 
 
 and sufficient to support a transfer give it that effect. If not transferred 
 
 of property. When it is a promis- before maturity or in due course of 
 
 sory note or bill of exchange, it has business, then, of course, it can not 
 
 the effect of giving absolute title and have that effect. A transfer for the 
 
 of cutting off prior equities, provid- purpose of securing a debt is a trans- 
 
 ed the ordinary conditions exist to fer in due course."
 
 26 NEGOTIABLE COLLATERAL SECURITIES. 
 
 the pledgee, to permit antecedent equities to prevail would 
 deprive him of no right or advantage enjoyed at the time of the 
 transfer, or impose upon him additional burdens or incon- 
 veniences. The Court, commenting upon these suggestions, 
 said : " This may be true in some, but it is not true in most 
 cases ; nor, in our opinion, is it ever true when the note, 
 upon its delivery to the transferee, is in such form as to 
 make him a party to the instrument and impose upon him 
 the duties which, according to the commercial law, must be 
 discharged by the holder of negotiable paper, in order to fix 
 liability upon the indorser." 1 
 
 21. THE STATE RULE IN SUCH CASES OF PLEDGE 
 NOT FOLLOWED. Attempts have been made to secure from 
 the Federal Court of last resort an acknowledgment of the 
 views of the several State Courts in construing the rights of 
 holder of negotiable instruments as collateral security for 
 antecedent debt, without further consideration, as furnish- 
 ing the proper guide in cases appealed from those States. 
 The United States Supreme Court has declined, in relation 
 to questions of commercial law, to consider itself bound by 
 the decisions of the State Appellate Courts.* In a recent 
 case, where a debtor had given to a national bank a nego- 
 tiable note as collateral security for a pre-existing debt, 
 paying usurious interest for an extension of the time of pay- 
 ment, it was insisted that the rule as applied by the Ala- 
 bama Courts, which do not follow Swift v. Tyson on the 
 question, should be applied. The Supreme Court held other- 
 wise, 1 and again in a later case. 4 
 
 22. THE RULE IN ENGLAND AND CANADA. In En- 
 gland, the rule is approved that the holder of negotiable 
 
 1 Railroad Co. . National Bank, Turpley, 18 How. 517; Goodman v. 
 
 p. 27. Simonds, 20 Ib. 343, 371. 
 
 Swift v. Tyson, 16 Pet. 1, 18; Gates v. Nat. Bank, 100 U. S. 239. 
 
 Carpenter t>. Ins. Co. Ib. 195; Ames 4 Railroad Co. 0. Nat. Bank, 103 
 
 t>. Smith, Ib. 303, 314; Watson t>. U. S. 14, 31.
 
 THE PLEDGEE A HOLDER FOB VALUE. 
 
 27 
 
 promissory notes or bills of exchange, receiving the same 
 properly indorsed, before maturity, as collateral security for 
 an antecedent debt, without more, in good faith, without 
 notice of prior equities, is a holder for value, in the usual 
 course of business, free from all antecedent equities as the 
 most favored holder of negotiable paper. 1 The like rule is 
 also approved in the Dominion of Canada. 9 The English 
 House of Lords has applied the rule to checks drawn upon 
 upon a bank, as being equally applicable to checks and such 
 negotiable instruments as were payable on demand as to 
 those payable at a future time. 8 Receiving such negotiable 
 paper charged with the duty of presentment and to give 
 notice of non-payment, if necessary, upon default, the 
 pledgee is charged with the amount of such securities 
 where loss is caused by his neglect. 4 And where a creditor 
 takes a note or bill payable at a future day, either in pay- 
 ment of or as collateral security for a pre-existing debt, he 
 can not commence an action at law for his original debt, un- 
 
 1 Currie . Misa, L. R. 10 Ex. 153, 
 165; s. c. affirmed on appeal, L. R. 
 1 App. Gas. 554 ; Percival v. Framp- 
 ton, 2 C. M. & R. 180; Poirier v. 
 Morris. 2 El. & Bl. 89; Collins . 
 Martin, 1 P. & B. 650; Heywood v. 
 Watson, 4 Bing. 493; s. c. 1 M. & 
 P. 268; Braraah v. Roberts, 1 Bing. 
 N. C. 469; Crofts v. Beale, 11 C. B. 
 N. S. 172; Bosanquet v. Forster, 9 
 C. & P. 659; Whistler v. Foster, 14 
 C. B. N. S. 248; Leask . Scott, L. 
 R. 2 Q. B. D. 376; Gorgier v. Mie- 
 ville, SB. & C. 45; In re Patent 
 File Co. L. R. 6 Ch. 83. In Rail- 
 road Company v. Nat. Bank, 102 U. 
 S. 14, 48, Mr. Justice Bradley, after 
 reviewing the English authorities 
 already cited, says: "These au- 
 thorities are sufficient to show that 
 there is but one voice upon the sub- 
 ject in the parent country, and that 
 they speak to the point with a de- 
 
 gree of unanimity and uniformity 
 well calculated to excite admiration 
 and to inspire confidence that the 
 rule of decision is both correct and 
 just. Not only every court, but 
 every judge of every court, in that 
 country, concurs in the proposition 
 that the holder of such a negotiable 
 security before maturity, as collat- 
 eral to a pre existing debt, without 
 notice of any prior equities, is a bona 
 fide holder for value in the usual 
 course of business and that his title 
 to the instrument is good, and whol- 
 ly unaffected by any such prior 
 equities between the antecedent par- 
 ties." 
 
 9 Bank v. Chamber. 11 Rich. 657.' 
 
 * Currie v. Misa, supra. 
 . 4 Peacock v. Purcell, 14 C. B. K 
 S. 728; Heywood v. Watson, 1 M. & 
 P. 268; s. c. 4 Bing. 496.
 
 28 NEGOTIABLE COLLATERAL SECURITIES. 
 
 til such note or bill becomes payable, and default is made ;' 
 nor where the collateral note or bill, indorsed to the pledgee, 
 has been transferred while, current, and passed into the 
 hands of third persons for value, and is still outstanding.* 
 
 The English Courts have discussed in relaiion to the 
 translY-r of negotiable instruments as collateral security for 
 antecedent debts, whether the requisite valuable considera- 
 tion to constitute the pledgee a holder for value, should be 
 presumed to arise from the implied agreement of the cred- 
 itor to suspend his remedies for the period during which the 
 note or bill so pledged has to run until maturity ;* or 
 from the fact that a negotiable security given for such a 
 purpose is a conditional payment of the debt, the condition 
 being that the debt survives if the security is not realized. 4 
 The latter view is approved in the leading case of Currie 
 v. Misa,' in which the court accepted as correct the follow- 
 ing definition of consideration : " A valuable consideration, 
 in the sense of the law, may consist either in some right, 
 interest, profit, or benefit accruing to the one party, or some 
 forbearance, detriment, loss, or responsibility, given, suffered, 
 or undertaken by the other.'" 
 
 23. THE CONTRA RULE THE PLEDGEE FOR AN 
 ANTECEDENT DEBT, WITHOUT MORE, NOT A HOLDER FOR 
 VALUE. The rule prevails in certain states that the pled- 
 gee, receiving negotiable instruments, before maturity, as 
 collateral security for an antecedent debt, without more, al- 
 though becoming a party thereto, and without notice of 
 equities, is not a holder for value, in the usual course of 
 business, but takes only the title of the pledger, subject to 
 
 'Stedmim *>. Gooch, 1 Esp. 4; Belshaw v. Bush, 11 C. B. 191; 
 
 Price v. Price, 16 M. & W. 233, 243. Griffiths t>. Owens, 13 M. & W. 58. 
 
 1 Price v. Price, supra. 64. 
 
 Alliance Bank v. Broom. 2 Drew * L. R. 10 Ex. 153; s. c. 1 App. 
 
 & 8. 289; Morton . Burn, 7 Ad. & Cas. 554. 
 
 E. 19; Baker v. Walker, 14 M. & W. Com. Dig. Action on the Case. 
 
 4C5; Purccll v. Peacock, supra. assumpsit, B. 1, 15.
 
 THE PLEDGEE A HOLDER FOR VALUE. 
 
 29 
 
 all antecedent equities existing at the time of the transfer. 
 This rule prevails, with various but not essential modifica- 
 tions, in the States of Alabama, Arkansas, Iowa, Kentucky, 
 Maine, Mississippi, Missouri, Nevada, New Hampshire, New 
 York, North Carolina, Ohio, Pennsylvania, Tennessee, Ver- 
 mont and Wisconsin. 1 It is supported mainly upon the 
 
 1 Bertrand v. Barkman, 13 Ark. 
 150; McKenzie v. Bank, 28 Ala. 
 606; Boyd v. Beck, 29 Ib. 703; Fe- 
 nouillc v. Hamilton. 35 Ala. 319; Cul- 
 lum v. Branch Bank, 4 Ib. 21; An- 
 drews v. McCoy, 8 Ib. 920; Wagner 
 v. Simmons, 61 Ib. 143; Bank of Mo- 
 bile v. Polnitz, 61 Ala. 147; Iowa Col- 
 lege v. Hill, 12 la. 462; Ryan v. 
 Chew, 13 Ib. 389; Union Nat. Bank 
 v. Barber, 56 la. 559; Lee v. Snaead, 
 1 Mete. 628; Alexander v. Spring- 
 field Bank, 2 Ib. 534; Greenwell v. 
 Iluyden, 78 Ky. 332; Smith v. His- 
 cock, 14 Me. 149; Nutler v. Stover, 
 48 Ib. 163; Bramhall v. Beckett. 31 
 Ib. 205; Homes v. Smith, 16 Ib. 177; 
 Brooks v. Whitson, 7 S. & M. (Miss.) 
 513; Goodman v. Simonds, 19 Mo. 
 106; Grant v. Kidwell, 30 Ib. 455; 
 Logan v. Smith, 62 Ib. 455; Ferry v. 
 Hickman, 1 Mo. App. 119; Brainard 
 . Reavis, 2 Ib. 490 ; Jenness v Bean, 
 10 N. H. 236; Williams v. Little, 11 
 Ib. 66; Fletcher v. Case, 16 N. H. 68; 
 Rices. Railt 17 N. H. 116; Fair*. 
 Howard 6 Nev. 304; Bay v. Codding- 
 ton, 5 Johns. 54; s. c. 20 Johns. 637; 
 Clark . Ely, 2 Sandf. Oh. 166; Fen- 
 by v. Pritch ird, 2 Ib. 151 ; Younges 
 v. Lee, 18 Barb. 187; Prentice v. 
 Graves 33 Ib. 621 ; American Ex. 
 Bank Corliss. 46 Ib. 19; Bright. 
 Judson, 47 Ib. 29; Stalker v. McDon- 
 ald, 6 Hill 93; Wardell v. Howard, 
 9 Wend. 170: Rosa p. Brotherson, 10 
 Ib. 85; Ontario Bank v. Worthing- 
 ton, 12 Ib. 593;Payne v. Cutler, 13 
 
 Ib. 605; Lawrence v. Clark. 36 N. Y. 
 128; Turner v. Tread way, 53 Ib. 
 650; Taft v. Chapman, 55 Ib. 445; 
 Phoenix Ins. Co. v. Church, 81 Ib. 
 222; Duncomb v. Railroad Co., 84 
 Ib. 190, 204; s. c. 88 Ib. 1; Roxbor- 
 ougli v. Messick, 6 Ohio St. 448; 
 Cleveland v. State Bank, 19 Ib. 145; 
 Copeland v. Manton, 22 Ib. 398, 402; 
 Kingslar.d v. Pryor, 33 Ib. 19; Bank 
 v. Fowler, 36 Ib. 524; Pitts v. Fogle- 
 song, 37 Ib. 676; Bank v. Bank, Ib. 
 208; Hartman v. Duval, 1 Rawle, 
 219; Petrie v Clark, 11 S. & R. 377; 
 Depeau v Washington, 6 Whart. 
 279; Trotter v. Shippen, 2 Pa. St. 
 258; Appleton v. Donaldson, 3 Ib. 
 381; Kirkpatrick v Muirhead, 16 Ib. 
 117; Lord t>. Ocean Bank, 20 Ib. 
 384; Sitgreaves v. Bank, 49 Ib 359; 
 Lenheim v. Wilmarding 55 Ib. 73; 
 Ashton's App. 73 Ib. 153; Pratt's 
 App., 77 Ib. 378; Roycr v. Keystone 
 Bank, 83 Ib. 248; Cummings v. 
 Boyd, Ib. 372; Penn Bank v. Frank- 
 ish, 91 Ib. 344; Dovey's App., 97 Ib. 
 53; Maynard v. Bank, 98 Ib. 250; 
 King v. Doolittle, 1 Head (Tenn ) 
 77; Kimbro v. L} tie, 10 Yerg. 417, 
 428; Napier v. Elam, 6 Ib. 108; 
 Richardson v. Rice, 9 Baxt. 290; 
 Nichols v. Bate, 10 Yerg. 429; 
 Raddick v. Jones, 6 Ib. 109; At- 
 kinson v. Brooks, 26 Vt. 569 ; 
 Austin v. Curtis, 31 Vt. 64; Cook v. 
 Helms, 5 Wis. Ill; Stevens v. Camp- 
 bell, 13 Ib. 375; Jenkins v. Schwab, 
 14 Ib. 1; Schufeldt v. Pease, 16 Ib.
 
 30 NEGOTIABLE COLLATERAL SECURITIES. 
 
 ground that a valuable present consideration must be given 
 by a pledgee to constitute him a holder for value in the 
 usual course of business; and that a pledgee of negotiable in- 
 struments as collateral security, who has made no present 
 advances, nor satisfied any existing debt, nor released any 
 securities, nor incurred any new responsibilities on the 
 credit of the paper, and who receives the same simply as 
 collateral security for an antecedent debt, 'without further 
 consideration, is not a holder for value, in the usual course 
 of business, and protected from antecedent equities. 
 
 The rule, as stated, has become a part of the settled 
 commercial law of the several states named, and is not like- 
 ly to be changed except by statutory enactment. The con- 
 trolling objections to it are that it serves to embarrass and 
 check the free use of commercial paper by parties dealing 
 bona fide; forces the debtor to sell his negotiable securities 
 often at a sacrifice, in order to apply the proceeds to the 
 payment of an antecedent debt, where he might, by using 
 the same as collateral security, obtain a moral claim at least 
 for time to pay such debt, and probably would be able to 
 pay it without sacrifice; and introduces an element of litiga- 
 tion in many transactions which never appears in states and 
 countries where the other and better rule prevails. 
 
 24. THE NEW YORK RULE AS TO PLEDGE FOR ANTE- 
 CEDENT DEBT. The leading case in New York, Coddington 
 v. Bay, 1 was decided by the Court of Errors, and involved 
 
 660; Bange v. Flint, 25 Ib. 544; Bow- sustains the decision in Swift v. Ty- 
 man v. Vankuren, 29 Ib. 209 ; Knox son, 16 Pet. 15, 22, and I am inclined 
 . Clifford, 38 Ib. 656; Body v. Jew- to concur in that decision as the 
 son, 33 Wis. 402, 410. plainer and better doctrine." Re- 
 1 5 Johns. 54 ; a. c. Johns. 637. ferring to this, Mr. Justice Harlan, 
 Subsequently to writing the opinion in delivering the opinion of the Uni- 
 in this case, Chancellor Kent added ted States Supreme Court, in Rail- 
 to his Commentaries, vol. 3, p. 81, n. road Company . National Bank, 102 
 b., the significant note: ''Mr. Jus- U. 8. 14, remarks, (p. 25): "Of 
 tice Story, in his treatise on Promis- course it did not escape Chancellor 
 aory Notes, p. 215, n. 1, repeats and Kent's attention that the Court in
 
 THE PLEDGEE A HOLDER FOR VALUE. 31 
 
 a wrongful misappropriation of negotiable instruments as col- 
 lateral security for responsibility theretofore incurred as in- 
 dorser for the pledger, with no other consideration. The 
 pledger was insolvent at the time. The pledgee, having 
 made no advance, incurred no responsibility upon account 
 of the paper, nor satisfied an existing debt, nor paid money 
 or property, nor created a debt, was not a holder for value, 
 in the due course of business, and the collateral notes, or 
 their proceeds, with interest, were decreed to be returned to 
 the owner. In a later case 1 heard after the decision of the 
 decision of the United States Supreme Court in Swift v. 
 Tyson, 2 the rule announced was affirmed in another case of 
 misappropriation of negotiable instruments by one holding 
 full title, the court reiterating that a pledgee of negotiable 
 instruments, as collateral security for an antecedent debt, 
 who had neither parted with value, nor relinquished secur- 
 ities previously, held, was not a holder for value, in the 
 usual course of business ; and the rule was applied in an- 
 other case, even where the paper had been received in pay- 
 ment of an antecedent debt. 8 The decisions of the New 
 York courts, from the leading position they have taken on 
 this subject, have been much discussed. 4 The courts of 
 
 Swift . Tyson declared the equities enforce the payment of the note 
 of prior parties to be shut out as well irrespective of the equities as be- 
 when the note was merely pledged tween the original parties. But 
 as collateral security for a pre-exist- may you not as well show a legal 
 ing debt as when transferred in pay- consideration by showing forbear- 
 ment of or extinguishment of such ance to act as by showing an act 
 debt." done ? A damage to the promisee is 
 
 1 Stalker v. McDonald, 6 Hill 93 all that is necessary to show a good 
 
 (Walworth, Chancellor.) consideration for a promise ; and 
 
 * 16 Pet. 1. ought not the same rule to apply in 
 
 8 Francia v. Joseph. 3 Edw. Ch. protection of a note transferred to 
 
 182; "Ward v. Howard 88 N. Y. 74. him? If the pnrty did not receive 
 
 4 In Blanchard v. Stevens, 3 Cush. the note as collateral security, he 
 
 162, 168, the court (Devvey, .T.) say: might have pursued other remedies 
 
 "All the cases of the New York to enforce the security or payment 
 
 courts concur in this: that if the of the debt. He might have obtained 
 
 party receiving the note parts with other securities, or perhaps payment 
 
 anything valuable, he is entitled to in money. * * The convenience
 
 C2 NEGOTIABLE COLLATERAL SECURITIES. 
 
 New York have steadity adhered to the rulings in the early 
 case of Coddington v. Bay. 1 
 
 25. THE RULE IN MISSOURI. In Missouri, an early 
 decision declared the rule as announced in Swift v. Ty- 
 son,* but later, a pledgee receiving negotiable instruments 
 as collateral security for an antecedent debt, without more, 
 was declared subject to all antecedent equities existing 
 between the original parties. 8 The decision .was reversed in 
 the United States Supreme Court. 4 The Supreme Court 
 of Missouri refused to follow the United States Supreme 
 Court, and the rule as stated has been followed in later 
 cases. 6 The equities to which the holder of such paper as 
 collateral security for a pre-existing debt are subject are 
 confined, however, to those existing between the orignal 
 parties ; nor can they be asserted against such holder by a 
 creditor of the maker of the note seeking to attacli the 
 same. 8 The rule that where the payee of a negotiable 
 
 aud safety of those dealing in nego- that entitles the holder, on grounds 
 
 liable paper seems to require and of commercial policy, to such cxtrn- 
 
 justify the rule that when a person ordinary protection, even in cases of 
 
 takes a negotiable note, not overdue, the most palpable fraud. It is im 
 
 or apparently dishonored, and with- exception to the general rule of law, 
 
 out notice, actual or constructive, of and ought not to be carried beyond 
 
 a want of consideration, or othsr de- the necessity that created it." Sim- 
 
 fcnse thereto, whether in payment of ilar language is used in Whistler t>. 
 
 a precedent debt, or as collateral Forstcr. 14 C. B., N. S, 248. 
 
 security for a debt, the holder should ' Sec 23, note 1. 
 
 have the legal right to enforce the * Clark v. Loker, 11 Mo. 97. 
 
 same against the parties thereto, not- 'Goodman v. Simonds, 19 Mo. 
 
 withstanding such defc'iises miirht 106. 
 
 have been effectual as between the * Simonds v. Goodman, 20 How. 
 
 original parties." Lord Coleridge, 343. 
 
 C. J , referring to ihc case of Cod- * Grant v. Kidwell, 30 Mo. 490; 
 
 dington v. Bay, supra, after citing Savings Inst. . Holland, 38 Ib. 49; 
 
 Chancellor Kent, says in liis dissen- Logan v. Smith, 62 Ib. 458; Davis v. 
 
 tient opinion, in Curric v. Misa, L. Carson, G9 Ib. 609 ; Terry v. Hick- 
 
 R. 10 Ex. 153 : " It is the credit man, 1 Mo. App. 119 ; Braincrd . 
 
 given to the paper, and the consider- Heaves, 2 Ib. 490. 
 
 ation bona fide paid on receiving it, Davis v. Carson, supra.
 
 THE PLEDGEE A HOLDER FOR VALUE. 33 
 
 promissory note indorses the same before maturity, a pay- 
 ment mtide to him before his indorsement will not extinguish 
 the debt so far as the indorsee is concerned, unless the 
 latter had notice at the time of the indorsement, is also 
 applied in cases of the transfer of such notes as collateral 
 security for antecedent liability. 1 
 
 26. THE RULE IN OHIO AND OTHER STATES. The 
 question was elaborately considered by the Supreme Court 
 of Ohio in the leading case of Roxborough v. Messick, 2 and 
 the following propositions approved : First, where the note 
 of a third person is transferred before due as collateral 
 security, and for value, such as in consideration of a loan 
 or advancement, or a stipulation, express or implied, of 
 further time to pay a pre-existing debt, or the like, the 
 holder of such collateral will be protected from infirmities 
 affecting the instrument before it was thus transferred ; and, 
 Second, when a debt is created, without any stipulation 
 for further security, and the debtor, without any applica- 
 tion to do so, voluntarily transfers a negotiable instrument 
 to secure the pre-existing debt, and both parties are left in 
 respect to the pre-existing debt in statu quo, no new con- 
 sideration, stipulation for delay, or credit being given or 
 right parted with by the creditor, he is not a holder of the 
 collateral for value, in the usual course of trade, and 
 receives it subject to all the equities existing against it at 
 the time of the transfer. These rules have been consistently 
 followed in the later cases. 8 
 
 In Alabama, the indorsee of commercial paper, acquiring 
 it either before or after maturity, merely as collateral 
 security fora pre-existing debt, receives the same subject to 
 all the defenses which the maker could prefer against the 
 
 1 Grant v. Kid well, supra. Kingsland v. Prior, 33 Ib. 19; Bank 
 
 6 Ohio St. 448; s. c. 11 Ib.172. t>. Fowler. 36 Ib 524 ; Copelaud . 
 
 3 Hatch v. Langdon, 7 Ohio St. Manton, 22 Ib. 398 ; Pitts v. Fogle- 
 
 245 ; Gebhart v. Sorrels, 9 Ib. 461 ; song, 37 Ib. 676; Bank . Bank, Ib. 
 
 Cleveland v. State Bank, 19 Ib. 145; 208. 
 3
 
 34 NEGOTIABLE COLLATERAL SECURITIES. 
 
 payee if he had remained the holder. This right exists as 
 to matters of set-off or discount as well as to defenses 
 affecting the instrument itself; and one of two joint 
 debtors was alloAved to set-off a debt due to him alone from 
 the common creditor. 1 But the rule was limited in 
 Lehman v. Tallahassee Manufacturing Company* declaring 
 that a corporation having authority to issue its negotiable 
 bonds for proper corporate purposes, such bonds might be 
 used as collateral security for antecedent debts. " It would 
 unnecessarily interfere with the operations of the com- 
 pany (say the court) to declare that these bonds can be 
 employed in paying antecedent debts, but must not be 
 hypothecated as security for such debts, although by such 
 hypothecation forbearance can be obtained, and the debts 
 paid eventually without an absolute unconditional transfer 
 of the bonds." 
 
 Defining a holder for value of commercial paper, the 
 Supreme Court of Arkansas held that he must have either 
 given money or property in exchange for the note, or having 
 received it absolutely or unconditionally in payment of a 
 pre-existing debt, or relinquished some valuable security or 
 some valuable right on the sole strength of the identical 
 paper so innocently received in the due course of trade, and 
 that when a note is transferred only by way of indemnity 
 against probable future loss, or from an existing liability, or 
 as a collateral security for a pre-existing debt, it is not such 
 a holding as comes within the rule.* 
 
 The decisions in Vermont are conflicting. In the first 
 case 4 the opinion was delivered by Judge Redfield, the 
 
 1 Bank of Mobile v. Poelnitz, 61 whose debt is due must pay it, or 
 
 Ala. 147; Thurman v. Stoddard, 63 become a bankrupt in a commercial 
 
 Ib. 333 ; Connerly v. Planters' Ins. sense. If. instead of money be gives 
 
 Co. 66 Ib. 432. a bill or note, citber on time or sight, 
 
 64 Ala. 567. whether this is payment in form or 
 
 1 Bertrand v. Barkham, 13 Ark. is given as collateral to his debt, he 
 
 150. gains time, and is saved from the 
 
 4 Atkinson v. Brooks, 26 Vt. 569, disgrace and ruin of stopping pay- 
 
 576. Redfield (C. J.) said : "One ment. Viewed as it may be, the
 
 THE PLEDGEE A HOLDER FOR VALUE. 35 
 
 court adopting the view that the indorsee of a bill of ex- 
 change as collateral security for a pre-existing debt, was 
 prima facie a holder for value, and was entitled to recover 
 against an accommodation indorser, not known to him to be 
 such when the bill was taken. In a subsequent case 1 the 
 rule was applied in favor of a surety on a letter of credit, 
 who was discharged where, without his consent, aftier the 
 maturity of the paper for the payment of which he was 
 bound, the holder received as collateral security for its pay- 
 ment, another obligation with other sureties, payable at a 
 future time. Tn a later case* the court (Judge Redfield dis- 
 senting, but filing no opinion) overruled the previous decis- 
 ions, so far as they conflicted with its then ruling, that no 
 binding agreement to delay the collection of an overdue 
 debt could be implied from the receipt by the creditor from 
 the principal debtor of a note or other obligation not yet 
 due, merely as collateral security therefor, and therefore the 
 pledgee thereof is not a holder for value, in the usual course 
 of business. 
 
 27. THE PLEDGEE FOR ANTECEDENT DEBT, WITH 
 NEW CONSIDERATION, A HOLDER FOR VALUE. The 
 pledgee of negotiable instruments, receiving the same be- 
 fore maturity, indorsed where required, so as to become a 
 party thereto, as collateral security for the payment of an 
 antecedent debt, who, by some affirmative act or contract in 
 
 debtor in either case derives the as collateral security merely, the 
 
 benefit of an implied understanding creditor doubtless furnishes ground 
 
 tha t the creditor will not immedi- for an expected indulgence on the 
 
 ately press for payment, unless the original debt. But the debtor is 
 
 new security proves unproductive. bound to treat this as at all times 
 
 and, if it does, that the creditor may countermandable at the will of the 
 
 pursue any other remedy." creditor." Judge Redfield again 
 
 1 Michigan Slate Bank v. Leaven- stated his views, after the decision in 
 
 worth, 28 Vt. 209. Austin . Curtis, in a note to the 
 
 1 Austin 0. Curtis, 31 Vt. 64. The case of Le Breton v. Pierce (2 Allen, 
 
 Court say: " By taking such an obli- 8) 1 Am. L. R., N. S. 35. 
 gation [an indorsed negotiable note]
 
 36 
 
 NEGOTIABLE COLLATERAL SECURITIES. 
 
 relation to such antecedent debt, gives a new and valuable 
 consideration for the transfer thereof, is regarded in every 
 jurisdiction as a holder for value in the usual course of busi- 
 ness. The pledgee, who thus receives negotiable collateral 
 securities for an antecedent debt, is as much favored, under 
 the general commercial law of every state, as the pledgee 
 who receives such securities upon a present advance. He 
 is entitled to enforce the payment of such collateral bills or 
 notes or bonds, as against parties bound thereon, and the 
 pledger, where he is an indorser thereof, free from antece- 
 dent equities. A valid extension of time upon the principal 
 note for a definite period of time, being an agreement to for- 
 bear suit upon the original indebtedness, is frequently of the 
 utmost importance to the debtor, and constitutes one of the 
 oldest titles of the law under the head of forbearance. 1 There- 
 linquishment by the creditor of some security of equal value,* 
 
 1 Swift v. Tyson, 16 Pet. 1 ; Good- 
 man v. Simonds, 20 How. 343, 371 , 
 Gates v. Nat. Bank, 100 U. S. 239 ; 
 Depeau v. Waddington, 6 Whart 219; 
 Petrie v. Clark, 11 S. & R. 377; Jen- 
 nison v. Stafford, 1 Gush. 168; 
 Wheeler v. Slocuin, 16 Pick. 52; 
 Elting v. Vanderlyn. 4 Johns. 273; 
 Bank . Wexson, 42 N. Y. 438 ; Er- 
 win v. Shaffer, 9 Ohio St. 43; Rox- 
 borough v. Messick, 6 Ib. 448 ; Holz- 
 worth v. Koch, 26 Ib. 83 ; First Nat. 
 Bank v. Fowler, 36 Ib. 524; Kings- 
 laud v. Pry or, 33 Ib. 19; Paulctte v. 
 Brown, 40 Mo. 54; Worcester Nat. 
 Bank v. Cheeney, 87 111. 602, 608; 
 Ryan v. Chew, 13 la. 589; Interna- 
 tional Bank . Barber, 56 Ib. 559; 
 Austin v. Curtis, 31 Vt. 64 ; Atkin- 
 son v. Brooks, 26 Vt. 374; Morton v. 
 Burn, 7 A. & E. 19; Baker v. Walk- 
 er, 14 M. & W. 465; Walton v. Mas- 
 call, 13 M. & W. 453. 
 
 * Bertrand v. Barkman, 13 Ark. 
 150; Payne v, Benseley, 8 Cal. 260; 
 
 Goodman v. Simonds, 20 How. 343, 
 371 ; Bank of Salina . Babcock, 2t 
 Wend. 299 ; Young v. Lee, 2 Kern. 
 551 ; Bank v. Vandcrhorst, 32 N. Y. 
 523 ; Lawrence t. Clark, 36 Ib. 128 ; 
 Pratt v. Cowan, 37 Ib. 440 ; Chrysler 
 v. Renois, 43 Ib. 209; Robbins v. 
 Richardson, 2 Bosw. 248; Phoenix 
 Ins. Co. v. Church, 81 N. Y. 222; 
 Goodwin. Conklin, 85 N. Y. 21; 
 First Nat. Bank . Bentley, 21 Minn. 
 87; Depeau v. Waddington, 6 Whart. 
 220. Notwithstanding such paper 
 was used against the restriction of 
 the accommodation maker, where 
 the pledgee was without knowledge 
 or notice of the facts. Kingsland v. 
 Pryor, 33 Ohio St. 19. Horublowcr 
 7>. Proud, 2 B. & A. 327; Rideout v. 
 Bristow, 1 Cromp & J. 231. Nor is 
 the pledgee regarded as a holder for 
 value, where subsequently to the 
 pledge of the collateral paper for an 
 antecedent debt the creditor grants 
 indulgence or forbears to enforce his
 
 THE PLEDGEE A HOLDER FOR VALUE. 3r 
 
 or the giving of a new consideration, 1 or discontinuing 
 legal process against the debtor,* or where, under statu- 
 tory provisions, the acceptance of such collateral security, 
 payable at a future time, is a waiver of the right of attach- 
 ment of the property of the debtor upon the original indebt- 
 edness,* are valuable considerations to bring the pledgee of 
 negotiable collateral securities within the rule, as stated. 
 
 28. TRANSFER IN PAYMENT OF ANTECEDENT DEBT. 
 A pre-existing debt or obligation constitutes a valuable 
 consideration, and one who takes a bill or note of a third 
 party in absolute payment of such obligation, is a holder 
 for value and unaffected with equities between the antece- 
 dent parties of which he had no notice, 4 even although it is 
 
 remedies for the collection of his 
 debt, when it is not shown that such 
 indulgence or forbearance was an 
 element of the contract by which he 
 acquired the same. Feuouille 0. 
 Hamilton, 35 Ala. 319. 
 
 'King 0. Doolittle, 1 Head, 77; 
 Varnum 0. Bellamy, 4 McLean, 87; 
 White 0. Springfield Bank, 3 Sandf. 
 222; New York etc. Works 0. Smith, 
 4 Duer, 362. 
 
 * Boyd 0. Cummiugs, 17 N. Y. 
 101. 
 
 8 Payne 0. Bensley, 8 Cal. 260. 
 The relation of the parties not being 
 the same after the giving of the col- 
 lateral security as before, although 
 no extension of time was given on 
 the original note, and no new con- 
 sideration except as stated. Naglce 
 0, Lynian, 14 Cal. 455. 
 
 <Bank 0. Hall, 6 Ala. G39; Pond 
 0. Lockvvood, 8 Ib. 669; B:irney 0. 
 Earle, 13 Ib. 106; Brush 0. Scribner, 
 11 Conn. 288; Adams 0. Smith, 35 
 Me. 324; Holmes 0. Smith, 16 Me. 
 177; Cecil Bank 0. Heald, 25 Md. 
 563; Norton 0. Waite, 20 Me. 175; 
 
 Emanuel 0. White, 34 Miss. 56; 
 Bostwick 0. Dodge, 1 Mich. 413; 
 Outh \vite0. Peters, 13 Ib. 539; Ste- 
 venson 0. Hyland, 11 Minn. 198; 
 Russell 0. Haddock, 3 Gilm. 235; 
 Manning 0. McClure, 35 111. 490; 
 Mix 0. Nat. Bank, 91 III. 20 ; Me- 
 Knight 0. Knisely, 25 lud. 336; 
 Kirkpatrick 0. Muirhead, 16 Pa. St. 
 123; Rosenberg 0. Bitting, 15 Ib. 
 278; Bardsley0. Delp, 88 Ib. 420; 
 Penn. Bank 0. Frankish,91 Ib. 344; 
 Draper 0. Cowles, 27 Ivans. 484; Mc- 
 Coy 0. Hazlitt, 14 Kan. 430 ; Med- 
 berry 0. Sopor, 17 Ib. 369; Wheeler 
 0. Fanrot, 37 Ohio St. 26 ; Green 0. 
 Kennedy, 11 Mo. App. 497; Green 
 0. Kennedy, 6 Ib. 577 ; Reddick 0. 
 Jones, 6 Ired. (N. C.)109; Young 0. 
 Hobbs, 5 Xev. 433 ; Williams 0. Lit- 
 tie, 11 N H. 66 ; Brown 0. Leavitt, 
 31 N. Y. 113 ; Carlisle 0. Wishart, 
 11 Ohio, 172 ; Bank 0. Carrington, 5 
 R. I. 515; King 0. Doolittle, 1 Head. 
 77; Dixon 0. Dixon, 31 Vt. 450; 
 Quinn 0. Hard, 43 Vt. 375; Lee 0. 
 Kimball, 45 Ib. 172; Bank 0. Sco- 
 vii:e, 24 Wend. 115; Bank 0. Gilli-
 
 88 NEGOTIABLE COLLATERAL SECURITIES. 
 
 taken for less than its face value, 1 unless the discount is so 
 great as to be of itself evidence of mala fides. 4 A V here such 
 pre-existing debt is represented by a note or other evidence 
 of indebtedness, the receipt of the new note in absolute pay- 
 ment extinguishes the liability upon the old note ; and this 
 rule has been applied for the benefit of stockholders of a 
 corporation whose individual liability for debts was sought 
 to be enforced on the ground that they were stockholders 
 at the time of the creation of the debt for which the old 
 note was given. 8 
 
 29. SUCH TRANSFER is PRIMA FACIE AS COLLAT- 
 ERAL SECURITY. Under the general law commercial, in 
 this country and England, the negotiation of a bill or note 
 of a third party for an antecedent debt, does not operate as 
 a discharge of such debt, unless such note is accepted as in 
 absolute payment. Prima facie, it is considered as a condi- 
 tional payment or as collateral security, although by express 
 agreement it may be a satisfaction or bar of the original de- 
 mand. 4 Nothing short of an actual agreement or of evi- 
 
 lantl, 23 Ib. 311 ; N. Y. Marbled Barb. 159; Parrott t>. Colby, 6 Hun, 
 
 Iron Works v. Smith, 4 Duer, 377; 55. 
 
 Gould. Segee, 5 Ib. 2GO; Bank v. 4 The Kimball, 3 Wall. 37; Day 
 Babcock, 21 Wend. 499; Phoenix C.Thompson 6D Ala. {11 Rep. 391); 
 Ins. Co. v. Church, 81 N. Y. 226; Myatt v. Bell, 41 Ala. 222; Albright 
 Chryslers Renois, 43 Ib. 209; Ward v. Griffin, 78 Ind. 182; Shephard v. 
 c. Howard, 88 Ib. 74; Sterens v. Allen, 16 Kan. 184; Cooper v. En- 
 Campbell, 13 Wis. 376; Heath v. den, 15 Ib 572: Comstock v. Smith, 
 Silverthorne etc. Co, 39 Ib. 146; 23 Me. 202; Fowler . Ludwig, 34 Ib. 
 Knox v. Clifford, 35 Ib. 651 ; Bange 455; Partee v. Bedford, 51 Miss. 84; 
 . Flint, 25 Ib. 544; Swift v. Tyson, Young v. Hibbs, 5 Nev. 433; Mc- 
 16 Pet. 1; Sawyer v. Prickett, 19 Lean v. Walker, 10 Johns. 471; Mui- 
 Wall. 147. don v. Whitlock, 1 Cow. 290; Com. 
 
 1 Bange v. Flint, 25 Wis. 544. Exch. Ins. Co. v. Babcock, 57 Barb. 
 
 'Heath . Silverthorne, etc. Co., 231: Hunter v. Moul, 98 Pa. St. 13; 
 
 89 Wis. 146. Leas. James, 10 S.& R.307; Wallace 
 
 'Wheeler Faurot, 37 Ohio St. v. Foreman, 4 Watts, 380; Stone v. 
 
 26 ; Castleman v. Holmes, 4 J. J. Miller, 16 Pa. St. 450; Mclutyre v. 
 
 Marsh, 1 ; Milliken v. Whitchouse, Kennedy, 29 Ib. 448; Brown v. Scott, 
 
 49 Me. 527; Fisher v. Marvin, 47 51 Ib. 357; League v. Waring, 85 Ib.
 
 THE PLEDGEE A HOLDER FOR VALUE. 
 
 39 
 
 dence from which a positive inference can be drawn, will 
 make such transaction a discharge of the debtor upon the 
 first claim. 1 The actual intention of the parties will govern. 
 Evidence is admitted to show that the negotiation of such 
 paper was as collateral security and not as payment. 9 The 
 burden of showing that the receipt by the creditor of a note 
 of a third person constituted an absolute payment of an 
 antecedent debt, is upon the party so alleging. 8 And if 
 such paper, properly indorsed, is shown to have been nego- 
 tiated as conditional payment, and by the gross neglect of 
 the creditor holding the same to apply in time to the maker 
 thereof, the amount of the note is lost, the antecedent debt 
 is extinguished. 4 
 
 244; Scbauh v. Arrowsmith, 9 N". J. 
 Eq. 323; Freeholders v. Thomas, 20 
 Ib. 41 ; Hutchinson v. Swartsweller, 
 32 Ib. 205; Wildrich v. Swain, 34 
 Ib. 167; Swain 0. Frazler, 35 Ib. 
 326 (14 Rep. 277) ; Morris v. Harveys, 
 75 Va. 726 (13 Rep. 480); Butts v. 
 Dean, 2 Met. 76; Parhani Machine 
 Co. v. Brock, 113 Mass. 195; Dows v. 
 Swett, 134 Mass. 140 (15 Rep. 466); 
 Valpy 0. Oakley, 16 Q. B. 919; Miles 
 t>. Gorton, 2 Cr. & M. 512; Sibree v. 
 Tripp, 15 M. & W. 23; Belshaw c. 
 Bush, 11 C. B. 206. In Day v. 
 Thomnson, supra, there was an ex- 
 press agreement by the creditor to 
 take a N. Y. draft "in payment 
 of bill in full." The bank failed be- 
 fore presentment, but the effect of 
 the receipt of the draft as payment 
 was not avoided thereby. Lowry . 
 Murrell, 2 Port. 280; Carriere . 
 Ticknor, 26 Ala, 571; Fulford v. 
 Johnson, 15 Ib. 385. The receipt of 
 a non-negotiable note will in no 
 sense operate as a payment of the 
 antecedent indebtedness, unless such 
 is the express intention of the par- 
 
 ties. Bristol Co. . Probasco, 64 Ind. 
 406; Stout v. Stout, 77 Ind. 541. 
 
 1 Mclntyre v. Kennedy, 29 Pa. St. 
 448. 
 
 8 McLean v. Walker, 10 Johns. 
 471; Comstock v. Smith, 23 Me. 202; 
 Partee v. Bedford, 51 Miss. 84; 
 Stone v. Miller, 16 Pa. St. 450; 
 Sykes v. Gerber, 98 Ib. 179; Butts 
 v. Dean, 2 Met. 76; Parham Ma- 
 chine Co. v. Brock, 113 Mass. 195; 
 Dows v. Swett, supra. 
 
 8 In re Parker, 11 Fed Rep. 397. 
 
 4 Gallagher's Exec, v Roberts, 2 
 Wash. 191. As where R person re- 
 ceives a promissory note drawn to 
 his own order for a debt due to him, 
 and gives a receipt wherein he states 
 that he has settled and received pay- 
 ment in full by taking the note, and 
 subsequently brings suit upon such 
 note and judgment is given for the de- 
 fendant. Such judgment is a bar to 
 any subsequent action upon the orig- 
 inal demand, the subject of both 
 suits being in fact the same. Sykaa 
 v. Gerber, 98 Pa. St. 179. '
 
 40 NEGOTIABLE COLLATERAL SECURITIES. 
 
 30. THE RULE IN MASSACHUSETTS AND VERMONT. 
 The rule in Massachusetts is, that where a debtor gives 
 his own negotiable promissory note to his creditor for the 
 amount of a pre-existing simple contract debt, it is prima 
 facie a payment or satisfaction of the debt. 1 If such note 
 be given for an amount due on an execution, and the execu- 
 tion be discharged, it is prima facie evidence of payment. 8 
 This presumption is founded upon the consideration that 
 when a note is given for goods, it is equally convenient for 
 the creditor to sue on the note as on the original considera- 
 tion, and no reason exists for any further vitality of the 
 original claim.* The presumption is one of fact, and not of 
 law, and may be rebutted, 4 and does not apply to non- 
 negotiable paper,* nor does it exist where the creditor, 
 upon taking such new note, retains the obligations of third 
 parties held by him, 8 nor upon receiving a new note and 
 mortgage where the note surrendered was secured by mort- 
 gage also. 11 But if such new note and mortgage is taken 
 for an old note unsecured, which is surrendered, it is pre- 
 sumed to be payment. 8 Where such new note is taken for a 
 pre-existing debt, secured by mortgage, it is only presump- 
 tive evidence of payment, and a question of fact for the 
 jury. 9 Checks of a third party dishonored, and not paid, 
 are not payment. 10 
 
 Under the decisions of the Supreme Court of Vermont, 
 a promissory note, either of the debtor or of a third person, 
 given in settlement of an account, or for a pre-existing 
 debt, is priraa facie payment. 11 Such presumption may be 
 
 1 Dodge V. Emerson, 131 Mass. Adams v. Jenkins, 16 Gray, 146. 
 
 467; Timelier 0. Dunsmore, 5Ib. 299. Dodge t>. Emerson, 131 Mass. 
 
 Day v. Hickney, 14 Allen, 255. 467. 
 
 Curtis v. Hubbard, 9 Met. 322. Small . Franklin Ins. Co. 99 
 
 4 Medledge v. Boston Iron Com- Mass. 277. 
 
 pany, 5 Cush. 170. " Hutchins v. Olcott, 4 Vt. 549; 
 
 6 Rowland v Coffin, 9 Pick. 54. Torrey v. Baxter, 13 Ib. 452; Farr v. 
 
 Butts v. Dean, 2 Met. 76; Ap- Stevens, 26 Ib. 299; Collamcr t>. 
 
 pleton v. Parker, 15 Ib. 173. Langdon, 29 Ib. 32; Wait v. Brcw- 
 
 Taft v. Boyd, 13 Allen, 84. ster, 31 Ib. 510.
 
 THE PLEDGEE A HOLDER FOR VALUE. 41 
 
 rebutted by evidence that the note was not received as pay- 
 ment, the question whether it was so received being one of 
 fact, depending upon the contract or understanding of the 
 parties. 1 So, a misunderstanding whether a third party is 
 bound will defeat the presumption, 2 and fraud of course wih 
 defeat it. 3 But it is immaterial that the former note, repre- 
 senting the pre-existing indebtedness, should not have been 
 surrendered on the giving of the new note. The retention 
 of the original note will not affect the transaction as one of 
 payment, if it be so in fact. 4 
 
 1 Follett v. Steele, 16 Vt. 30; Fair Hutchins v. Olcott. Fair v. Stev- 
 
 v. Stevens, and Collamerfl. Langdon, ens, Wcmet v. Mississquoi Co , Wait 
 
 supra. v. Brewster, supra. 
 
 1 Dickinson v. King, 28 Vt 378; Dixon fl.Dixon. 31 Vt. 450. 
 Wemet v. Mississquoi Co. 46 Ib. 460; 
 "Wait v. Brewster, supra.
 
 42 NEGOTIABLE COLLATERAL SECURITIES. 
 
 CHAPTER IV. 
 
 ACCOMMODATION PAPER AS COLLATERAL SECURITY. 
 
 31. The title of the pledgee of accommodation paper. 
 
 32. The paper included in the term " accommodation." 
 
 33. As collateral security for a present advance. 
 
 34. As collateral security for a pre-existing debt. 
 
 35. The rule adopted in New York. 
 
 36. The rule in Ohio and Pennsylvania. 
 
 37. The English rule. 
 
 38. Misappropriation of accommodation paper as collateral security. 
 
 39. Such pledges not sustained as collateral security for antecedent debt, 
 
 without more. 
 
 40. Pledgee chargeable with notice of fraud or forgery can not recover. 
 
 41. Pledge of accommodation paper, after maturity, supported. 
 
 42. The amount of recovery by the pledgee. 
 
 31. THE TITLE OF THE PLEDGEE OF ACCOMMODATION 
 PAPER. The title of the pledgee, receiving accommodation 
 paper as collateral security, as a holder for value in the 
 usual course of business, where there has been no restriction 
 placed upon the use of such paper by the party signing or 
 indorsing the same, is especially favored in commercial law. 
 The use of such paper as collateral security for a present 
 advance, or for an antecedent debt, even in states where 
 ordinary commercial paper taken as collateral security for 
 such antecedent debt, without more, is subject to equities, 
 is supported, and the obligation of the accommodating party 
 who has held himself out to the world as absolutely bound 
 to every person who shall take the note for value, is enforced 
 in his favor. 1 The pledgee, receiving such paper, after ma- 
 
 1 Logan v. Smith, 62 Mo. 455; Con- Bank, 84 Ib. 420, 436 ; G rocer's Bank 
 tinental Nat. Bank . Townsend, 87 v. Penfield, 69 N. Y. 502; Miller v. 
 N. Y. 9; Southwick v. First Nat. Larned, 103 111. 562; Pitts v. Fogle-
 
 ACCOMMODATION PAPER. 43 
 
 turity, as collateral security where the accommodated party 
 has been allowed to retain the same by the maker, is pro- 
 tected, as his continued possession thereof creates a pre- 
 sumption that he has a continued right to use the paper. 1 
 Where, however, the act of pledge of accommodation paper 
 is a fraud, and in violation of restrictions placed upon its 
 use, the pledgee for value, without notice, is restricted 
 in his recovery against the accommodating party to the 
 amount of his loan; and if chargeable with notice of the 
 fraud, acquires no title whatever as against the defrauded 
 party. 8 
 
 . 32. THE PAPER INCLUDED WITHIN THE TERM "AC- 
 COMMODATION." Accommodation paper includes a negotia- 
 ble or non-negotiable bill or note made or indorsed by a 
 person without consideration, 8 and includes the handing by 
 a person of his signature upon a blank piece of paper to 
 another, authorizing him to fill it up, which being done, as 
 between the accommodating party and an innocent pledgee 
 before maturity, without notice, and for a valuable advance 
 in the usual course of business, the accommodating party is 
 estopped to deny his signature. 4 Where a note is signed 
 
 song. 37 Ohio St. 676; Matthews v. 208; Miller v. Lamed, 103 111. 562; 
 
 Rutherford, 7 La. Ann. 225; Lord v. Davis v. Randall, 115 Mass. 547; 
 
 Ocean Bank, 20 Pa St. 384 Agawam Bank v. Strever, 18 K Y. 
 
 1 Connerly v. Planters' Ins. Co. 66 502; Richardson v. Rice, 9 Baxter 
 
 Ala. 432; Dunn v. Weston, 71 Me. 290; Baldwin . Ely. 9 How. 580; 
 
 270; Miller v. Lamed, 103 111. 562; Matthews v. Finley, 7 La. Ann. 
 
 Silverman v. Bullock, 98 Ib. 11; 225; Hey wood v. Watson, 4 Bing. 
 
 Robbins v. Richardson, 2 Bosw. 283; 496. "An accommodation bill or 
 
 Harrington v. Dow, 3 Robt. 275. note is one to which the accommo- 
 
 * Maitland v. Bank, 40 Md. 540; dating party has put his name with- 
 Allaire . Hartshorn, 21 N. J. L. out consideration, for the purpose of 
 665; Dresser D. Railroad Co. 93 U. accommodating some other party 
 S. 92, 96; Fisher v. Fisher, 98 Mass. who is to use it and is expected 
 303 ; Stoddard v. Kiraball, 6 Cush. to pay it. ' Byles on Bills, Shars- 
 469; Small v. Smith, 1 Denio, 583. wood's Ed. 237. 
 
 * Dayton National Bank v. Mer- 4 Goodman . Simonds, 20 How, 
 chants' National Bank, 37 Ohio St. 361; Violet v. Patton, 5 Crunch 142;
 
 44 NEGOTIABLE COLLATERAL SECURITIES. 
 
 by two persons jointly, one being an accommodation maker, 
 and the other receives the same and indorses it before matu- 
 rity to a bona fide holder for value, in the usual course of 
 business, the accommodating party is bound. 1 Nor is the 
 character of accommodation paper changed because the 
 makers or indorsers thereof are protected against personal 
 loss by securities alleged to be equitably owned by the 
 party accommodated.* Nor is it any defense for the accom- 
 modation maker, when it is sought to enforce his obligation, 
 that the creditor holds other securities more than sufficient 
 for his protection. 1 
 
 33. As COLLATERAL SECURITY FOB A PRESENT AD- 
 VANCE. Accommodation paper, in the hands of the party 
 accommodated, without restrictions as to its use, may be 
 negotiated as collateral security for a debt then created by 
 the holder, or to become due, or in payment of antecedent 
 debt, and the person making, indorsing or accepting the same 
 as an accommodation party, has no defense as against the 
 pledgee for value, before maturity, without notice of equi- 
 
 Bank of Pittsburgh v. Neal, 22 How. worth, 80 Vt. 11; Frank t>. Little- 
 
 107; Davidson v. Lanier. 4 Wall. field, 33 Gratt. 384; Snyder v. Van- 
 
 457; Michigan Bank v. Eldred, 9 Ib. Dcurcn, 46 Wis. 602; Collett v. Em- 
 
 544, 552; Angle v. N. W. Ins. Co., melt, 1 H. Bl. 313; Montague v. Per- 
 
 92 U.^S. 330; Bank v. Kimball, 10 kins, 22 E. L. & E. 516; s. c. 22 L. 
 
 Cush. 373; Joseph v. Nat. Bank, 17 J. C. P. 187. 
 
 Kan. 756; Ives v. Farmers' Bank, 2 'First Nat. Bank r. Fowler, 36 
 
 Allen 236; Mnhonc v. Central Bank, Ohio St. 524; Wallace v. Jewell, 21 
 
 17 Ga. Ill; Rich*. Starbuck, 51 Ib. 163; Boyd v. Brotherson, 10 
 
 Ind. 87; Spitler v. James 32Ib.202; Wend. 93; Pearson v. Stoddard, 9 
 
 Coburnfl. Webb, 56 Ib. 96; Jones v. Gray, 199; McCrary . Cashcy, 27 
 
 Shelbyville Ins. Co.. 1 Mete. 58; Geo. 54; Taylor v. Strickland, 87 
 
 Bank v. Curry, 2 Dana 142; Dunham Ala. 642 ; Kelsey v. Hibbs, 13 Ohio 
 
 . Clogg, 30 Md. 284; Hardy v. Nor- St. 340; Goldsuede v. Swan, 1 W. 
 
 ton, 66 Barb. 527; Seymour v. Mick- H. & G. 154. 
 
 ey, 15 Ohio St. 573; Grissora t>. File, 'Miller . Lamed, 103 111. 562; 
 
 1 Head. 332; Waldron v. Young, 9 Silverman v. Bullock, 98 Ib. 111. 
 
 Heisk.777; Nichol v. Bate, 10 Ycrg. Lyon v. Huntington Bank, 12 S. 
 
 429; Diercks v. Roberts, 13 S. C. & R. 61. 
 838, Michigan Ins. Co. v. Leaven-
 
 ACCOMMODATION PAPER. 45 
 
 ties. 1 The Supreme Court of Ohio, in a recent case,* stated 
 the rule as follows : " Where one, not induced by fraud, in- 
 dorses a negotiable promissory note for the accommoda- 
 tion of another, without restriction as to its use, a third 
 person who receives it before due as collateral security for 
 a debt to become due from the person for whom the indorse- 
 ment was made, and subsequently prosecutes an action 
 against such indorser, will not be affected in respect to his 
 right to recover, by the fact that such defendant is an 
 accommodation indorser. The obligation of the indorser in 
 such case is held to be the same whether the indorsement 
 was for value received or for accommodation." 8 A payee 
 of an accommodation note, under an agreement with the 
 maker, gave collateral security to the person discounting 
 the note, who had no knowledge that it was accommodation 
 paper. Afterwards, the payee agreed that the collateral 
 securities might be held to secure other obligations. The 
 accommodation maker was held not entitled to require the 
 application of the collateral securities to the accommodation 
 note as against the party discounting it. 4 
 
 34. As COLLATERAL SECURITY FOR AN ANTECEDENT 
 DEBT. The freedom of use and credit accorded to accom- 
 modation paper, when given to the accommodated person 
 without restriction upon its use, has led it to be treated, when 
 indorsed and delivered as collateral security for antecedent 
 debt, with greater favor in connection with such use than 
 the ordinary negotiable instrument issued for value. The 
 undertaking of the accommodating party is liberally con- 
 strued. Even in the states where the restricted rule pre- 
 
 1 Logan v. Smith, 62 Mo. 455. County Bank v. Lane, 8 Ohio St. 
 
 J Pitts v. Foglesong, 37 Ohio St. 405; Erwin v. Schaffer, 9 Ib. 43; 
 
 676. Knox County Bank v. Lloyd. 18 Ib. 
 
 8 Stone v. Vance, 6 Ohio, 246; 353; Kingsland v. Pryor, 33 Ib. 19. 
 
 Riley v. Johnson, 8 Ib. 526 ; Will- 4 Tyler . Bussey, 3 MacArth. (D. 
 
 iams v. Bosson, 11 Ib. 62 ; Clinton C.), 344. 
 Bank v. Ayres, 16 Ib. 282; Portage
 
 46 
 
 NEGOTIABLE COLLATERAL SECURITIES. 
 
 vails, under which the indorsee of ordinary commercial 
 paper receiving the same as collateral security for an ante- 
 cedent debt, without more, is not a holder for value, the 
 pledgee of accommodation paper, receiving the same as col- 
 lateral security under the like circumstances, before due, 
 properly indorsed, and without notice, is a holder for value, 
 in the usual course of business, and entitled to enforce the 
 same free from antecedent equities. Nor is it necessary that 
 the pledgee of accommodation paper under such circumstan- 
 ces should have parted with value, in order to be within the 
 rule. 1 The existence of the debt secured is a sufficient 
 consideration to support the title of the pledgee to the col- 
 lateral securities.* 
 
 35. THE RULE ADOPTED IN NEW YORK. The use 
 of accommodation paper as collateral security for an aiite- 
 
 1 Continental Nat. Bank v. Towns- 
 end, 87 N. Y. 9 ; South wick v. First 
 Nat. Bank, 84 Ib. 420,436; Freund 
 t>. Bank, 76 Ib. 352 ; Grocers' Bank 
 v. Penfield, 69 N. Y. 502; Schepp v. 
 Carpenter, 51 N. Y. 602 ; Bank 
 of Rutland v Buck, 5 "Wend. 66 ; 
 Grandin . LeRoy, 2 Paige, 509; 
 Lathrop v. Morris, 5 Sandf. 7; De- 
 Zeng v. Fyfe, 1 Bosw. 335; Bobbins 
 t>. Richardson, 2 Ib. 248 (in which 
 there was a surrender of other secur- 
 ities) ; Boyd v. Cummings, 17 N. Y. 
 101 ; Mohawk Valley v. Corey, 1 
 Hill, 513; Matthews v. Rutherford, 
 7 La. Ann. 225 ; Appleton v. Donald- 
 son, 3 Pa. St. 386; Lord v. Ocean 
 Bank, 20 Pa. St. 384; Works. Ease, 
 84 Ib. 138 ; Cummings t>. Boyd, 83 
 Ib. 372. But in Cummings v. Boyd, 
 the Court say that the holder of an 
 accommodation note pledged as col- 
 lateral security for an antecedent 
 debt is nota purchaser for value.and 
 the note in his hands may be im- 
 peached for fraud in its making or 
 
 procurement. Ashton's App. 73 Ib. 
 153. Kimbro v. Lytle, 10 Yerg. 417; 
 Miller v. Lamed, 103 111. 562 ; Pitts 
 v. Foglesong, 37 Ohio St. 676. The 
 rule in Alabama is to the contrary : 
 that the holder of accommodation 
 paper as collateral security for a 
 pre-existing debt simply is not a 
 holder for value, nor entitled to pro- 
 tection against equities and defences 
 existing between prior parties of 
 which he had no notice. Connerly 
 v. Planters' Ins. Co., 66 Ala. 432. 
 The Supreme Court follow the es- 
 tablished rule in Alabama in its de- 
 cision, acknowledging that the 
 weight of authority is the other way, 
 and saying: "Whether the rule (as 
 to accommodation paper) could be 
 adopted here without infringing 
 upon the rule so long adopted that 
 it can not be departed from without 
 disturbing transactions which may 
 have commenced, we do not consid- 
 
 er.' 
 
 Lathrop c. Morris, 5 Sandf. 7.
 
 ACCOMMODATION PAPER. 47 
 
 ceclent debt, without any further consideration, is approved 
 in New York. The rule in such cases was stated in the 
 Grocers' Bank v. Penfield, 1 where it was held : " Where 
 a promissory note is made for the accommodation of the 
 payee, but without restriction as to its use, an indorsee 
 taking it in good faith as collateral security for an ante- 
 cedent debt of the payee and indorser without other con- 
 sideration, occupies the position of holder for value, and can 
 recover thereon against the maker. The precedent debt is 
 a sufficient consideration for the transfer, and no new con- 
 sideration need be shown. It is only where the note has 
 been diverted from the purpose for which it was intended 
 by the payee, or some other equity exists in favor of the 
 maker that it is necessary that the holder should have 
 parted with value on the strength of the note, in order to 
 enforce the same." 
 
 An accommodation note was received in good faith and 
 without notice of equities, other notes being surrendered to 
 the payee. This was a good consideration, the parties re- 
 ceiving the same being bona fide holders, and the fact that 
 the note was executed for the accommodation of the payee, 
 and fraudulently diverted from the use intended, forming no 
 defense. 9 The rule, as thus limited, is recognized in several 
 cases in New York. 8 A surety is liable on an accommoda- 
 tion note where used as collateral security for an antece- 
 dent debt. 4 And, in another case, 5 where promissory notes, 
 made for accommodation, without restriction as to their 
 use, were transferred to the plaintiff on the last day of 
 grace, during banking hours, to be held as collateral 
 security for indebtedness of the payee to the pledgee, and 
 
 1 69 N. Y. 502. 55 Ib. 24 ; Freund v. Bank, 76 N. Y. 
 
 Nickerson v. Rager, 84 K Y. 352; Soutliwick v. First Nat. Bank, 
 
 675; s.c. 76 N. Y. 279. Ib. 349. 
 
 * Spencers. Ballou, 18 K Y. 331; 4 Bank of Rutland v. Buck, 5 
 
 Park Bank v. Watson, 42 Ib. 490; "Wend. 66. 
 
 Schepp v. Carpenter, 51 Ib. 602; 6 Continental Nat. Bank v. Towns- 
 Merchants' Nat. Bank v. Comstock, end, 87 N. Y. 9.
 
 48 NEGOTIABLE COLLATERAL SECURITIES. 
 
 when collected the proceeds to be applied on such indebt- 
 edness, the pledgee was regarded as a holder for value. 
 The notes were transferred before maturity, the maker 
 having the whole of the last day of grace in which to pay 
 them. 1 A different view has been expressed in a Massa- 
 chusetts case.* 
 
 36. THE RULE IN OHIO AND PENNSYLVANIA. The 
 Supreme Court of Ohio considered the liability of an ac- 
 commodating indorser, where the paper has been used as 
 collateral security for an antecedent debt, for the first time 
 in the case of Pitts v. Foglesong, 1 and so far extended the 
 rule declared in Roxborough v. Messick 4 as to declare that, 
 in the absence of fraud, the indorser of a negotiable promis- 
 sory note, owned by another, and indorsed for the accom- 
 modation of the latter, without restriction as to ; ts use, is 
 liable to an indorsee who receives it in good faith from the 
 owner before due as collateral security for an antecedent 
 debt of such owner, although there be no other considera- 
 tion for such collateral. In Pennsylvania, the maker of an 
 accommodation note cannot set up a want of consideration 
 as a defense against it in the hands of a third person holding 
 it merely as collateral security for an antecedent debt of the 
 payee. The man, as observed by the court in Lord v. Ocean 
 Bank 8 who chooses to put himself in the front; of a 
 negotiable instrument for the benefit of his friend must 
 abide the consequences, and has no more right to complain 
 if his friend accommodates himself by pledging it for an old 
 debt than if he had used it in any other way. Accommoda- 
 tion paper is a loan of the maker's credit when made with- 
 
 1 Continental Nat. Bank v. Towns- Barb. 104; Cothart v. Ballard. 41 
 
 end, supra; Bank v. Penfield, 69 N. Ib. 33. 
 
 Y. 502; Osborne c. Moncure, 3 Pine v. Smith, 11 Gray, 88. 
 Wend. 170 ; Hopping v. Quinn, 12 87 Ohio St. 670 
 Ib. 517; Cayuga Bank v. Hunt, 2 6 Ib. 448. 
 Hill, 635; Smith v. Aylesworth, 40 20 Pa. St. 334.
 
 ACCOMMODATION PAPER. 49 
 
 out restriction as to the manner of its use. 1 The fact that 
 the pledgee holds other security more than sufficient to 
 cover his debt is no defence for the accommodation 
 maker.* Where however such paper is misappropriated by 
 an agent as collateral security for his own antecedent debt, 
 the pledgee is not regarded as a holder for value in the 
 usual course of business.* 
 
 37. THE ENGLISH RULE. The like rules are applied 
 by English courts, in considering the relations of parties to 
 accommodation bills and notes as to other paper. The 
 pledgee thereof when a party to the instrument, taking the 
 same before maturity in good faith for value advanced and 
 without notice of equities, is a holder for value, in the 
 usual course of business. The negotiation of such paper as 
 collateral security for an antecedent debt was sustained by 
 Baron Parke in Crofts v. Beale, 4 although the note in the 
 case being non-negotiable in form was not enforced against 
 the surety. In Watson v. Russell, in the Queen's Bench,* 
 the rule was announced that a party who by means of a 
 false pretence, or condition which he does not fulfil, pro- 
 cures another party to give him a note or acceptance in 
 favor of a third person, to whom he pays it, and who re- 
 ceives it bona fide for value, the accommodation maker or 
 acceptor remains liable to pay the same, because his ac- 
 ceptance or transfer of the same imparts value prima facie, 
 and he can only relieve himself of his promise to pay the 
 holder by showing that he is not a holder for value, or that 
 he received the instrument in bad faith, or with notice of 
 its infirmity. 
 
 1 Work v. Ease, 34 Ib. 138; Apple- B. & S. 34. 40. The chief jus- 
 ton v. Donaldson, 3 Ib. 381. tice, however, thought the extent of 
 
 * Lyon v. Huntington Bank, 12 S. the recovery, where the same had 
 & R. 61 ; Lord v. Ocean Bank, 20 Pa. been pledged as collateral security, 
 St. 384. should be limited to the extent of 
 
 8 Royer v. Keystone Nat. Bank, the debt which the accommodation 
 83 Pa. St. 248. paper was given to secure. 
 
 * Crofts v. Beale, 11 C. B. K S. 172. 
 
 4
 
 50 NEGOTIABLE COLLATERAL SECURITIES. 
 
 38. MISAPPROPRIATION OP ACCOMMODATION PA- 
 PER AS COLLATERAL SECURITY. The pledgee of commer- 
 cial paper given for accommodation, receiving the same 
 from the holder thereof before maturity, in good faith, for 
 value, and without notice of 'any equities or fraud, although 
 the accommodation maker has imposed secret restrictions 
 upon its use, and the act of pledge is a misappropriation by 
 the accommodated party, is a holder for value, in the usual 
 course of business, and entitled to enforce such paper to the 
 whole amount of the face thereof, as against all parties 
 thereto. This is an undoubted right of a pledgee for value, 
 but where such paper is received from the accommodated 
 party, and exceeds in its value the amount of the loan, and 
 the pledgee is liable over to nobody for the surplus, if he 
 should collect the whole, his recovery, as against the ac- 
 commodating party, may be equitably restricted to the ac- 
 tual advance and proper charges. In any other event, as a 
 holder for value, he is entitled to recover the whole amount 
 of the collateral accommodation notes, the presumption be- 
 ing that full value was given therefor. 1 Even where re- 
 ceived with knowledge of misappropriation for a greater 
 sum than authorized, the pledgee is allowed to recover, 
 having advanced value thereon, to the extent of the amounts 
 then remaining due, to secure the payment of which the 
 collateral accommodation notes were authorized to be 
 pledged. 9 In cases, however, where fraud intervenes, and 
 the accommodation paper is taken for value as collateral se- 
 curity by a pledgee chargeable with full notice of the fraud, 
 he can not recover, not being a bona fide holder.* 
 
 To defeat the title of the bona fide pledgee of accom- 
 
 1 Williams . Smith, 2 Hill. 301; Y. 166; Small t. Smith, Denio, 583; 
 
 Allaire v. Hartshorn, 21 N. J. L, Collins v. Gilbert. 94 U. S. 753, 761. 
 
 665; Maitland v. Bank. 40 Md. 540; Maitland v. Bank, 40 Md. 540. 
 
 Stoddard v. Kimball, 6 Cush. 469; 'Collins t>. Gilbert, 94 U. 8. 753. 
 
 Dresser v. Railroad Co., 93 U. S. 92, 760: Stoddard c. Kimball, 6 Cush. 
 
 96; Watson v. Cabot Bank, 5 Sandf. 469; Small r. Smith, 1 Denio. 583. 
 423; Case *. Mech. Bid. Assn., 4 N.
 
 ACCOMMODATION PAPER. 51 
 
 modation paper receiving the same before maturity, for a 
 valuable consideration, and without notice, where such use 
 of the paper by the holder is a misappropriation thereof, and 
 contrary to the restrictions imposed by the accommodating 
 party on its use, such affirmative acts or gross negligence, 
 or knowledge actual or presumptive, of the misappropria- 
 tion, must be shown as to make the transaction of pledge a 
 fraud. 1 The inference in such cases is, that the pledgee of 
 such accommodation bill or note gave value for it, that be- 
 ing the object for which such paper is given, although the 
 act of pledge be a misappropriation. * 
 
 A bona fide holder of accommodation paper, for value, 
 before maturity, without notice of equities, receiving the 
 same from a pledgee thereof, is entitled to recover the 
 whole amount, although as between the maker and the 
 payee and pledgee there is a complete defense. 3 Where 
 accommodation paper is given for the purpose of being 
 used as collateral security, for a present loan, it is no 
 defense thereto that it was received by a pledgee as col- 
 lateral security for an antecedent debt, the purposes of the 
 accommodation party having been obtained, and no fraud 
 being charged ;* and where the power was to sell, and the 
 note was pledged as collateral security for an antecedent 
 debt, the maker remained liable ;* as also where the accom- 
 
 1 Jackson t>. First Nat. Bank, 42 N. original note by the pledgee, and 
 
 J. L. 177; Duncan v. Gilbert, 29 N. execution issued. Suit was then 
 
 J. L. 52; Fisher v. Fisher, 98 Mass, brought on the collateral note, and 
 
 303. In the last case, an accommoda- the pledgee was allowed to recover 
 
 tion promissory note was delivered to the extent of the debt secured, 
 
 by the payee to a third party to be dis- Stoddard v. Kimball. 6 Cash. 469. 
 counted for his benefit, but the third * Collins v. Gilbert, 94 U. S. 753 ; 
 
 party pledged the same as collateral Seybel v. Bank, 54 N. Y. 291 ; Perci- 
 
 security for his own note not then val v. Frampton, 2 Cr. M. & R. 183. 
 due, held by the plaintiffs. The 3 Cook . Norwood, 106 111. 558. 
 pledgees had no knowledge that the 4 Lee v. First Nat. Bank, 42 N. J. 
 
 note was an accommodation one, L. 177; Duncan v. Gilbert, 29 Ib. 52. 
 nor of the relations existing between 5 Matthews v. Rutherford, 7 La. 
 
 any of the prior parties. Judgment Ann. 225. 
 was afterwards obtained on the
 
 52 NEGOTIABLE COLLATERAL SECURITIES. 
 
 modation paper was pledged for a much larger amount than 
 that authorized. 1 
 
 39. SUCH PLEDGES NOT SUSTAINED FOB ANTECE- 
 DENT DEBT, WITHOUT MORE. Pledges of accommodation 
 paper, in cases of misappropriation, are not sustained in 
 states where the more restricted rule as to the title of the 
 holder of ordinary commercial paper as collateral security 
 for an antecedent debt, without more, prevails. A pledgee, 
 receiving accommodation paper by an act of misappropri- 
 ation, merely as collateral security, without any further 
 consideration, although without notice and in good faith, is 
 not in such states a holder for value, in the usual course of 
 business. The rule was applied in a case in New York, 
 where restrictions had been placed upon the use of accom- 
 modation paper, the pledgee, although receiving the collat- 
 eral securities before maturity, bona fide and without no- 
 tice, was not allowed to recover thereon.' The original 
 taint of invalidity affects subsequent transactions, as where 
 a pre-existing debt for which collateral notes had been 
 pledged having been discharged, the notes were, by agree- 
 ment of the parties, retained as collateral security for an 
 overdrawn account. Under this class of decisions, the sec- 
 ond transaction was vicious equally with the first. 8 Nor 
 will a pledgee become a holder for value, where, upon a 
 tortious pledge of an accommodation note by an agent, to 
 whom it had been intrusted to get discounted, for his own 
 antecedent debt, the collateral note was afterwards renewed, 
 without consideration. 4 But no recovery was allowed to the 
 maker of an accommodation note wrongfully pledged by 
 one entrusted therewith for a specific purpose as collateral 
 security for his own antecedent debt, who had paid the 
 
 1 Maitland v. Bank, 40 Md. 540. Merchants' Bank v. Corliss, 46 
 
 * Grocers' Bank v. Penfield, 69 N. Barb. 19. 
 
 Y. 502; Freund v. Bank, 76 Ib. 352; * Royer v. Keystone Nat. Bank, 83 
 
 Bee Essex Co. Bank v. Russell, 29 Ib. Pa. St. 248. 
 673.
 
 ACCOMMODATION PAPEB. 53 
 
 same, and then before the statute of limitations had barred 
 any rights he might have had, but after the relations of the 
 parties had been greatly complicated and changed, brought 
 a suit to recover the money back. The lower court decided 
 in favor of the accommodation maker, 1 but was overruled 
 by the -court of appeals.* 
 
 40. PLEDGEE CHARGEABLE WITH NOTICE OF FRAUD 
 OR FORGERY, CAN NOT RECOVER. Where accommodation 
 paper is fraudulently misappropriated, and the pledgee re- 
 ceiving the same is chargeable with knowledge, actual or 
 presumptive, of such misappropriation, or where the names 
 of parties to such paper are shown to have been forged, 
 no recovery is permitted as against the injured party. The 
 fraudulent pledge of an accommodation note, purporting to 
 be indorsed by a partnership, for an antecedent debt, where 
 the pledgee was chargeable with notice of the facts, will 
 not entitle the pledgee to recover as against the partner 
 without whose consent the paper was so used.* And 
 where accommodation paper was fraudulently misappro- 
 priated by a member of a partnership, being received 
 with knowledge of the fraud, and subsequently the maker 
 of the accommodation note, having full knowledge cf the 
 fraud, gave a new note in renewal, which he subsequently 
 paid, under the facts, the maker not being liable to pay 
 the first note, his subsequent payment of the note given in 
 renewal created no valid claim on the partnership to reim- 
 burse him the amount paid. 4 The accommodation note of 
 an individual partner, secured by a mortgage upon his wife's 
 separate property, the name of the wife being forged upon 
 the note as joint maker, is utterly void as against the wife 
 in the hands even of an innocent holder. The note and 
 
 1 First Nat. Bank v. Southwick, 20 329; but see Maitland v. Bank, 40 
 
 Hun. 849. Md. 540. 
 
 * S. c. 76 N. Y. 352. * Mix v, Muggy, 28 Conn. 186. 
 8 Myuahan v. Hanford, 42 Mich.
 
 64 NEGOTIABLE COLLATERAL SECURITIES. 
 
 mortgage are one contract, and the former being void, the 
 wife was discharged. 1 
 
 41. PLEDGE OP ACCOMMODATION PAPER, AFTER 
 MATUTUTY. Tt results from the character and purposes of 
 accommodation paper, that the obliged party, permitted 
 to retain such paper after its maturity, may transfer the 
 same, either absolutely by sale or as collateral security, and 
 the accommodation maker or indorser will have no defense, 
 by reason of such negotiation after maturity as against a 
 bona fide pledgee, advancing a valuable consideration, and 
 taking the same without notice of equities.* Where there 
 is no limitation placed upon the time of its use by the ac- 
 commodated party, no legal presumption arises of an inten- 
 tion to limit such use to the time before its maturity, so long 
 as it remains in the possession of the party accommodated. 1 
 Nor will a presumption of fraud or mala fides arise where 
 such accommodation paper is negotiated after its maturity 
 by one holding it for his benefit without restrictions, from 
 the fact alone that such paper was overdue. 4 The liability 
 of an accommodation indorser was decided in a New York 
 case to be defeated where such note was retained by the 
 accommodated party until after its maturity, nor was an 
 indorsee of such note, although paying full value, receiving 
 the same dishonored, entitled to enforce it as against such 
 
 1 Mersman v. Werger, 1 McCrary, of the person entrusted with its use 
 
 528. ceases, if it is not negotiated before 
 
 9 Miller . Lamed, 103 111. 562; its maturity. Negotiation after ma- 
 
 Silverman . Bullock, 98 Ib. 11; turity may serve the very purpose of 
 
 Harrington v. Dow, 8 Robt. 275 ; its making in that way only it may 
 
 Robbins v. Richardson, 2 Bosw. 253. be the intended loan of credit can be 
 
 *Dunn. Weston,71Me. 270; First made effectual. Connerly v. Plan- 
 National Bank v. Grant, 71 Ib. 374 ; ters' Ins. Co., 66 Ala. 432. 
 Robbins v. Richardson, 2 Bosw. 253 ; 4 Brown v. Mott, 7 Johns. 861; 
 Harrington . Dow, 8 Rob. 275. Lincoln . Stevens, 7 Mete. 529; Con- 
 There can be no inference or pre- nerly v. Planters Ins. Co. supra 
 sumption that such paper is to be- Charles v, Marsden, 1 Taunt. 224. 
 come valueless, or that the authority
 
 ACCOMMODATION PAPER. 55 
 
 indorser. The defense of want of consideration attaches to 
 the note after maturity in the hands of any holder. 1 
 
 42. THE AMOUNT OF RECOVERY BY THE PLEDGEE. 
 Where an accommodation bill or note, upon which no re- 
 striction as to the mode or time of its use has been placed by 
 the accommodating party, has been transferred as collateral 
 security, in good faith, in the usual course of business, 
 the pledgee holding for value is entitled to recover the full 
 amount thereof, although he may have had knowledge that 
 it was accommodation paper. 1 But if he is chargeable with 
 knowledge that the paper was intended to be pledged for a 
 specified debt, and accepts it as collateral security for a 
 larger sum, his recovery is confined to the sum actually 
 intended to be secured. 3 The presumption is, both where 
 the note is taken as collateral security for a debt then 
 created as well as where it is taken as collateral security for 
 an antecedent debt, that the holder paid full consideration 
 for the note. It is upon the defendant to prove, in order to 
 overcome thb presumption, that the holder did not give full 
 consideration for it. 4 The pledgee of such negotiable ac- 
 commodation paper holding the same as collateral security 
 
 1 Chester . Dorr, 41 "K Y. 279. Mechanics' Bank v. Barnett, 27 Lou. 
 
 * First Nat. Bank v. Grant, 71 Mo. Ann. 177, the pledgee was only 
 374 ; Dunn . Weston, Ib. 270; Rob- given the amount of his advances, 
 bins c. Richardson, 2 Bosw. 253 ; Maitland 0. Bank, 40 Md. 540. 
 Brown v. Mott, 7 Johns. 360; Sey- * Duncan v. Gilbert, 29 N. J. L. 
 bel t>. Bank, 54 N. Y. 291 ; Hairing- 521 ; Collins . Gilbert, 94 U. S. 753, 
 ton v. Dow, 3 Rob. 275 ; Common- 751. "Where an accommodation 
 wealth v. City of Pittsburgh, 34 Pa. note was pledged as collateral secur- 
 St. 496; Smith 0. Knox, 3 Esp. 46; ity f or letters of credit, the holder 
 Lord t>. Ocean Bank, 20 Pa. St. 384; was not required to show that his 
 Newberry v. Rand, 38 N. H. 166; actual advances had reached the 
 Maitland v. Bank, 40 Md. 540 ; Stod- amount of the letters of credit, in 
 dard v. Kimball, 6 Cush. 469; Fish- order to enable him to recover the 
 er v. Fisher, 88 Mass. 303 ; Bowman face of the note if the letters of 
 . Wilson, 58 111. 36 ; Louisiana St. credit were still unrevoked and his 
 Bank v. Gaienue, 21 Lou. Ann. 355; liability continued. Allaire v. Harts- 
 Gardner v. Maxwell, 27 Ib. 561. In home, 21 N. J. L. 566.
 
 56 NEGOTIABLE COLLATERAL SECURITIES. 
 
 for an antecedent debt simply, in good faith, although a 
 holder for value, is, under an equitable rule, permitted 
 only to recover as against the accommodating party the 
 amount of his advances thereon, where less than the value 
 of the collateral securities. Unless accountable to some 
 third person for any surplus, no reason exists why the 
 pledgee should recover any more than the balance of the 
 debt for which he is a holder for value. 1 The recovery 
 was similarly restricted, in a case where the note thus 
 assigned was tainted with usury.* 
 
 1 Cromwell v. County of Sac, 96 N. T. 503 ; Maitland v. Citizens' 
 
 U.S. 51, 60; Allaire v. Hartshorne, Nat. Bank, 40 Md. 570; Gnmt v. 
 
 21 N. J. L. 665; Williams . Smith, Kidwell, 30 Mo. 455; Atlas I3:tuk v. 
 
 2 Hill, 301 ; Chicopee Bank v. Cha- Doyle, 9 R. I. 76; Mayo v. Moore, 
 
 pin, 8 Met. 40; Stoddard 0. Kimball, 28 111.428; Steere v. Benson, 2 
 
 6 Gush. 469 ; Atkinson v. Brooks, 26 Bradw. 560 ; Jones t>. Heffcrt, 2 
 
 Vt. 569; Tarbell v. Sturtevant, Ib. Stark. 356. 
 
 513; Grocers' Bank v. Penfleld, 69 ' Taylor v. Daniels, 38 111. 331.
 
 BONDS AND COUPONS. 67 
 
 CHAPTER V. 
 
 NEGOTIABLE BONDS AND COUPONS AS COLLATERAL. 
 
 43. The pledgee of negotiable bonds and coupons a holder for value. 
 
 44. No title acquired by pledgee upon bonds totally void. 
 
 45. The rule as to " registered " bonds. 
 
 46. The pledgee of negotiable bonds, when subject to equity. 
 
 47. The negotiability of severed coupons. 
 
 48. The title of the pledgee of negotiable coupons, overdue. 
 
 49. The title of bona fide holders, pledgees of "debentures." 
 
 43. THE PLEDGEE OP NEGOTIABLE BONDS AND 
 COUPONS A HOLDEK FOR VALUE. Bonds issued by a muni- 
 cipal or other corporation under statutory authority, and 
 made payable to "bearer" or " holder," are valid commer- 
 cial instruments, and a pledgee receiving the same before 
 maturity, for a valuable consideration, without notice ot 
 equities in the usual course of business, is vested with the 
 legal title thereto, free of prior equities between antecedent 
 parties, as in the case of negotiable promissory notes and 
 bills of exchange. The title of such pledgee, so advancing 
 a valuable consideration, upon the faith and credit of the 
 representations of such negotiable collateral securities, in 
 good faith, is good against the world. 1 Being negotiable in- 
 
 1 White v. Railroad Co., 21 How. Co., 99 U. S. 362, 370 ; Copper v. New 
 
 575 ; Mercer Co. v. Hacket, 1 Wall. Jersey City, 44 N. J. L 634; Boyd 
 
 83 ; Gilpecke v. City of Dubuque, Ib. v. Kennedy, 38 Ib. 146 ; Arents v. 
 
 175; Myer . City of Muscatine, Ib. Commonwealth, 18 Gratt. 750; De- 
 
 884; Murray . Lardner, 2 Ib. 110; Voss v. Richmond, Ib. 338; Beaver 
 
 Thompson v. Lee County, 3 Ib. 327; Co. v. Armstrong, 44 Pa. St. 63 ; Mc- 
 
 Super visors v. Schenck, 5 Ib. 772; Elrath v. P. & S. R. Co., 55 Ib. 189, 
 
 Marion County Commissioners v. 206 ; Greenwell v. Hayden, 78 Ky. 
 
 Clark, 94 U. S. 278 ; Brooklyn v. Ins 332; Town of Eagle v. (John, 84 111.
 
 58 NEGOTIABLE COLLATERAL SECURITIES. 
 
 struments, where one person, without notice of equities, 
 advances value thereon, in the usual course of business, a 
 second person, who acquires the same from him before due, 
 for value, is vested with a legal title, although with notice, 
 because he receives a new and independent title 
 from such previous holder for value without notice. 1 
 Where the power to issue negotiable bonds by municipal or 
 other corporations is to be exercised in a special manner, or 
 subject to certain regulations, conditions or qualifications ; 
 and upon the face of the bonds it is recited that they are 
 issued in conformity with such regulations, conditions or 
 qualifications ; and it is the sole province of the officers or 
 agents of the municipality executing such bonds, to decide 
 whether or not there was an antecedent compliance with 
 such regulations, conditions or qualifications, the equitable 
 doctrine of estoppel is applied. Such corporation is es- 
 topped to deny the truth of the recitals appearing on the 
 face of its negotiable bonds as against a bona fide holder 
 before maturity, who has advanced value on the faith 
 thereof.* Where however parties have notice and knowledge 
 of the non-performance of essential conditions by the party 
 issuing the same, the holder is not protected against equities. 8 
 A municipal or other corporation which has paid interest 
 for several years on its negotiable bonds, without objection, 
 is estopped by its affirmative acts, amounting to a ratifica- 
 tion thereof, to dispute the validity of them, in the hands of 
 
 293; Garvin . Whwcll, 83 Ib. 218; 'Montclair v. Ramsdcll, 107 U. S. 
 
 P. & S. R R. Co. v. Thompson, 103 147; Marion County Comm. v. 
 
 Ib. 205; Brainerd v. Railroad Co., Clark, 94 U. S. 278; Bailey . Bid- 
 
 25 N. Y. 496; Dinsmore t>. Duncan, well, 13 M. & W. 15. 
 
 57 Ib. 573 ; Evertson v. National * Joseph Township v. Rogers, 16 
 
 Bank, 66 Ib. 14; Claflin . South Wall. 659; Town of Colona v. Eaves, 
 
 Carolina R. R. Co., 4 Hughes, 12; 92 U. S. 784; Marion County t>. 
 
 Third Nat. Bank v. Seneca Falls, 15 Clark, 94 Ib. 278; Hackett v. Otta- 
 
 Fed. Rep. 779; Higgs v. Assam Co., wa, 99 Ib. 86; Ottawa v. National 
 
 L. R. 4 Ex. 387 ; In re Blakesley, L. Bank, 105 U. S. 342. 
 
 R. 3 Ch. 154; Rumball v. Metropoli- 'Ottawa . Carey, 108 U. S. 110; 
 
 tan Bank, L. R. 2 Q. B. D. 194; In Dixoii v. Field, 111 Ib. 89. 
 re Cork etc. Ry. Co., L. R. 4 Ch. 748.
 
 BONDS AND COUPONS. 59 
 
 bona fide holders, advancing money thereon, without notice 
 of equities. 1 Nor will mere irregularities in the organiza- 
 tion of the municipal or other body issuing the same, defeat 
 the title of holders of bonds for value where otherwise 
 legally issued.* Nor the failure by the officers of a muni- 
 pal or other corporation to follow special directions in 
 relation to particular bonds where a holder for value is not 
 chargeable with notice. 8 
 
 44. No TITLE ACQUIRED BY PLEDGEE, UPON BONDS 
 TOTALLY VOID. Iii cases of the issue of negotiable bonds 
 and coupons, by municipal or other corporations, where 
 there is a total want of power on the part of such municipal 
 or other corporation to issue the same, notice thereof is 
 chargeable upon all persons dealing therewith, and no 
 right, title, or interest, can be acquired even by persons 
 advancing money thereon, as against such municipal or 
 other corporation upon any negotiation thereof. 4 In the 
 absence of statutory authority, municipal or other corpora- 
 tions are without power to issue negotiable bonds and cou- 
 pons. 5 Nor can a municipal or other corporation, without 
 such authority, issue its bonds in aid of an object clearly 
 extraneous to its legitimate purposes. Every person deal- 
 ing in such bonds must at his peril take notice of the exist- 
 ence and terms of the law under which is claimed the power 
 of issue, whether value be paid or advanced or not, upon 
 such securities.' But where the issue of bonds by agents 
 
 1 County of Clay v. Society for 4 East Oakland v. Skinner, 94 U. S 
 
 Savings, 104 U. S. 579, 591 ; Super- 255. 
 
 visor v. Schenck, 5 Wall. 772; 6 Merrill v. Town of Monticello, 
 
 Whiting v. Town of Potter, 18 14 Fed. Hep. 628; Hepper v. Cov- 
 
 Blatchf. 105, 165, 180; Bank v. Sen- iugton, 8 Fed. Rep., 777. 
 cca Falls, (C. C. U. S. N. Y. 1883) South Ottawa v. Perkins, 94 U. S. 
 
 15 Fed. Rep. 783; Society v. New 260; Pendleton County v. Amy, 13 
 
 London. 29 Conn. 174. Wall 297; Kennicott v. Supervisors, 
 
 8 Savings Bank v. Roscoe, 75 Mo. 16 Ib. 452; St. Joseph v. Rogers, Ib. 
 
 408. 644 ; Colona e. Eaves, 92 U. S. 784. 
 
 1 Devoss V. Richmond, 18 Gratt. 
 838.
 
 60 NEGOTIABLE COLLATERAL SECURITIES. 
 
 appointed by a municipality is, in the beginning, irregular- 
 ly or insufficiently authorized, a municipal or other corpora- 
 tion, having power to appoint such agents to issue for them 
 such obligations, may, like individuals, adopt and ratify, 
 and thus make valid the acts of their agents, and estop 
 themselves, as against pledgees of such bonds, for value, to 
 set up any defenses. 1 
 
 45. THE RULE AS TO REGISTERED BONDS. A different 
 rule is applied to "registered "bonds for the payment of money 
 by municipal or other corporations, which are but quasi ne- 
 gotiable instruments, being made payable to a particular 
 person, or "assigns," and not to "bearer" or "holder.'* 
 Such bonds are like shares of stock, and usually books of 
 registration and transfer are kept, and the transfer of such 
 bonds is generally covered by statutory charter provisions, 
 and are also by the terms thereof, transferable only upon such 
 books. A full legal title thereto, as against third parties, 
 can only be acquired by a transfer thereon. Until such 
 transfer is made, the assignee receives an equitable title 
 only, and the bonds are subject to all the defenses to which 
 they would have been subject in the hands of prior holders.* 
 Other bonds are sometimes issued by corporations, payable 
 to bearer, which may, at the option of the holder, be regis- 
 tered on the books of the company, a certificate thereof be- 
 ing indorsed on the bond by the transfer agent of the com- 
 pany. After such registration, no transfer, except upon the 
 books of the company, conveys the legal title thereto as 
 against third parties ; but silfch transfer may, usually at the 
 
 1 Knox Co. . Aepinwall, 21 How. Mayor, 17 N. Y. 449 ; Hoyt v. Thomp- 
 
 644; Zabriskie t>. Railroad Co. 23 son, 19 Ib. 208; Calhouu v. Delhi 
 
 How. 381 ; Supervisors v. Schenck, 5 Ry Co., 28 Hun. 379 ; Society for 
 
 Wall. 772, 781 ; Pendleton Co. v. Savings v. New London, 29 Conn. 
 
 Amy, 13 Ib. 296; County of Clay*. 174; N. Y. & N. H. R. R. Co. v 
 
 Society of Savings, 104 U. 8. 579; Schuyler, 34 N. Y. 80, 49. 
 
 Johnson v. Stark Co. 24 111. 90; Stuart * Cronin t>. Patrick Co. 4 Hughes, 
 
 t>. School Dist. 30 Mich. 69; Tash v. 524; DeVoss C.Richmond, 18 Gratt. 
 
 Adams, 10 Cush. 252; Peterson v. 838.
 
 BONDS AND COUPONS. 61 
 
 election of the holder, be made to bearer, restoring negotia- 
 bility to the bond. This power of registration, and the con- 
 ditions thereof, generally appear on the face of the bond, 
 and covers any number of successive transfers and regis- 
 trations. 
 
 46. THE PLEDGEE OF NEGOTIABLE BONDS, WHEN 
 SUBJECT TO EQUITIES. Negotiable bonds and coupons, 
 when received after due, as collateral security upon an ad- 
 vance, or as collateral security for an antecedent debt, are 
 subject in the hands of the pledgee to the like equities and 
 defenses as other instruments of commerce, bills of exchange 
 and promissory notes. The pledgee, receiving such collat- 
 erals after maturity, obtains no better title or greater inter- 
 est therein than the pledger, and is subject to the defenses 
 available against the holders, although for value, of dishon- 
 ored paper. 1 The like rule is applied to bonds and treasury 
 notes of the United States, payable to bearer at a definite 
 time when transferred after maturity. The title of the 
 holder is subject to the equities of antecedent parties to the 
 same extent as in the case of other commercial paper, in- 
 dorsed after maturity.* 
 
 The presence of unpaid coupons upon a bond is not of 
 itself sufficient evidence of dishonor of the bonds to which 
 they are attached, to destroy negotiability, and does not 
 render a pledgee taking the same as collateral security, in 
 good faith, and without notice, subject to equities between 
 the original parties. 8 The recovery of the pledgee, whether 
 the loan be made at the time, or the bonds be received as 
 collateral security for a precedent debt, may be limited 
 
 'Texas v. "White, 7 Wall. 700; 'Cromwell v. County of Sac, 96 U, 
 
 Texas . Hardenbergh, 10 Ib. 90; S. 51, 58; Nat. Bank of N. A. . 
 
 Parsons v. Jackson, 99 U. S, 440; Kirby, 108 Mass. 497; Boss v. Hew- 
 
 Stern v. Germania Nat. Bank, 34 La. itt, 15 Wis. 260; Indiana & 111. 
 
 Ann. 1119; Greenwell . Hayden, 78 Cent. R. Co. v. Sprague, 103 U. S. 
 
 Ky. 332. 756, distinguishing Parsons v. Jack- 
 
 11 Vermilye v. Adams Exp. Co., 21 son, supra. 
 Wall. 139.
 
 62 NEGOTIABLE COLLATERAL SECURITIES. 
 
 to the amount actually advanced or secured, in cases 
 where the pledgee, although holding an absolute title 
 to the negotiable collaterals, is or can not be responsi- 
 ble over either to the pledgor or to other parties 
 should he recover the entire face value of the collat- 
 eral. 1 The negotiability of such bonds, when payable to 
 bearer, carries with it a guarantee free of equities existing 
 between the original parties.* A bond made payable to a 
 certain person, and after maturity, upon consideration, fur- 
 ther time was given, the corporation indorsing on the bond 
 under its seal that it would pay the same to " bearer." The 
 indorsement rendered the bond negotiable. 1 
 
 47. THE NEGOTIABILITY OF SEVERED COUPONS. The 
 coupons or warrants for interest generally attached to corpo- 
 ration or municipal bonds, are usually made payable to 
 " bearer," and are negotiable equally with the bond. When 
 severed, they cease to be mere incidents of the bonds, and 
 become independent claims, assimilating to negotiable prom- 
 issory notes. Their validity, negotiability, or ability to 
 support separate actions on the promises contained therein, 
 is not lost or destroyed, although the bonds with which 
 they were issued be, for any cause, canceled or paid before 
 maturity. 4 Suit may be maintained upon them in advance 
 
 1 Cromwell t>. County of Sac., 4 Town of Thompson v. Perrine, 
 
 Bupra, per Field, J; Stoddard v. 106 U.S.259; Walnut*. Wade, 103 Ib. 
 
 Kimball, 6 Gush. 468; Allaire v. 696; Brooklyn v. Insurance Co., 99 
 
 Hartshorne, 1 Zab. 665; Chicopee. Ib. 362; County of Ray v. Vansycle, 
 
 Bank v. Chapin, 8 Met, 40; Williams 96 Ib. 675; Cromwell v. County of 
 
 , Smith, 2 Hill 301. Sac, 94 Ib. 351, 362; Clark v. Iowa 
 
 * In re Agra & Masterman's Bank, City, 20 Wall. 583; Aurora City v. 
 
 L. R 2 Ch. App. 397; In re Blake- West, 7 Ib. 82; Thompson . Lee 
 
 ley Ordnance Company, L. R. 3 Ch. County, 8 Ib. 327; Gelpccher, Du- 
 
 App. 154 buque, 1 Ib. 175; Knox County . 
 
 Manufacturing Co. v, Bradley, Aspinwall, 21 How. 533; White v. 
 
 105 U. S. 175; Langston t>. S. C. Ry Railroad Co., Ib. 575; Moran v. Mia- 
 
 Co., 2 S. C. 248; Bank . Railroad mie County, 2 Black 722; Third Na- 
 
 Co., 6 Ib. 156; Bonded Debt Cases, tional Bank v. Seneca Falls, C. C. U. 
 
 12 Ib. 200, 250. S. N. Y. 1883, 15 Fed. Rep. 783;
 
 BONDS AND COUPONS. 63 
 
 of the maturity of the principal debt, without any produc- 
 tion of the bond, and interest collected upon them from the 
 time of their maturity. 1 The holder is not required to pre- 
 sent them at maturity at any certain place which may be 
 designated for payment before suing thereon, but it will be 
 a matter of defense for the company if funds were in readi- 
 ness at such time and place, 9 and unless the latter conditions 
 are proved, interest will be required to be paid. 8 The rule is 
 otherwise, where such interest coupons contain no negotiable 
 words, nor language from which negotiability can be inferred, 
 or any intention on the part of the corporation to create an 
 obligation independent of the bonds to which they were 
 severally attached when issued, nor will proof of custom be 
 allowed to impart negotiability to such coupons, so issued. 4 
 
 48. THE TITLE OP THE PLEDGEE OF NEGOTIABLE 
 COUPONS, OVER DUE. The right of action upon coupons 
 payable to bearer, and issued with negotiable bonds, whether 
 they remain attached to the bond or have been severed 
 therefrom, begins from maturity. 6 Such coupons, payable 
 to bearer, are, like other negotiable instruments, entitled to 
 days of grace, and a bona fide pledgee, receiving the same 
 
 Stern v. Germania Nat. Bank, 34 La. Ib. 282; City V, Lawson, 9 Ib. 477; 
 
 Ann. 1119; Gyger v. New Orleans Gelpecke v. City of Dubuque, 1 Ib. 
 
 32 La. Ann. 1255; Johnson v. Stark 175; Commissioners Knox Co. v. 
 
 County, 24 111. 75 ; Town of Eagle v. Aspinwall, 21 How. 539. 
 
 Kobn, 84 Ib, 292; Pettee v. Pratt, 3 Walnut v. "Wade, supra ; Wallace 
 
 Gray 502; Haven v. Railroad Co., v. McConnell, 13 Pet. 136; Irwiii . 
 
 109 Mass. 88; McKim v. King, 58 Withers, 1 Stew. (Ala.) 234; Mont- 
 
 Md. 502; Beaver County v. Arm- gomery v. Elliott, 6 Ala. 701. Cou- 
 
 Btrong, 44 Pa. St. 63; National Ex- pons payable to bearer at a special 
 
 change Bank v. Hartford R. R. Co., time and place have all the attributes 
 
 8R, I. 375; Miller v. Rutland R. R. of negotiable paper. First Nat. Bank 
 
 Co., 40 Vt. 499; First Nat. Bank v. v. Tabor, 52 Vt. 7. 
 
 Tabor, 52 Ib 7; Evertson v. National * Walnut v. Wade, and Wallace v. 
 
 Bank, 66 N. Y. 14. McConnell. supra. 
 
 'Amy v. Dubuque, 98 U. S. 473; 4 Myers v. Railroad Co., 43 Me. 
 
 Town of Genoa v. Woodruff, 92 Ib. 232; Jackson v. Railroad Co., 48 Ib. 
 
 502; Clarke. Iowa City, 20 Wall. 147. 
 
 503: City of Lexington v. Butler, 14 Amy v. Dubuque, 98 U. S. 473.
 
 64 NEGOTIABLE COLLATERAL SECURITIES. 
 
 before the expiration of the days of grace, for a valuable 
 consideration, without notice of equities, is not subject to 
 defenses attending the transfer of past due commercial 
 paper. 1 Where the bonds to which the coupons are attached 
 when issued have not matured, the latter, although overdue 
 and detached from the bond, do not lose their quality of 
 negotiability by the law merchant. Any one advancing 
 money bona fide thereon before the maturity of the bond, 
 is entitled to sue on them as in the case of the transfer of 
 negotiable paper payable to "bearer."* The holders of 
 such coupons are entitled to all the privileges and subjected 
 to all the liabilities attendant upon ordinary commercial 
 paper by the law merchant. Where coupons, payable to 
 bearer, are fraudulently transferred after maturity, the 
 holder receives no better title than his transferror, and the 
 latter having obtained them by fraud or theft, not being the 
 owner, nor authorized to sell or pledge, no title passes by 
 the transfer as against the real owner. 8 Nor can the doc- 
 trine of estoppel be invoked to protect the holder as against 
 the owner's claims. 4 
 
 The bona fide holder of coupons payable to bearer, trans- 
 ferred for a valuable consideration, is not chargeable with 
 notice of the conditions upon which they were issued, nor of 
 the resolutions on the record books of the company issuing 
 the same. 5 Nor is it any defense against such detached 
 coupons in the hands of a bona fide holder advancing value 
 without notice that the railroad company did not construct 
 the line it agreed to as the consideration for the bonds and 
 coupons, 6 nor that informalities were committed in the execu- 
 
 1 Evertson v. Nat. Bank, 66 N. Y. Jackson. 99 U. 8. 440; Henderson v. 
 
 14. Case, 31 La. Ann. 215. 
 
 * Town of Thompson v. Pcrrine, * Toby . Smith. 6 Wall. 493; 
 106 U. 8. 259. Stern t. Germania Nat. Bank, supra; 
 
 McKim v. King, 58 Md. 502; Stern Bird t>. Cockrem, 28 La. Ann. 70. 
 
 . Germania Nat. Bank, 34 La. Ann. Johnson v. Stark County, 24 Ib. 
 
 1119; Texas . White, 7 Wall. 700; 75; Town of Eagle . Kohn, 84 Ib. 
 
 Vermilye t>. Adams, 21 Ib. 143 ; Texas 892. 
 
 t>. Hardenburg, 10 Ib. 90; Parsons v. Brooklyn v. Ins. Co., 99 U. 8. 362.
 
 BONDS AND COUPONS. 65 
 
 tion or delivery thereof. 1 Nor will questions of form merely, 
 or irregularity, or fraud, or misconduct on the part of agents, 
 constitute a defense as against a holder for value.* But 
 where upon their face the coupons refer to the bonds to 
 which they were attached, and purport to be for the semi- 
 annual interest accruing thereon, the holder is chargeable 
 with notice of the contents of the bond.* 
 
 49. THE TITLE ACQUIRED BY BONA FIDE HOLDERS, 
 PLEDGEES, TO " DEBENTURES." English " debentures " 
 have many of the features of American bonds. They are 
 instruments showing that the corporation issuing them owes 
 money, and is bound to pay ; and being negotiable in char- 
 acter, a bona fide pledgee advancing funds upon the credit 
 of such representations, without notice, is not subject to any 
 equities or defenses existing between the company and the 
 original holder. 4 Vice-Chancellor Malins, in re Imperial 
 Land Company, 1 said: "Every principle of public policy 
 calls upon me to repudiate the notion that such documents 
 are to be treated like bonds or choses in action in which 
 the equities between the parties can be entered into." 
 Where, in accordance with a previous contract, debentures 
 were issued professing to be payable to bearer and negotia- 
 ble as money, the bona fide holders thereof were not sub- 
 ject to equities existing between the company issuing the 
 debentures and the parties with whom the contract of loan 
 was made,' nor even where the debentures were acquired 
 after an order had been entered for the winding up of the 
 company issuing the same, when taken without notice.' 
 
 1 Wilson v. Salamanca, 99 U.S. 499. 3 Ch. 758; Higgs v. Assam Tea Co. 
 
 * East Lincoln v. Davenport, 94 U. L. R. 4 Ex. 387. 
 
 S. 801 ; Third National Bank v. Sen- * In re Imperial Land Company, 
 
 eca Fall, 15 Fed. Rep. 783. supra, p. 490. 
 
 McClure . Oxford, 94 U. S. 429; In re Blakeley Ord. Company, L. 
 
 George v. Oxford, 16 Kan. 72. R. 2 Ch. 154. 
 
 4 In re Imperial Land Co.,L. R. 11 7 In re Imperial Land Company, 
 
 Eq. 478; Ex parte City Bank, L. R. supra. 
 5
 
 66 NEGOTIABLE COLLATERAL SECURITIES. 
 
 The advantages of negotiability do not follow debentures 
 where made payable to a certain person named, " or to his 
 executors, administrators, or transferees, or to the holder 
 for the time being," the word " transferees" meaning " as- 
 signs," and assignments being required to be by deed, and 
 the other words " holder for the time being" being inserted 
 to avoid the expense of making transfers by deed, and not 
 for the purpose of placing such holder in a better position 
 as to equities than an assignee by deed. 1 
 
 1 In re Natal Inv. Co., L. R. 8 Ch. conditions were held non-negotiable, 
 
 855; but a different view of the and the holder of one, in good faith, 
 
 meaning of "holders for the time which proved to have been stolen, 
 
 being " was held in Alsatt v. Farqu- was not allowed to recover thereon, 
 
 harson, 10 W. R. 458. And deben- Crouch v. Credit Foncier, L. 11. 8 Q. 
 
 tures containing a contract in their B. 874.
 
 PLEDGE BY PARTNERS. 67 
 
 CHAPTER VI. 
 
 PLEDGE OF COLLATERAL SECURITIES BY PARTNERS. 
 
 50. The partner's right to borrow money, and give and receive collateral 
 security. 
 
 51. Misappropriation of proceeds of loan by partner. 
 
 52. The pledgee, when a creditor of the firm. 
 
 53. The use of trust funds and securities by partners. 
 
 54. Pledge by partner for his own debt, or debt of third party Its sub- 
 
 sequent ratification. 
 
 55. The rule as to guaranties and accommodation paper. 
 
 56. The rights of the bona fide indorsee, under such pledge. 
 
 57. Notice of misappropriation to charge the pledgee. 
 
 58. The recovery of the bona fide indorsee for value. 
 
 59. Effect of taking security from individual partner. 
 
 60. Release of collateral security of partner, by payment. 
 
 50. THE PARTNER'S RIGHT TO BORROW MONEY AND 
 GIVE AND RECEIVE COLLATERAL SECURITY. Members of 
 an ordinary commercial partnership have a general authority 
 to borrow money upon the credit of the firm, in the usual 
 course of business, and for partnership purposes. Such 
 authority includes the drawing, acceptance and indorsement 
 of bills of exchange, and the making and indorsement of 
 promissory notes, in the name of the firm, upon the sale or 
 pledge of which money may be obtained or the payment of 
 a partnership liability be secured. 1 The exercise of this 
 
 1 Gregg v. Fisher, 3 Bradw. 261 ; 47 N. H. 419; Saltmarsh v. Bower, 22 
 
 Blinn v. Evans, 24 111. 317; Uley v. Ala. 221; Wilson v. Richards, 27 
 
 Ginrich, 57 Ib. 531; Davis v. Rich- Minn. 337; Porter v. White, 39 Md. 
 
 ardson, 45 Miss. 499; McKee v. 613; Grier v. Hood, 25 Pa. St. 430; 
 
 Hamilton, 33 Ohio St. 7; Leffier . Ross v. Howell, 84 Ib.129; McNagh- 
 
 Rice, 44 Ind. 103; Baily v. Brown- ten's App. 101 Ib 204 (15 Rep. 474); 
 
 field, 20 Pa. St. 41 ; Dow v. Moore, Moorehead v. Gilmore, 77 Pa. St.
 
 68 NEGOTIABLE COLLATERAL SECURITIES. 
 
 authority may be, however, controlled by the articles of 
 partnership, or by agreements between the partners. Such 
 contracts are sustained as between the parties ihereto and 
 parties chargeable with notice thereof; but as against third 
 parties who hnve ndvanced value, in good faith, upon such 
 securities, in the usual course of business, without notice, 
 they form no defense. The general authority of partners 
 in commercial undertakings to bind the firm in regard to the 
 
 o o 
 
 sale or pledge of its paper can not be secretly destroyed or 
 restricted to the injury of an innocent indorsee thereof for 
 value. 1 The authority is given to partners in commercial 
 or trading partnerships, and does not extend to farmers, 
 doctors, attorneys, or others of the non-trading class.* 
 
 The authority of members of a commercial or trading 
 partnership extends also to the transfer or assignment of 
 the property and credit of the firm as collateral security for 
 the payment of moneys advanced to the firm, and its debts 
 and liabilities. The power, being a general one in commer- 
 cial and trading partnerships, is supported when exer- 
 cised in the usual course of business, although without the 
 
 118; Smith v. Collins, 115 Mass. 283; Wilson 0. Richards, 27 Minn. 
 
 388; Kimbro v. Bulbitt, 23 How. 337; Sylverstein v. Atkinson, 45 
 
 266; Leroy v. Johnson, 2 Pet. 186; Miss. 81; Nat. Union Bank*. Lon- 
 
 Michigan Bank v. Eldredge, 9 Wall. don, 66 Barb. 189; Boswellfl Green, 
 
 544; Alliance Bank v. Kearsley, L. 25 N. J. L. 390; Ex parte Holds- 
 
 R. 6 C. P. 433, 437; Lane v. Will- worth, 1 M. D. & D. 475; Glcadon 
 
 iams, 2 Vern. 277, 292; Rothwell v. v. Tinker, Holt N. P. Cas. 586; 
 
 Humphries, 1 Esp. 406; Lloyd v. Howken D. Bourne, 8 M. & W. 
 
 Freshficld, 2 Carr. & P. 325; s. c. 8 703. 
 
 Ves. 540; Howkin v. Bourne, 8 M. * McCrary . Slaughter, 58 Ala. 
 
 &W. 710; Gordon v. Ellis, 7 Man. & 230; Hunt v. Chapin, 6 Lans. 139; 
 
 Gr. 607; Brown v. Kidger, 3 H. & Gray v. Ward, 18 111. 82; Ulcry 
 
 N. 853; Lewis v. Reilly, 1 Q. B. 349. v. Ginrich, 57 Ib. 531 ; Mix v. Muggy, 
 
 1 Kimbro v. Bullit, 22 How. 266; 28 Conn. 186; Crosthwait v. Ross, 1 
 
 Michigan Bank v. Eldredge, 9 Wall. Humph. 23; Breckenridge v. Shrievc, 
 
 544; Bush . Crawford, 7 N. B. R. 4 Dana, 875; Grecnslade v. Dower, 
 
 299; U. S. Bank v. Binney, 5 Mason 7 B. & C. 635; Dickerson v Valpcy, 
 
 176, B. c. 5 Pet. 529; Gregg v. Fisher, 10 Ib. 138; Foster t. Mackreth, L. R. 
 
 8 Bradw. 561; Davis v. Richardson, 2 Ex. 163, 166. 
 45 Miss. 499; Laler . Jordan, 44 Ib.
 
 PLEDGE BY PARTNERS. 69 
 
 knowledge or consent of the other partners. 1 The assign- 
 ment of the property of the partnership, or the indorsement 
 of its commercial paper, as collateral security for the pay- 
 ment of an antecedent debt, is within this authority.* Even 
 after dissolution, a deposit of collateral securities or of the 
 property of the firm, may be made to complete the contract 
 obligations of the firm by the partner, to whom has been 
 entrusted the settlement of its affairs.* 
 
 One of two or more partners may, in the conduct of 
 partnership affairs, receive collateral securities for moneys 
 loaned or debts due to the firm. Where the business carried 
 on is that of banking, the acceptance of collateral 
 securities upon a loan of money by one of the partners is 
 such a transaction as would be a part of the ordinary bank- 
 ing business ; and in cases of doubt the other partner may, 
 by his acts or by his silence, waive his right to object to any 
 results following the acceptance of such collateral securities 
 with title. Where one of two partners in a banking firm 
 received collateral security for an advance by his firm and 
 taking the title thereto in the name of the firm the better 
 to secure repayment of the money loaned, the other partner 
 making no objection upon learning of the transaction, was 
 equally bound by the liabilities which eventually followed 
 the vesting of the title of the securities in the pledgees. 4 
 
 1 Harrison v. Sterry,3 Cranch, 289; f. Davis, 5 R. I. 448; Gregg v. Fisher, 
 
 Hodges v. Harris, 6 Pick. 360; Tap. 3 Bradw. 261; Ex parte Bonbonus, 8 
 
 ley v. Butterfield,lMet. 515; Russell Ves. 540; Brownrigg v. Rae, 5 Ex. 
 
 . Leland, 12 Allen, 349; Denning 489; Gordon v. Ellis, 7 Mann. & Gr. 
 
 . Colt, 3 Sandf. 290; Egberts v. 607; Burchartfl. Dresser, 10 Hare, 453; 
 
 Woods, 3 Paige, 517; Mabbett v. a. c. 4 De G. M. & G. 542. 
 
 White, 12 N. Y. 442; McClelland v. 2 Harrison . Steny, 3 Cranch, 
 
 Remsen, 14 Abb. Pr. 335; s. c. 36 289; Smith v. Dennison, 101 111. 531; 
 
 Barb. 622; Everett v. Strong, 5 Hill, McClelland v. Ramsen, 36 Barb. 622; 
 
 163; s, c. 7 Hill, 585; Nat. Union Dana v. Lull, 27 Vt. 394. 
 
 Bank v. London, 66 Barb. 189; Dana * Burchart v. Dresser, 10 Hare, 
 
 . Lull, 17 Vt. 390; Boswell v. Green, 453; s. c. 4 De G. M. & G. 542. 
 
 25 K J. L. 390; Cullom v. Blood- * Weikersheim's case, L R. 8 Ch. 
 
 good, 15 Ala. 34; McCollough v. 831. 
 Somerville, 8 Leigh, 415; Ormsbee
 
 70 NEGOTIABLE COLLATERAL SECURITIES. 
 
 51. MISAPPROPRIATION OF PROCEEDS OF LOAN BY 
 PARTNER. Where one of two or more partners borrows 
 money, in the regular course of business of the firm, and 
 upon its credit by the negotiation of commercial paper, 
 made, indorsed or accepted in its name, and the holder ad- 
 vancing value thereon, takes the same bona fide, for value, 
 before maturity, the liability of the partnership or of the 
 other partners to such holder is not affected by the fact that 
 the money so obtained was in fact misappropriated by the 
 borrowing partner. 1 The presumption is, that negotiable 
 paper made by one partner, in the name of the firm, is 
 made in the course of partnership dealings, and the burden 
 is upon the partnership alleging the contrary, to show that 
 it is not, and that it was received by the holder advancing 
 money thereon, under such circumstances as to charge him 
 with notice." 
 
 52. THE PLEDGEE, WHEN A CREDITOR OF THE FIRM. 
 The appropriation of the avails of a loan to partnership 
 purposes, where such loan is made to a partner upon his in- 
 dividual credit, who gives his own note or other security 
 for the payment thereof, is not of itself sufficient to create 
 the relation of creditor and debtor between the lender and 
 the partnership, nor to make the partnership liable upon 
 the loan. 8 Even where the other partners are informed of 
 
 1 Winship v. Bank, 5 Peters, 529; Gregg . Fisher, 3 Bradw. 261; Syl- 
 Blodgett v. Weed, 119 Mass. 215; verstein t>. Atkinson, 45 Miss. 81. 
 Hay ward v, French, 12 Gray, 453 ; Gregg v. Fisher, 3 Bradw. 261; 
 Church v. Sparrow, 5 Wend. 223; Barrett. Swan, 17 Me. 180; Hamil- 
 Whittakert). Brown, 16 Ib. 595; On- ton v. Summers, 12 B. Monr. 11; 
 ondago Banks. De Puy, 17 Ib. 47; Doty v. Bates, 11 Johns. 544; Whit- 
 Alexander t>. State, 56 Geo. 478; Em- taker v. Brown, 16 Wend. 505; Man- 
 erson . Harmon, 14 Me. 271; Waldo ning c. Hays, 6 Md. 5; Miller v. 
 Bank v. Lambert, 16 Mo. 416; Miff- Maurice, 6 Hill, 114; Bank v. Binney, 
 lin v. Swift, 17 8. & R. 165; Bailey 5 Mason, 176. 
 >. Brownfield, 20 Pa. St. 41; Halde- Le Roy . Johnson, 2 Pet. 198; 
 man . Bank of Middleton, 28 Id. StockwelU. Dillingham, 50 Me. 442; 
 440; Wagner . Freschel, 56 N. H. Jaques . Marquand, 6 Cow. 497; 
 495; Smith t>. Harvie, 31 111. 62; Whittaker v. Brown, 16 Wend. 505;
 
 PLEDGE BY PARTNERS. 71 
 
 the persons from whom such funds were obtained, and of 
 their use in the business of the firm ;' nor where bills are 
 drawn up by a partner in his own name, and discount ob- 
 tained by an agent, the proceeds going to the firm.* And 
 where money has been loaned to an individual partner, 
 although the intention be to provide for his share of the 
 partnership capital, and the money is so applied, no liability 
 is created on the part of the firm, the loan not having 
 been made to the firm, nor upon its credit. 8 The decisive 
 question as to the firm liability is, whether it, by one of its 
 partners or otherwise, entered into the contract of loan so as 
 to be chargeable thereunder, and not whether the firm ob- 
 tained the benefit of the loan made by the partner. 4 
 
 Where such money, however, has been obtained generally, 
 by the individual partner, the fact that the funds thus ob- 
 tained have been applied to partnership purposes, is prima 
 facie evidence to charge the firm, 5 or where the loan is not 
 made upon the individual credit of the borrowing partner, 
 
 and it is shown that the money was borrowed for and ap- 
 
 
 
 Ketchum v. Durfee, 1 Hoffm. Ch. 204 (15 Rep. 454); Donnelly . 
 
 538; Tallmadge v. Pennoyer, 35 Ryan, 41 Pa. St. 306. 
 
 Barb. 120; Bailey v. Clark, 6 Pick. 4 Beckham v. Drake, 9 M. & W. 99; 
 
 372; Green v. Tanner, 8 Met. 411; Ernest v. Nichols. 6 H. L. Cas. 423; 
 
 Peterson v. Roach, 32 Ohio St. 374; Bank of South Australia case, 8 
 
 Norwalk v. Nat. Bank 39 Ohio St. 27 Barn. & C. 427; Faith v. Richmond, 
 
 Alb. L. J. 185: Welkcr Y>. Wallace, 11 A. & E. 339; Le Roy . Johnson, 
 
 31 Ga. 362; Graff v. Hitchman, 5 2 Pet. 186; Peterson v. Roach, 32 
 
 Watts, 454; Nat. Bank . Day, 12 Ohio St. 374; Bank of Rochester v. 
 
 Heisk. 413; Foster i>. Hall. 4 Humph. Monteith, 1 Denio 402; Wright v. 
 
 346; Emly v. Lye, 15 East. 7; Bevan Hooker, 10 N. Y. 51. The question 
 
 v. Lewis, 1 Sim. 376; In re Worcester is, whether the name used, and to 
 
 Corn. Ex. Co., 3 DeG. M. & G. 180; which credit is given, is that of the 
 
 Burmester v. Norris, 6 Ex. 796; Haw- firm, or the name which the firm has 
 
 tayne v. Bourne, 7 M. & W. 595; In adopted and used as the name to 
 
 re Ansonia Fibre Co., L. R. 9 Ch. designate the partnership; it is only 
 
 635. where such name has been used 
 
 1 Ketchum . Durfee, 1 Hoffm. that the members of the firm are 
 
 Ch. 538. held. National Bank of Salem e. 
 
 * Emly . Lye, 15 East, 7. Thomas, 47 N. Y. 15. 
 
 1 McNaughten's App. 101 Pa. St. 5 Jaques v. Marquand, 6 Cow. 497.
 
 72 NEGOTIABLE COLLATERAL SECURITIES. 
 
 propriated to the use of the firm, notwithstanding the false 
 and fraudulent representations of the borrowing partner re- 
 lating to the business of the firm by which the money was 
 secured. 1 Where one partner contracts a debt representing 
 to the creditor that the money obtained is for the benefit of 
 the firm, if the contract is within the scope of its business, 
 the firm is liable, whether the representations were true or 
 false. 8 And where money was borrowed by a partner in 
 his own name, his individual note being given, and the 
 money is used for partnership purposes, a note of the part- 
 nership given in renewal of the individual note, is such a 
 ratification that the firm is held thereon. 8 Where there 
 was a partnership liability for a debt, evidenced by a note 
 with sureties, and a new note given in renewal signed by 
 one partner alone, with the same sureties, who signed such 
 note on the faith of representations that it was necessary in 
 the business of the firm, and that the other partner would 
 sign it, upon paying the note, the sureties may recover as 
 against the partnership, although the other partner did not 
 in fact sign the note. 4 
 
 53. THE USE OF TRUST FCTNDS AND SECURITIES BY 
 PARTNERS. Where one of two or more partners is a trus- 
 tee, having the control and management of a trust estate, 
 and fraudulently uses the trust money and securities in the 
 business, but without the knowledge or privity of the other 
 partner or partners that the money so furnished belongs to 
 any trust fund, no joint debt or obligation is created as 
 against the partnership by such use. The act of the part- 
 ner is a breach and abuse of his trust, but this of itself is 
 not sufficient to change the innocent partners into implied 
 trustees, nor to render them liable as under contract, to the 
 
 1 Stockwell r. Dillingham, 50 Me. * Union Bank ?. Smith, 7 Paige, 
 442. 26, 33. 
 
 8 Ibid.; Church t>. Sparrow, 5 * McKee . Hamilton, 33 Ohio St. 
 Wend. 223; Tucker . Peasley, 36 N. 7. 
 H. 167.
 
 PLEDGE BY PARTNERS. 73 
 
 cestuis que trust. 1 Where, however, such trust funds or 
 securities are fraudulently loaned by one partner having the 
 control thereof, and the other partners are chargeable with 
 knowledge that such securities are not the individual prop- 
 erty of the trustee, the firm, in the event of their loss in the 
 course of its business, is liable to the trust estate for the 
 value of the securities.* Knowledge of the other members 
 of a partnership of or privity to such misuse of trust funds 
 or securities, will charge the partnership ; aliter, if there be 
 no notice.* 
 
 54. PLEDGE BY PARTNER FOR HIS OWN DEBT, OR 
 DEBT OF THIRD PARTY ITS SUBSEQUENT RATIFICATION. 
 A. member of a partnership has no authority to use the 
 name and credit of the firm to secure the payment of his 
 own indebtedness, or the indebtedness of a third party. A 
 creditor of a partner, receiving the securities of the firm, as 
 collateral security for the individual debt of such partner, 
 or of a third person, does so at his risk and peril, and is not 
 allowed to recover as against the firm, or the remaining 
 partners, except he show their knowledge of the act and 
 consent thereto, or their subsequent ratification. 4 The 
 
 1 In re Jordan, 2 Fed. Rep. 319; Wilson v. Williams, Ib. 146; Stamer 
 
 Jaques v. Marquand, 6 Cow. 497; ID. Tyson 3 Hill, 379; Miller v. Man- 
 
 Hutchinson v. Smith, 7 Paige 26; ice, 6 Ib. 115; Rutledge v. Squires, 
 
 Tallmadge. Pennoyer, 35 Barb. 120; 23 la. 53; Hickman . Reineking, 6 
 
 Guillou V. Peterson, 9 Phila. 225; Ib. 388; Clay v. Cottrell, 18 Pa. St. 
 
 Logan v. Bond, 13 Geo. 192. 408: Cooper v. McClushan, 22 Ib. 80; 
 
 8 Guillou v. Peterson, 9 Phila. 225. King v. Faber, 22 Ib. 21; Baird v. 
 
 Hutchinson v. Smith, 7 Paige 26. Cochrane, 4 S. & R. 397; Williams 0. 
 
 4 Mutual National Bank v. Rich- Gilchrist, 11 Ib. 535; Robinson v. 
 
 ardson, 33 La. Ann. 1312; John- Aldridge, 34 Miss 352; Hickm&n v. 
 
 son v. Crichton, 50 Md. 108; Living- Hunkle, 27 Mo. 401; Weed . Rich- 
 
 8ton v. Roosevelt, 4 Johns. 251; Os- ardson, 2 Dev. & Bat. 535; Porter 
 
 borne v. Stone, 30 Minn. 25 (15 Rep. v. Gunnison, 2 Grant's Cas, 297; 
 
 52); Selden t>. Bank, 3 Minn. 166; Burleigh v. Parton, 21 Tex. '585; 
 
 Rollins v. Stevens. 31 Me. 454; Raust Powell v. Messer, 18 Tex. 401; Tom- 
 
 . Hauselt, 41 N. Y. Sup. Ct. 467; kyns v. Woryard, 5 W. Va. 216; 
 
 Williams v, Walbridge, 3 Wend. 415; Munroe v. Cooper, 5 Pick. 412; Sweet- 
 
 Gansevoort v. Williams, 14 Ib. 131 ; ser v. French, 2 Cush. 309; Leverson
 
 NEGOTIABLE COLLATERAL SECURITIES. 
 
 onus probandi is on the creditor to show such knowl- 
 edge and consent, or ratification. 1 And where a partner 
 has misappropriated a judgment note, executed by him in 
 the name of the firm, to secure the payment of his own 
 debt, and the same is received by the pledgee with knowl- 
 edge of the misappropriation, the transaction is held a fraud, 
 not only upon the partners, but upon the creditors of the firm 
 also.* The title to such partnership securities, so fraud- 
 ulently pledged by the individual partner, is not diverted 
 from the partnership, whether the creditor was chargeable 
 with knowledge of the misappropriation or not. 1 No sub- 
 stantial difference exists between taking the note of a firm 
 for a private debt of a partner by a creditor of such partner, 
 thus pledging the credit of the firm, and taking the property 
 of the firm, upon a purchase by one of the partners, to pay 
 his private debt. In both cases, the act is equally injurious 
 
 v. Lane, 13 C. B. N. S. 278; Wells v. 
 Masterman, 2 Esp. 371; Ex parte 
 Austen, 1 M. D. &. D. 247; Ex parte 
 Bonbonus, 8 Ves. 540; Heilbut v. 
 Nevill, L. R. 4 C. P. 354; on appeal, 
 L. R. 4 C. P. 473; Elstonc. Deacon. L. 
 R. 2. C. P. 20. Where a bill is drawn 
 by one partner in the name of the 
 firm in fraud of his co-partners and 
 is accepted by the drawee, and after- 
 wards paid by the drawer in the 
 name of the firm, the acceptor may 
 successfully deny the endorsement, 
 but not the drawing. Garland 0. 
 Jocomb, L. R. 8 Ex. 216. 
 
 1 Kendall . Wood, L. R. 6 Ex.243; 
 Leverson v. Lane, 13 C. B. N. S 278; 
 Edwards . Thomas 66 Mo. 468; 
 Stall t>. Catskill Bank. 18 Wend. 466. 
 In ex parte Golding, cited by Collyer 
 on Partnership, 1st ed. p 283, Lord 
 Lyndhurst said: " No principle can 
 be more clear than that where a part- 
 ner and a creditor enter into a con- 
 tract on a separate account, the part- 
 
 ner can not pledge the partner- 
 ship funds or give partnership ac- 
 ceptances in discharge of the con- 
 tract so as to bind the firm." No 
 fraud was charged in that case. To 
 like effect as to pledge of partnership 
 property and credit, Ridley ^.Taylor. 
 13 East, 175. A mere statement by a 
 partner that the money is wanted for 
 the partnership is not sufficient to 
 charge the firm where a partner 
 pledged securities of the firm as in- 
 demnity upon an indorsement of his 
 personal note. Uhler v. Browning, 
 28 N. J. L. 79. 
 
 McNaughten's App. 101 Pa. St. 
 204; Purdy v. Poweis, 6 Ib. 492. 
 
 Liberty Savings Bank v. Camp- 
 bell 75 Va. 534; Bemis v. Wad ill 
 82 Gratt, 588, 594; Rogers v. Batch- 
 elor, 12 Pet. 221 ; Heilbut v. Nevill 
 L. R. 4 C. P. 854; on app. Ib. 
 478; Deardorf v. Thatcher, 78 Mo 
 128.
 
 PLEDGE BY PARTNERS. 75 
 
 to the other partners. It is taking their common property 
 to pay a private debt of one of the partners. 1 
 
 Where a partner has wrongfully pledged the credit or 
 effects of the partnership, or has misappropriated its securi- 
 ties for his own individual advantage, the other partner or 
 partners may, by their subsequent affirmative acts, so far 
 ratify and confirm the same as to render the partnership 
 liable. As where a partner had given a promissory note 
 in the name of the firm for his individual debt, 
 and the other partner obtained forbearance in its prose- 
 cution by a promise to pay it, a judgment against both was 
 sustained.* Or a ratification or recognition of the note so 
 misappropriated, by the remaining partners, is sufficient. 1 
 Where such note has been ratified by the other partners, and 
 a note in renewal thereof has been given, no further ratifi- 
 cation is necessary. 4 The promise of such partners, im- 
 plied from such ratification, needs no consideration for its 
 support, as it does not come within the Statute of Frauds.* 
 
 55. THE RULE AS TO GUARANTIES AND ACCOMMODA- 
 TION PAPER. One of the two partners has no authority, 
 without the consent of his co-partners, to pledge the credit 
 of the firm by signing commercial paper so as to make the 
 firm a surety, indorser, or guarantor of a third person, or to 
 make accommodation acceptances or notes in the name of 
 the firm. Persons receiving such paper with knowledge of 
 or chargeable with notice that the act is a fraudulent pledge 
 of the firm's credit, can not recover as against the other 
 co-partners, without proving their authority or subsequent 
 assent. Except in the hands of bona fide holders for value, 
 before maturity, without notice of the want of authority, 
 
 1 Dob v. Halsey, 16 John. 34 * Wheeler v. Rice, 8 Cxish. 205. 
 (Spencer C. J.); Everingham v Ems- 'Jones v. Booth, 10 Vt. 268; 
 
 worth, 7 Wend. 326; Livingston v. Sweetzer v. French, 2 Cush. 309. 
 Roosevelt, 4 Johns. 251; Rogers v. * Tilford v. Ramsey, 37 Mo. 563. 
 Batchelor, 12 Pet. 221; Green v. 6 Commercial Bank v. Ramsey, 
 
 Deakin, 2 Stark. 357, 87 Mo. 568.
 
 76 NEGOTIABLE COLLATERAL SECURITIES. 
 
 such indorsements, or guaranties, or accommodation accept- 
 ances, are without validity, and no rights can be acquired 
 thereunder as against the partnership. 1 A person who takes 
 a negotiable note, signed or indorsed as stated, showing 
 upon its face that the firm is a mere surety or guarantor 
 thereon for some third person, does so at his peril, as he is 
 chargeable with notice of every fact to which inquiry would 
 lead, and to be protected must ascertain the authority of the 
 partner to indorse the firm name as surety or guarantor 
 thereon.* Such an ftct is not within the usual course of 
 partnership business, and the burden of affirmatively proving 
 a special agreement authorizing such act is upon the holder, 
 the act of the partner alone not being sufficient. 8 Where 
 a person takes a note showing upon its face that it is made 
 by one partner in the name of the firm, for the accommoda- 
 tion of another person, the holder can not recover as against 
 the other partners, without proving their assent. 4 
 
 56. THE RIGHTS OF THE BONA FIDE INDORSEE, 
 UNDER SUCH PLEDGE. A bona fide indorsee for value, be- 
 fore maturity, of a negotiable bill or note given by a partner 
 in the name of a partnership, and without notice of the 
 equities arising from the fact that it had been fraudulently 
 transferred for the partner's personal debt, is always pro- 
 tected. If any one should suffer by reason of the fraudulent 
 conduct of the partner in thus misappropriating the firm's 
 credit or property, as against an innocent indorsee of such 
 paper, without notice, it should be the person who has had 
 
 1 Atlas Nat. Bank v. Savery, 127 78 111. 234 ; Marsh t>. Thompson Nat. 
 Mass. 275 ; Sweetzer v. French, 2 Bank, 2 Bradw. 217 ; Davis v. Black- 
 Gush. 309; Osborne v. Stone, 30 well, 5 Ib. 32 ; Rollins v. Stevens, 31 
 Minn. 25 (13 N. W. R. 922); Bauk of Me. 454; First Nat. Bank v. Breese, 
 Rochester v. Bo wen, 7 Wend. 158 ; 19 Iowa, 640; Langan v. Hewett, 13 
 Fieldens v. Lahens, 9 Bosw. 445; S. & M. 122. 
 
 Evans c. Wells, 20 Wend. 254; 22 * Davis . Blackwell, 5 Bradw. 32. 
 
 Ib. 824; Bank of Chemung v. Brad- 'Ibid; Osborne . Carr, sjupra. 
 
 ner, 44 N. Y. 080; Hendrie v. Berk- * Massachusetts Nat. Bank . 
 
 owitz, 37 Cal. 113 ; Zuel v. Bowen, Law, 127 Mass. 72.
 
 PLEDGE BY PARTNERS. 
 
 77 
 
 sufficient confidence to enter into such close commercial 
 relations with him as that of partnership. 1 To support the 
 indorsee's title, he must have advanced value on the faith 
 and credit of the paper in good faith. 9 Nor is it material 
 that the indorser from whom title was acquired to a bill 
 of exchange valid upon its face, had himself notice that it 
 was open to defenses." Evidence will not be received that, 
 by the articles of partnership, one partner had no right to 
 indorse negotiable paper, to defeat the title of a bona fide 
 indorsee for value, of such paper, receiving the same as col- 
 
 1 Blodgett . Weed, 119 Mass. 215 ; 
 Wait v. Thayer, 118 Ib. 474 ; War- 
 ren v. French, 6 Allen, 317 ; Hay- 
 ward v. French, 12 Gray, 453 ; Che- 
 mung Canal Bank v. Bradner, 44 N. 
 Y. 680 ; Michigan Bank . Eldred, 9 
 Wall. 544 ; Mechanics' Bank v. Fos- 
 ter, 29 How. Pr. 408 ; Livingston v. 
 Roosevelt, 4 Johns. 251 ; Smith . 
 Lusher, 5 Cow. 688 ; Evans v. Wells, 
 20 Wend. 254 ; 22 Ib. 324 ; Redlon 
 . Churchill, 73 Me. 146; Waldo 
 Bank . Greeley, 16 Ib. 419 ; Parker 
 v. Burgess 5 R. I. 277 ; Haldeman v. 
 Bank, 28 Pa. St. 440; Manufac- 
 turers Bank v. Winship, 5 Pick. 11; 
 Hogarth v. Latham, L. R. 3 Q. B. 
 D., 643 ; Ellston v. Deacon, L. R. 2 
 C. P. 20 ; ex parte Bushell, 3 M. D. 
 & D. 615 ; ex parte Meyer. DeGcx, 
 632 (an accommodation bill) ; Lane 
 v. Williams, 2 Vern. 277 ; Wintle v. 
 Crowther, 1 Cr. & J. 316 ; R'dley . 
 Taylor, 13 East, 175; Sanderson v. 
 Brooksbank, 4 Car. & P. 286 ; Lewis 
 v. Reilly, 1 Q. B. 349; Swan v. 
 Steele, 7 East, 210. 
 
 * Clark v. Dearborn, 6 Duer, 309 ; 
 Munroe t>. Cooper, 5 Pick. 412; Mix 
 0. Muggy, 28 Conn. 186 ; Blodgett v. 
 Weed, 119 Mass. 215. The rule in 
 England is, that if a bill is drawn 
 
 and accepted by one partner in fraud 
 of the firm, the holder can not recov- 
 er against the firm unless he can 
 show that he gave value for ihe bill. 
 Hogg v. Shene, 18 C. B. N. S. 426 ; 
 Bailey v. Bid well, 13 M. & W. 73 ; 
 Smith v. Braine, 15 Jur. 287, Q, B. ; 
 Harvey v. Towers, 6 Ex. 656 ; Berry 
 v. Alderman, 14 C. B. 95 ; Heath v. 
 Snnsom, 2 B. & Ad. 291. And in 
 Heilbut v. Nevill. L. R. 4 C. P. 354, 
 affirmed L. R. 5 C. P. 478, where a 
 partner in fraud of the partnership, 
 indorsed and delivered bills of ex- 
 change belonging to the firm to the 
 defendant in satisfaction of his pri- 
 vate debt, the defendant, who was 
 cognizant of the fraud, having real- 
 ized the bills, the assignees of the 
 fraudulent partner, together with 
 the other partner, without disaffirm- 
 ing the contract, sued the defendant 
 . for wrongful conversion. They 
 were allowed to recover on the mon- 
 ey counts, Baron Cleasby saying 
 that no property passed by the in- 
 dorsement and delivery of the bills 
 by the partner for his own debt, the 
 indorsee being cognizant of the 
 fraud. 
 
 1 Hogarth D. Latham, L. R. 8 Q. 
 B. D. 643.
 
 78 NEGOTIABLE COLLATERAL SECURITIES. 
 
 lateral security upon discount of the partner's note ;' nor 
 will such verbal understanding defeat the title of an in- 
 dorsee for value, although the bill, indorsed by the partner 
 in the firm name and payable to the firm, was the partner's 
 own property.* Where promissory notes, made payable to 
 a partnership, were indorsed as collateral security by one 
 partner to another firm, for value, the pledgees thereof, be- 
 ing bona fide holders for value, were entitled, whether the 
 other partner knew of the indorsement or not, to the benefit 
 of any mortgage or other security subsequently given to 
 secure the payment of the notes, the first firm having become 
 insolvent. 8 But where such paper is received after due as 
 collateral security, 4 or where the liability of the partnership 
 upon negotiable paper has been satisfied, an indorsee receiv- 
 ing the same from a partner for his individual debt,' are 
 subject to equities. 
 
 57. NOTICE OF MISAPPROPRIATION TO CHARGE THE 
 PLEDGEE. Notice of fraud, in order to charge the pledgee 
 advancing value, in good faith, upon commercial paper, 
 wrongfully misappropriated by a partner, with knowledge 
 thereof, and thus defeat his claim as against the partnership, 
 must be more than a mere suspicion of defects or knowledge 
 of facts which might excite suspicion in the mind of a 
 cautious man. Neglect, not amounting to fraud or bad 
 faith, will not defeat the rights of a pledgee of such paper.* 
 There must be actual knowledge, suspicion, or cause of sus- 
 picion of fraud upon the partnership in the making and 
 negotiation of the note, to defeat his title. 7 No such knowl- 
 
 1 Michigan Bank c. Eldred, 9 Freemans' Nat. Bank v. Savcry, 127 
 
 Wall. 544. Ib. 79 ; Murray v. Lardncr, 2 Wall. 
 
 Barrett v. Russell, 45 Vt. 43. 110 ; Cromwell v. County of Sac. 90 
 
 Walker . Lee, 15 S. C. 142. U. S. 51 ; Farrell v. Lovctt, 68 Me. 
 
 4 Thompson v. Hale, 6 Pick. 259. 820; Kellogg. Curtis, 09 Ib. 212; 
 
 Dana v. Conant, 80 Vt. 43. Hobart v. Penny, 70 Ib. 248. 
 
 Recllon 0. Churchill, 73 Me. 146 ; ' Blodgett v. Weed, 119 Mass. 
 Smith v. Livingston, 111 Mass. 842 ; 215.
 
 PLEDGE BY PARTNERS. 79 
 
 edge or suspicion of fraud arose where one of two partners 
 delivered to a third person, a co-partner with him, in another 
 firm, a blank draft drawn by the partner, in the name of the 
 first firm, and the blank being filled by such partner with 
 his own name as drawee, with the name of the other firm as 
 drawer, in the presence of the person loaning the money, 
 the partner indorsing the bill, the money was obtained upon 
 the credit of the bill. The other partner who had not 
 signed the blank draft, was obliged to pay the same, although 
 the money was misappropriated. 1 The possession of a nego- 
 tiable promissory note by the maker, after indorsement has 
 been made in the name of the firm, is sufficient to charge a 
 third person advancing money thereon, with notice that the 
 indorsement was intended for the accommodation of the 
 partner, 2 or the character of the transaction may amount to 
 notice. 3 In such cases, the burden of proving the assent of 
 the other partners to the use of such accommodation paper, 
 bearing the indorsement of the firm, when its character as 
 accommodation paper has been established, is upon the 
 holder of such paper ; 4 but the proof may be from circum- 
 stances, and not of an express and positive agreement. 6 
 
 58. THE RECOVERY OF THE BONA FIDE INDORSEE 
 FOR VALUE. Where one member of a firm makes his own 
 note payable to his own order and indorses thereon the 
 name of his firm, receiving and appropriating the proceeds 
 to his own use, the firm being duly notified is liable therefor 
 
 1 Bank of Cliemung v. Bradner, 44 drie v. Berkowitz, 37 Cal. 119 ; Lang 
 
 N. Y. 680. 7>. Waring, 17 Ala. 145 ; Chenowith 
 
 1 Moynahanfl. Hanford, 42 Mich. v. Chamberlain, 6 B. Mon. 60; La- 
 
 329 ; Hendrie v. Berkowitz, 27 Cal. verty v. Burr, 1 Wend. 529 ; Me- 
 
 119 ; Stall v. Catskill Bank,18 Wend. chanics Bank v. Livingston, 33 Barb. 
 
 466 ; Fieldens v. Lahens, 9 Bosw. 458 ; Tutt v. Adams, 24 Mo. 186 ; 
 
 445. Heffron 0. Hanaford, 40 Mich. 305 ; 
 
 8 Union Nat. Bank v. Underbill, Dob v. Helsey, 16 Johns. 34. 
 
 21 Hun. 278. First Nat. Bank . Breeze, 39 la. 
 
 4 Darling v. March, 22 Me. 184 ; 640 ; Sweetzer v. French, 2 Cush. 
 
 Foot v. Sabin, 19 Johns. 154 ; Hen- 315.
 
 80 NEGOTIABLE COLLATERAL SECURITIES. 
 
 to an indorsee, who, in good faith, before maturity, has 
 given value for the note, in ignorance of any circumstances 
 affecting its validity. 1 The same rule applies where a part- 
 ner has general authority to accept bills of exchange for the 
 firm, and a bill is accepted for more than is due from the 
 firm, there being no fraud, the bona fide holder for value 
 of the bill is entitled to sue the partnership upon it at all 
 events, to the extent to which there is authority, although 
 the additional sum be in payment of a pre-existing indi- 
 vidual debt of the partner. 1 The like principle applies 
 in the case of a partnership holding the acceptance of a third 
 person, where one of the two partners indorses the same to a 
 creditor for a debt partly due from the firm and partly from 
 himself alone, the bona fide indorsee is entitled to recover 
 against the firm to the extent of the debt of the firm. Re- 
 covery may be had upon a count for the consideration if 
 not upon the bill.* 
 
 59. EFFECT OP TAKING SECURITY FROM INDIVIDUAL 
 PARTNER. Generally, where the holder of negotiable 
 paper issued in the name of a partner receives a new secur- 
 ity from one or more of the partners liable on the same, the 
 remaining members of the partnership are discharged. But 
 in cases where the holder for value of such bills or notes, 
 by an agreement made at the time retains the principal note 
 or other personal evidence of the debt, and reserves his 
 right to proceed against the other partners, he may main- 
 tain an action against the latter on the debt, in the event 
 that the new note given by the individual partner should 
 prove insufficient. 4 Where the bond of one partner was taken 
 
 1 Redlon . Churchill, 73 Me. 146 ; Est. of Davis, 5 Whart. 530; 
 
 Wilson t>. Richards, 27 Minn. 837; Yarnell v. Anderson, 14 Mo. 619; 
 
 Gansevoort . Williams, 14 Wend. Vernon t. Manhattan Co., 22 Wend. 
 
 146: Swan . Steele, 7 East, 210. '183; Parker v. Cousins, 2 Gratt. 873; 
 
 * Ellston t>. Deacon, L. R. 2 C. P. Thompson v. Percival, 5 B. & A. 
 
 20 925; Bedford v. Dakin, 2 Ib. 210. 
 
 Ibid.
 
 PLEDGE BY PARTNERS. 81 
 
 at the time of making a loan to a partnership, and, as the 
 consideration for loaning the money, the other partners are 
 not bound thereon. The acceptance of the bond havitg extin- 
 guished the simple contract debt, it could no longer be 
 treated as a collateral security. 1 A judgment recovered 
 against two persons as partners, for money borrowed for the 
 use of the firm, although remaining unsatisfied, constitutes 
 a bar to an action by the same plaintiffs against a third 
 person who is afterwards discovered to have been really 
 interested as a partner in the business, for the purposes for 
 which the money was borrowed. 1 
 
 60. RELEASE OF COLLATERAL SECURITY OF PARTNER 
 BY PAYMENT. The general rule was applied that partner- 
 ship property is first used in paying partnership debts, to the 
 exclusion of the creditors of the individual partners, and 
 that the creditors of the latter are first paid from the 
 separate effects of the debtor before the partnership credi- 
 tors can claim anything, in a case where one partner of a 
 firm had deposited with a creditor a promissory note be- 
 longing to himself as collateral security for the payment of 
 a particular debt of the firm owing to such creditor. The 
 debt having been paid, the partner demanded the return of 
 his collateral note, or of the proceeds thereof, the pledgee 
 having in the meantime collected the note at maturity. 
 The pledgee refused to pay over the proceeds of the note, 
 claiming to hold them to apply upon other unadjusted 
 claims against the partnership. The firm being solvent, the 
 collateral note or the proceeds thereof, were ordered to be 
 returned to the individual partner. 3 Where, however, a 
 partnership, consisting of four persons, pledged securities 
 for the payment of a bill of exchange, and the interests of 
 three of the partners, after dissolution, came, by assignment, 
 into the hands of one person, who tendered to the pledgee 
 
 1 Bond v. Aitkin, 6 W. & S. P. D. 403, affirmed in L. R. 4 App. 
 
 165. Gas. 504. 
 
 1 Kendall v. Hamilton, L. R. 3 C. * Adams v. Sturgess, 55 111. 468. 
 6
 
 82 NEGOTIABLE COLLATERAL SECURITIES. 
 
 the amount for which the securities were held, without the 
 knowledge or consent of the other partner, the refusal of 
 the pledgee to return the securities, and his subsequent sale 
 thereof, upon the dishonor of the bill, for a larger sum than 
 the amount due him, was not such a conversion as would 
 entitle the three-fourths owner of the security to maintain 
 an action of trover. 1 
 
 CHAPTER VII. 
 
 COLLATERAL SECURITIES IN RELATION TO BANKS. 
 
 61. The banker's general lien on securities. 
 
 62. His lien under contract, and as against third persons. 
 
 63. The banker's liability holding securities. 
 
 64. The rights of national banks under mortgage securities. 
 
 61. THE BANKER'S GENERAL LIEN ON SECURITIES. 
 A banker's lien is either general or special. His general lien, 
 arising under the usual relations of banker and customer, 
 is upon all funds and securities held by him, for the general 
 balance of the customer. 8 Such a general lien arises upon 
 the maturity of a note discounted for the customer, and 
 then held by the banker, and will extend to other commer- 
 cial paper, subsequently acquired by the banker in the 
 usual course of business with his customer, and to any 
 commercial paper belonging to the customer, indorsed by 
 
 1 Harper c. Goodsell, L. R. 5 Q. B. 8 Ch. 41 ; In re Gen. Ass. Co. L. R 
 
 422. 14 Eq. 507; Bank of the Metropolis 
 
 * Scott v. Franklin, 15 East, 428; . N. E. Bank, 1 How. 234; s. c. 6 
 
 Vanderzee v. Willis, 3 Bro. C. C.21; Ib. 212; Dumont v. Fry, 13 Fed. 
 
 Leonino . Leonino, L. R. 10 Ch. Rep. 423. 
 D. 460 ; In re European Bank, L. R.
 
 THE BANKER'S LIEN. 83 
 
 him to the banker for the purpose of collection. 1 The 
 rule has been applied where bills of exchange deposited as 
 collateral security for a loan account were applied, so far as 
 not used, to meet over-drafts on another account.* But 
 such lien does not extend to money left on deposit with the 
 banker as against an appropriation of it by the customer to 
 a holder for value of a check, drawn against such account, 
 and is confined to such securities and valuables of the cus- 
 tomer as may have been placed in the custody of the 
 banker, and upon the faith of which, either in possession or 
 expectancy, credit has been extended by the banker. 1 And 
 to a lien on shares of stock in the bank, and dividends 
 accruing thereon under a clause in the charter, 4 but not to 
 documents or securities deposited for safe custody or for 
 some purpose foreign to the relations of banker and cus- 
 tomer.' 
 
 62. His LIEN UNDER CONTRACT, AND AS AGAINST 
 THIRD PERSONS. Where funds or securities are deposited 
 with a banker as collateral security to cover a special ad- 
 vance or discount, the lien of the banker thereon is limited, 
 and is discharged upon repayment of such special advance ; 
 and a claim of a banker of a general lien for balances or 
 on account of other loans, upon such funds or securities, 
 is not supported, where a contract for the special appropria- 
 tion thereof is established. 6 The rule applies equally to 
 
 1 Commercial Bank v. Hughes, 17 3 Gilm. 233. 
 
 Wend. 94; City Bank v. Armstrong, 4 Hague v. Dandeson. 2 Ex. 741. 
 
 4 Dev. 59; Muench v. Nat. Bank, 11 'Leese v. Martin, L. R. 17 Eq. 224; 
 
 Mo. App. 144; Ford. Thornton, 3 Brandao v. Barnett, 1 M. & G. 908; 
 
 Leigh. 695; Bank v. Bank, 11 How. s. c. 12 C. & F. 787. 
 
 239; Brandao . Barnett, 3 C. B. 519; Duncan v. Brennan, 83 K Y. 
 
 Scott v. Franklin, 15 East, 428; ex 487; Muench v. Nat. Bank, 11 Mo. 
 
 parte Pease, 1 Rose, 232; ex parte App. 144; Lane v. Bailey, 47 Ib. 
 
 "Wakefield Bank, 19 Ves. 25. 395; Neponset Bank v. Leland, 5 
 
 * In re European Bank, L. R. 8 Met. 259; Grant v. Taylor, 35 N. T. 
 
 Ch. 41. Supr. Ct. 338; Wyckoff v. Anthony, 
 
 'Fourth Nat. Bank v. City Nat. 90 N. Y. 442; Gould v. Fanners L. 
 
 Bank, 68 111. 398; Russell . Hadduck, & T. Co., 23 Hun, 322; In re Boys,
 
 84 NEGOTIABLE COLLATERAL SECURITIES. 
 
 stock brokers and others, who have received collateral 
 securities for their advances under a special agreement to 
 cover a particular transaction. They are not allowed after 
 repayment and settlement of the special contract, to apply 
 such securities upon a general balance or other claim. 1 
 
 The banker's general lien attaches to all funds and 
 securities deposited with him by his customer, as against 
 not only his customer, but the secret equities of 
 third parties. In the current business of a bank, the 
 fact that an account is kept in the name of a person 
 " as trustee " does not charge the bank with greater 
 duties in the payment of checks thereon, which it is entitled 
 to presume are signed in the ordinary course of business of 
 the trust estate. The rule is otherwise, where, upon the 
 insolvency of the trustee, the bank seeks to assert a general 
 lien on such fund as against the beneficiaries under the 
 trust, since the bank is chargeable with knowledge that the 
 trustee is acting for a beneficiary. This inference arises 
 where the word u as trustee " is used, even without naming 
 the cestuis que trust, or as " general agent." 1 The rule is 
 applied against the general lien of a banker in cases where 
 no trust is disclosed if the fund or securities can be traced, 
 whether the trustee has also money belonging to him de- 
 posited in the same bank. 8 
 
 63. THE BANKER'S LIABILITY, HOLDING SECURI- 
 TIES. Bankers, and national banks, may hold collateral 
 
 L. R 10 Eq. 467; Latham t>. Bank Col. C. C. 241; Boodenham v. Hos- 
 
 of India, L. R. 17 Eq. 205; In re kyns. 2 De G. M. & G. 903. 
 
 European Bank, L. R. 8 Ch. 41; In 'Farmers' Nat. Bank v. King, 57 
 
 re Gen. Ass. Co. L. R. 14 Eq. 507. Pa. St. 502; Van Alen v. American 
 
 1 Wyckoff v. Anthony, 90 N. Y. Nat. Bank, 52 N. Y. 1; National 
 
 442; McVee v. Gorst, L. R. 4 Eq. Bank v. Insurance Co. 104 U. S. 54, 
 
 815, 325. 67; Knatchbull v. Hallett, L. R. 13 
 
 * National Bank v. Insurance Co., Ch. D. 696; Birt v. Birt, L. R. 11 Ch. 
 
 104 TJ. S. 54; Duncan v. Jaudon, 15 D. 773 n; Pennell v. Deffell, 4 DeG. 
 
 Wall. 165; Bailey . Finch, L. R 7 M. & G. 372, 388; Frith . Cartland, 
 
 Q. B. 34; ex parte Knightston, L. 2 H. & M. 417. 
 R 7 Ch. 632; Pannell v. Hurley, 2
 
 THE BANKER'S LIEN. 85 
 
 securities for the performance of contracts between third 
 parties, and such corporations are estopped to insist that 
 the act is ultra vires, as to do so would enable them to 
 perpetrate a fraud upon innocent persons entering upon 
 such contracts in reliance upon the representations made. 1 
 But a national bank has no power, upon the deposit of col- 
 lateral securities to guarantee the undertaking or obligation 
 of the pledger, since it has no power to loan its credit in 
 this manner. 8 Negotiable bonds held as collateral security 
 by a bank for loans and discounts, were stolen at a time 
 when the pledger was not indebted thereto. The question 
 of negligence on the part of the bank was for a jury ; if it had 
 been negligent, the proper measure of damages was, the 
 value of the bonds at the time they were stolen. 8 Where 
 such bonds, pledged with a bank as collateral security, were 
 stolen before the note for which they were given as col- 
 lateral security had become due and payable, in an action 
 upon the note, the agreement of the bank relative to the 
 safe keeping of the bond being an independent promise, and 
 not a condition of the promise to pay in the note, the burden 
 of showing negligence was on the pledger. 4 Nor will evidence 
 merely that bonds were received by a bank for safe-keeping, 
 and were not returned to the depositor when called for 
 because they had been stolen with other securities, be suffi- 
 cient to authorize a recovery of their value from the bank.* 
 
 64. THE RIGHTS OP NATIONAL BANKS UNDER MORT- 
 GAGE SECURITIES. A national bank is permitted to enforce 
 the collection of negotiable promissory notes by foreclosing 
 the mortgage or deed of trust on real estate, given as 
 
 1 Bushnell v. Chautauqua Nat. 4 Winthrop Savings Bank . Jack- 
 Bank, 10 Hun. 378. son, 67 Me. 570; Mills v. Gilbreth, 
 
 * Seligman t>. Nat. Bank, (U. S. C. 47 Ib. 330. 
 
 C. Va.) 9 Rep. 72. Wylie . Northampton Nat. 
 
 3 Third Nat. Banks. Boyd,44Md. Bank, 64 How. Pr. 456; otherwise, 
 
 47; First Nat. Bank . Ocean Nat. where lost by gross negligence. 
 
 Bank, 48 How. Pr. 148. Bank v. Lent, 39 Ohio St. 105.
 
 86 NEGOTIABLE COLLATERAL SECURITIES. 
 
 security thereon where such note and mortgage are 
 held as collateral security for the payment of a present 
 loan, notwithstanding the provisions of sections 5136 and 
 5137 of the National Banking Act, authorizing loans on 
 personal property only and restricting the acquisition of 
 real estate. In National Bank v. Matthews, 1 a promissory 
 note and deed of trust were pledged as collateral security 
 with a national bank, and the principal debt not being paid 
 at maturity, and default having occurred in the collateral 
 notes, the trustee was directed to sell the mortgage se- 
 curity. The maker of the notes filed a bill in equity, seek- 
 ing to restrain the sale on the ground that the bank had 
 violated the provisions of sections 5156 and 5137 referred 
 to. The United States Supreme Court (Swayne, J.) in 
 its decision, declared " the impending danger of a judgment 
 of ouster was the check, and none other, contemplated by 
 Congress. That has always been the punishment prescribed 
 for the wanton violation of a charter, and it may be made to 
 follow whenever the proper public authority shall see fit to 
 invoke its application. A private person can not, directly, 
 or indirectly, usurp this function of the government." The 
 rule has been generally approved that such a conveyance is 
 not void, but only voidable. 1 
 
 A national bank may hold mortgage security, where the 
 consideration is a pre-existing indebtedness, new notes 
 being executed therefor at the time the security is de- 
 livered. 8 Where the title by mortgage or conveyance is 
 not taken to the bank directly, the case is not within the 
 
 1 99 U. S. 621. Nat. Bank, 16 Kan. 341; Turner . 
 
 1 Silver Lake Bank v. North, 4 National Bank, 78 Ind. 19; Bank v. 
 
 Johns. Ch. 870; Goundie v. North- Poiliaux, 3 Rand. 136; Wrotten t>. 
 
 arapton Co. 7 Pa. St. 233; Baird v. Armat, 31 Gratt. 228; Runyan v. 
 
 Bank of Washington, 11 8. & R. Coster, 14 Pet. 122; Gold Mining 
 
 411; Leazure v. Hillegas, 7 Ib. 320; Co.*. Nat. Banking Co., 96 U. S. 
 
 Thornton v. Nat. Ex. Bank, 71 Mo. 640; Nat. Bank v. Mears,8 Biss.158; 
 
 221; First Wat. Bank *. Haire. 86 Nat. Bank v. Rowell, 2 Dill. 871. 
 
 la. 443; Wood v. People's Nat. Bank, Howard Nat. Bank v. Loomis, 51 
 
 83 Pa. St. 57; Orm v. Merchants' Vt. 849.
 
 MISAPPROPRIATION IN PLEDGE. 87 
 
 statute, the fact that the title may enure indirectly to 
 the security and benefit of the bank not vitiating the 
 transaction. 1 
 
 CHAPTER VIII. 
 
 MISAPPROPRIATION OF NEGOTIABLE INSTRUMENTS IN 
 
 PLEDGE. 
 
 65. The title of the pledgee, under misappropriation of negotiable in- 
 struments. 
 
 66. Misappropriation of blank acceptances and of accommodation paper. 
 
 67. Or where pledger has temporary possession of pledged securities. 
 
 68. The pledge of forged collateral securities, and illegal pledges. 
 
 69. Pledge of misappropriated, lost or stolen securities after maturity. 
 
 70. Misappropriation of negotiable securities by agents. 
 
 71. Wrongful pledges by agent, for antecedent debt. 
 
 72. The rule, as applied to bankers. 
 
 73. The rule, as applied to executors and administrators. 
 
 74. And to directors of corporations. 
 
 75. What notice of defects, etc., will defeat the title of the pledgee. 
 
 76. Notice by the terms of the collateral securities. 
 
 77. Cases where notice was not presumed. 
 
 78. Recovery of the pledgee limited to advances. 
 
 65. THE TITLE OP THE PLEDGEE UNDER MISAPPRO- 
 PRIATION OF NEGOTIABLE INSTRUMENTS. The use of ne- 
 gotiable instruments, as bills of exchange or promissory 
 notes, for the purposes of collateral security, indorsed 
 where required, or indorsed in blank, or payable to bearer, 
 is, under the general commercial law, so highly favored, 
 that the pledgee thereof receiving such negotiable col- 
 lateral securities before maturity, in good faith, and without 
 notice of equity, is a holder for value, and protected, al- 
 
 1 First Nat. Bank v. Haire, 36 la. 
 443.
 
 88 
 
 NEGOTIABLE COLLATERAL SECURITIES. 
 
 though the act of pledge by the person entrusted with the 
 title and apparent absolute ownership thereof is a fraud 
 upon the real owner, and made without authority. The 
 pledgee's title, having acted in good faith, and without 
 notice, and given value upon the credit of such apparent 
 absolute ownership, cannot be impeached. He enjoys the 
 benetit of the presumption the law makes in favor of the 
 holders of negotiable instruments, that the pledger is the 
 owner thereof, by a transfer for value, in good faith. 1 The 
 protection thus afforded the pledgee of negotiable collateral 
 securities, receiving the same before maturity, for value, and 
 without notice of equities, is extended to cases of pledge 
 of such collateral securities where they have been received 
 from one who has stolen or found the same. The pk-dgee, 
 receiving such negotiable instruments in good faiih and 
 without notice is a holder for value ; and only bad faith, 
 which is never presumed, can defeat his title.* 
 
 1 Swift v. Tyson, 16 Pet. 1 ; Good- 
 man v. Simcnds, 20 How. 843; Mer- 
 chants' Bankt>. State Bank, 10 Wall, 
 604; Hotchkiss v. Nat. Bank, 21 Ib. 
 354; Railroad Co. . National Bank, 
 102 U. S. 16; Swift v. Smith, 102 U. 
 8. 442; Brush v. Scribner, 11 Conn. 
 387; Capen's App. 28 Ib. 220; Beadle 
 e. Southern Bank, 57 Ga. 274; Mur- 
 ray v. Beckw.ith, 81 111. 43: Morris 
 c. Preston, 93 Ib. 215; Paulette v. 
 Brown, 40 Mo. 52; Ringling v. Kolin, 
 4 Mo. App. 59; Greenwell v. Hay- 
 den, 78 Ky. 322; Gardner v. Gager, 1 
 Allen, 502; Fisher*. Fisher, 98 Mass. 
 303; Draper v. Sexton, 118 Ib. 429; 
 Clement v. Leveritt, 12 N. H. 317; 
 Stalker t>. McDonald, 6 Hill, 93; 
 Stettheimer v. Meyer, 83 Barb. 215; 
 Youngs t>. Lee, 12 N. Y. 551 ; Boyd v. 
 Cummings, 17 Ib. 101; Spencer v. 
 Ballou, 18 Ib. 327; Bank of New 
 
 York*. Vanderhorst, 32 Ib. 553; 
 Belmont v. Hoge, 35 Ib. 65; Farwell 
 t>. Importers Bank, 90 N. Y. 384, s. 
 c. 47 N. Y. Supr. Ct. 409; First Nat. 
 Bank v. Fowler, 36 Ohio St. 524; 
 Nichol v. Bates, 10 Yerg. 429; Ban- 
 croft v. McKnight, 11 Rich. 63; Bel- 
 den v. Manley, 21 Vt. 551; Good- 
 win v. Roberts, L. R. 10 Ex. 76, 337, 
 s.c. 1 App. 476; Anon, 1 Salk. 126, 
 cas. 5; Solomons v. Bank of England, 
 13 East, 135, n. a; Collins . Martin, 
 1 B. & P. 648; Miller. Race, 1 Burr, 
 452: Gorgier . Meville, 3 B. & C. 
 45; Palmer v. Richards, 15 Jur. 41; 
 Marston*. Allen, 8 M. & W. 494; 
 Lloyd v. Howard, 20 L. J. Q. B. 1 ; 
 Ashurst v. Bank, 37 E. L. & E. 195. 
 Hotchkiss v. National Bank, 21 
 Wall. 354; Greunwall v. Hayden, 78 
 Ky. 322; Raphael v. Bank of Eng- 
 land, 17 C. B. 161.
 
 MISAPPROPRIATION IN PLEDGE. 89 
 
 66. MISAPPROPRIATION OF BLANK ACCEPTANCES 
 AND ACCOMMODATION PAPER. A holder for value of bills 
 of exchange, before maturity, without notice of equities, in 
 the usual course of business, is protected, although the act of 
 pledge be a fraud and misappropriation of such paper by a 
 person who has been entrusted, with mistaken confidence, 
 with a blank acceptance. The rule of estoppel in pais is 
 applied in favor of the pledgee that where a man signs his 
 name to a blank piece of paper, and delivers it to another to 
 be negotiated, the latter has the right to fill it up, treating 
 the signature as that of an acceptor, and if the bill thus 
 completed is indorsed to a holder for value, without notice, 
 the latter is entitled to recover upon it as against the person 
 who has thus signed his name, although the man to whom 
 it was originally given may have defrauded him. 1 In 
 England, where varying stamp duties are imposed upon 
 such paper, a stamp must be affixed to make the document 
 a valid instrument, and the amount which is filled in is 
 governed by the stamp so affixed. 8 The power in this 
 country is to insert an indefinite sum. Such sum, so in- 
 
 1 Johnston Harv. Co. . McLean, & C. 468; Foster v. Mackinnon, L. 
 
 57 Wis. 258 (15 Rep. 799); Violett R., 4 C. P. 712; L & S. W. Bank v. 
 
 v. Patton, 5 Cranch, 142; Goodman Wentworth, L. R. 5 Ex. D. 96. 
 c. Simonds, 20 How. 361; Bank of 9 A owing a debt of 50 to B 
 
 Pittsburgh D. Neal, 22 Ib. 96 ; Joseph writes to him enclosing a blank 
 
 . National Bank, 17 Kan. 256; paper with a stamp sufficient to cov- 
 
 Snyder v. Vandoren, 46 Wis. 602 ; er a bill for 100. saying " I don't 
 
 Bank v. Spence, 9 Ala. 800; Van know the exact amount of my debt, 
 
 Duzer v Howe. 21 N. Y. 501; Day but fill up the enclosed for the 
 
 v. Sauuders, 42 Ib. 347; Bank of amount, and I will honor it at three 
 
 Chemung v. Braclner, 44 Ib. 680; months." Bin fraud of A draws a 
 
 Fullerton V. Sturges, 4 Ohio St. 529; bill for 75, indorses it, and it comes 
 
 Fni/.ier v. Gaines, 58 Tenn. 93; into the hands of a bona fide holder 
 
 Johnson v. Blasdell, 1 S. & M. 17; for value. A is liable, notwithstand- 
 
 Kussell v. Langstaffe, 2 Doug. 514 ing the fraud, and absence of au- 
 
 ( decided in 1780) ; Peacock v. thority of B. Baron Pollock, in 
 
 Rhodes, Ib. 633; Collis v. Emett, 1 London & S. W. Bank v. Weut- 
 
 K.B1.313; Schultz a.Astley, 2 Bing. worth, L. R. 5 Ex. D. 96. 
 N. C. 544; Cooper v. Meyer, 10 B.
 
 90 NEGOTIABLE COLLATERAL SECURITIES. 
 
 serted, as to holders for value without notice, is con- 
 clusive as against the acceptor. 1 
 
 The title of a holder for value of an accommodation bill 
 of exchange or promissory note, payable to bearer or in- 
 dorsed in blank, receiving the same as collateral security for 
 advances, is not affected by the fact that the party from 
 whom it was received before maturity, committed an 
 act of misappropriation thereby, having received the paper 
 for other purposes. The presumption is, that the holder 
 gave value for it, that being the object for which such ac- 
 commodation paper is issued.* In such cases of misappro- 
 priation the pledgee, who has advanced value thereon, in 
 good faith, before maturity, without notice of equities, is 
 enlitled to recover the full face value thereof as against the 
 accommodating maker, if less than the debt incurred, or to 
 the amount of his advances where they are less than the 
 value of the collateral securities. 8 The like rule applies to 
 the holder of accommodation paper for value before ma- 
 turity, without notice, receiving the same from a pledgee 
 thereof, although as between the maker of the note and the 
 payee and pledgee there may be a complete defense. 4 
 
 67. OR WHERE PLEDQOR HAS TEMPORARY POSSES- 
 SION OP COLLATERAL SECURITIES. The title of a pledgee 
 for value of collateral securities, receiving the same properly 
 
 1 Violett v. Patton, 5 Cr. 142; rison Wire Co., 11 Mo. App. 440; 
 
 Goodman v. Simonds, 20 How. 36; Stoddard v. Kimball, Cush. 469; 
 
 Bank of Pittsburgh v. Neal, 22 How. Fisher v. Fisher, 98 Mass. 803; Mait- 
 
 96; Decatur Bank v. Spence, 9 Ala. land v. Bank, 40 Md. 540; Williams 
 
 800; Fullerton. Sturges, 4 Ohio St. v. Smith, 2 Hill, 301; Watson . 
 
 529; Van Duzer v. Howe, 21 N. Y. Cabot, Bank, 5 Sandf. 423 ; Case . 
 
 531; Day v. Saunders, 42 Ib. 347. Mechanics' Banking Assn. 4 N. Y. 
 
 Collins v. Gilbert, 94 U. 8. 753; 166 ; But not where wrongfully 
 
 Seybel . Bank, 54 N. Y. 291; Perci- pledged for an antecedent debt, 
 
 val v. Frampton, 2 Cr. M. & R. 183. Rogers v. Keystone Nat. Bank, 83 
 
 Jackson . First Nat. Bank, 42 Pa. St. 248. 
 
 N. J. L. 177; Duncan. Gilbert, 29 Cook t>. Norwood, 106 111. 558; 
 
 Ib. 521; American Nat. Bauk. Har- Oilman v. R. R. Co 72 Ala. 566.
 
 MISAPPEOPRIATION IN PLEDGE. 91 
 
 indorsed, so as to take full title thereto, is protected where 
 the pledger, having temporary possession of such securities, 
 converts the same to his own use, the other person being 
 chargeable with knowledge of the indorsement thereon. 
 The payee of a promissory note, upon obtaining an advance, 
 indorsed the note to the pledgee by name, as collateral 
 security. Upon repaying a part of the loan, the pledger 
 was allowed to take temporarily the collateral note, think- 
 ing he could make a beneficial sale of it, upon an agreement 
 that it should be returned and indorsed by the pledgee upon 
 paj'ment of the balance of his advance. The pledger imme- 
 diately negotiated the note to a third person, to whom pay- 
 ment of the full face thereof, upon its surrender, was made 
 by the makers. The pledgee sued the makers, setting up 
 the restricted indorsement to himself, but the note was not 
 produced. The makers and purchaser were held chargeable 
 with knowledge of the rights of the pledgee to the note, 
 although the purchaser could not read, while no estoppel 
 arose, as against the pledgee, from the delivery for such 
 a purpose of a note specially indorsed. The failure to pro- 
 duce the note upon trial created of itself a presumption that 
 the indorsement remained uncanceled at the time of pay- 
 ment by the makers. 1 
 
 68. THE PLEDGE OF FORGED COLLATERAL SECUR- 
 ITIES, AND ILLEGAL PLEDGES. A claim founded on nego- 
 tiable securities arising directly out of a forgery by one of 
 the parties thereto, is not supported. 9 Where, however, 
 the action is to recover on collateral securities, which are 
 independent of and not tainted with forgery, although the 
 felonious act has entered into other parts of the transaction, 
 the pledgee is entitled to recover. Bills of exchange, 
 pledged to bankers to secure over-drafts, were discovered to 
 
 1 Pier v. Bullis, 48 Wis. 429. "Wells v. Abrahams, L. R. 7 Q. B. 
 
 * Crosby . Long, 12 East, 409; 554; "Wellock v. Constantino, 2 H. 
 
 Wallace v. Havdacre, 1 Campb. 45; & C. 146. 
 ex parte Ball, L. R. 10 Ch. D. 667;
 
 92 NEGOTIABLE COLLATERAL SECURITIES. 
 
 be forgeries, and other genuine promissory notes of the guilty 
 parties were given as collateral security for the same over- 
 drafts upon a surrender of the forged bills. The pledgee 
 was allowed to avail himself of the last securities, the agree- 
 ment upon which they were received being a contract inde- 
 pendent of the felony. 1 Where a bill of exchange Avas 
 accepted in blank for the purpose of being negotiated (the 
 blank acceptance being given on account of a loan) and was 
 afterwards filled in Avith the name and signature of a person 
 as drawer and indorser, the acceptor was not allowed, as 
 against a bona fide indorsee for value, the bill having been 
 deposited at a bankers who made an advance thereon equal 
 to the full value of the bill, to introduce evidence to shoAV 
 that either the drawing or indorsement was a forgery, the 
 forgery forming no part of the transaction by which the 
 bank acquired the bill.* 
 
 The rights of the innocent indorsee of negotiable instru- 
 ments as collateral security for debts of the transferror, 
 receiving the same without notice of his want of authority 
 to transfer, and in the usual course of business, is supported 
 as against the rightful owner, even in states where the 
 pledge or transfer, in any way, of collateral securities by the 
 pledgee before the debt is due and payable, Avithout the 
 authority of the real owner, is made a statutory offense. 
 Such assignment has been sustained in Massachusetts." Nor 
 was the pledgee put upon inquiry as to their title, by the 
 fact that the pledgors informed the pledgee that they Avould 
 probably want to substitute other collaterals for the note 
 before its maturity. 4 A later case in the same state is to 
 the like effect.' 
 
 69. PLEDGES OF MISAPPROPRIATED, LOST OR STOLEN 
 SECURITIES, AFTER MATURITY. The pledgee, receiving 
 
 1 Ex parte Leslie, L. R. 20 Cli. D. Gcn. Stats. Mass. C. 101, gG4; 
 
 181; Murray . Lardner, 2 Wall. Pub. Stats. Mass. 1882, pt. 4. tit. 1, 
 
 121. ch. 203, 72. 
 
 1 London etc. Bank v. Wentworth, * Gardner v. Gager, 1 Allen, 502. 
 
 L. li. 5 Ex. D. 96. Draper . Saxton, 118 Mass. 437.
 
 MISAPPROPRIATION IN PLEDGE. 93 
 
 negotiable instruments as collateral security, after due, 
 although for a valuable consideration, is subject to the ante- 
 cedent equities and defenses in common with other holders 
 of dishonored paper. 1 The rule applies in cases where such 
 negotiable paper is pledged after its maturity by a person 
 who is not its owner, nor authorized to pledge, but misap- 
 propriates the same. The pledgee in such cases acquires no 
 title or right to such collaterals as against the defrauded 
 owner.* Nor will the doctrine of estoppel, founded upon 
 the acknowledged equitable rule that where one of two 
 innocent purchasers must suffer, the loss should fall upon the 
 one who has enabled the third person to commit the fraud, 
 be applied for the relief of the pledgee in cases where the 
 possession given by the owner to the pledger is for the legit- 
 imate purpose of making collection of the collaterals, and 
 with no power to pledge, or in other like cases. A pledge 
 made under such circumstances after the maturity of the 
 paper, vests in the pledgee no greater rights than those of 
 the pledger himself.* 
 
 The rule that the pledgee of negotiable securities, receiv- 
 ing them after maturity, is subject to antecedent equities, is 
 applied where such securities have been lost by the owner, 
 or stolen from him. Where negotiable coupons were stolen 
 from the owner before their maturity, and passed by several 
 transfers into the hands of the defendant in good faith, for 
 value, no presumption arising that the thief had negotiated 
 the coupons before maturity, the defendant was therefore 
 subject to all antecedent rights, aud to all defenses of the 
 
 1 Murray v. Lardner, 2 Wall. 118; ler v. Brantley, 14 Pet. 318; Andrews 
 
 Foley v. Smith, 6 Ib. 493; Texas v. v. Pound, 13 Ib. 65; Henderson v. 
 
 White, 7 Ib. 735; Arents v. Com- Case, 31 La. Ann. 215; Davis v. 
 
 monwealth, 18 Gratt. 750 ; Aslmrst Bradley, 26 Ib. 555 ; Stern v. Ger- 
 
 v. Bank, 37 E. L. & E. 195. mania Bank, 34 La. Ann. 1119. 
 
 'Parsons v. Jackson, 99 U. S. * Foley v. Smith, 6 Wall. 493; 
 
 440; Vermilye v. Adams, 21 Wall. Bird v. Cockrem, 28 La. Ann. 70; 
 
 143; Texas v. White, 7 Ib. 700; Tex- Stern v. Germania Bank, 34 La. Ann. 
 
 as v. Hardenbergh, 10 Ib. 90; Fow- 1119.
 
 94 NEGOTIABLE COLLATERAL SECURITIES. 
 
 promisor. 1 The like rule was applied in a case where a 
 negotiable coupon bond was pledged by a third person, who 
 had obtained possession of the same by a felonious act, the 
 bond at the time of the pledge being over-due five years, 
 although continued payments of interest had been made 
 thereon.* 
 
 But where bills of exchange were received by a creditor 
 from his debtor as collateral security for the payment of a 
 debt which had been contracted under circumstances which 
 might render the debtor liable to a criminal proceeding, it 
 was not enough to show in defense of an action on the col- 
 laterals, that the creditor was thereby induced to abstain 
 from prosecuting the maker. 8 Equity will not aid either 
 party where the consideration is illegal. 4 
 
 70. MISAPPROPRIATION OF NEGOTIABLE SECURITIES 
 BY AGENTS. The innocent indorsee of negotiable instru- 
 ments as collateral security, for a valuable advance, before 
 maturity and without notice, although the act of pledge be 
 a misappropriation by an agent intrusted with possession 
 and the apparent absolute ownership thereof, is protected, as 
 a holder for value, in the usual course of business. 8 In a case 
 where negotiable instruments were fraudulently misappro- 
 priated as collateral security by an agent, for a bona fide ad- 
 vance to himself, the United States Supreme Court say: 
 " Although the pledgee took the note only as collateral se- 
 curity, he is entitled to the protection of a purchaser for 
 value, without notice of anything to impeach his right. 
 
 1 Hinckley t>. Merchants' .Nat. 35 N. T. 65; Clement v. Leverett, 12 
 
 Bank, 131 Mass. 147. N. H. 317; Murray v. Beckwith, 81 
 
 * Greenwall v. Hayden, 78 Ky.332. 111. 43; Chicopee Bank v. Chapin, 8 
 Flower . Sadler, L. R. 9 Q.B.D. Met. 40; First Nat. Bank v. Fowler, 
 
 83 ; Ward c.Floyd, 7 Scott (N.S.) 499. 36 Ohio St. 524; Goodman v. Si- 
 
 * Taylor t>. Chester, L. R., 4 Q. B. monds, 20 How. 843; Swift v. Smith, 
 809. 102 U. S. 442; Stone r>. Brown, 54 
 
 * Railroad Co. v. National Eank, Tex. 830. See Wickhatn t>. More- 
 102 U. S. 16 ; Belmont Bank v. Hoge, house, 16 Fed. Rep. 324.
 
 MISAPPROPRIATION IN PLEDGE. 95 
 
 Conceding that the agent was not in fact the owner of the 
 note when he transferred it, and that in transferring it, he 
 perpetrated a fraud upon the true owner, it is still certain 
 that he was clothed with power to make the transfer, and 
 though its exercise was a fraud, if the pledgee advanced his 
 money in good faith relying upon the apparent ownership, 
 the true owner thereby lost his title. He was bound by the 
 act of his agent or attorney." 1 The pledgee, as a holder 
 for value, is entitled to recover the full amount of such mis- 
 appropriated securities from the parties liable thereon,* but 
 where the suit is against the defrauded party, and the debt 
 secured is less than the face of the note, and the pledgee is not 
 responsible over to any third person for any surplus remain- 
 ing in his hands after the payment of his debt, his recovery 
 is limited to the amount of his claim, or to so much thereof 
 as remains unpaid.* 
 
 The leading English case of Goodwin v. Roberts 4 fully 
 supports the rights of the pledgee for value of negotiable 
 securities, when taken in good faith, without notice of 
 equities, although the act of pledge is a misappropriation 
 thereof by an agent. The negotiable securities in that case 
 were left with a stock-broker, as agent of the owner, to be 
 disposed of as the owner might direct, but the agent wrong- 
 fully pledged the same, with other negotiable instruments, 
 as collateral security for an advance from a bank, and after- 
 wards became bankrupt. The bank sold the collaterals on 
 the stock exchange, according to the usual custom, applying 
 the proceeds to the payment of the debt, having no notice 
 of the claims of the owner during the whole transaction. 
 
 1 Swift v. Smith, 102 U. S. 442. The the note from the defrauded mak- 
 
 same rule was enforced in Railroad er. 
 
 Co. v. Nat. Bank, 102 U. S. 14, where * Stoddard v. Kimball, 6 Cush. 469; 
 
 a broker, entrusted with negotiable Chicopee Bank v. Chapin, 8 Met. 40; 
 
 notes, indorsed in blank, for sale, Swift v. Smith, supra; Watson v. 
 
 fraudulently pledged them for his Russell, 3 B. &. S. 34, 40. 
 
 own antecedent debt. The pledgee, 8 Chicopee Bank v. Chapin, supra, 
 
 receiving them without notice, was 4 L. R. 10 Ex. 76; s. c. Ib. 339; on 
 
 allowed to collect the whole face of app. L. R. 1 App. 476.
 
 90 NEGOTIABLE COLLATERAL SECURITIES. 
 
 The delivery of a government bond payable to bearer, by an 
 agent, as collateral security for his own debt, notwithstand- 
 ing he held the same simply to collect interest thereon, the 
 pledgee receiving the same in good faith, without notice, 
 was sustained as against an action of trover by the owner. 1 
 
 71. WRONGFUL PLEDGE BY AGENT, FOR ANTECED- 
 ENT DEBT. In states, including New York and Pennsyl- 
 vania, where the rule prevails that the indorsee of negotia- 
 ble instruments, receiving the same, as collateral security for 
 an antecedent debt, without further consideration's not a 
 holder for value, in the usual course of business, the pledgee, 
 so receiving such securities from an agent, where the act is 
 one of misappropriation, although without knowledge 
 thereof, is not entitled to recover. The question of misap- 
 propriation by agents arose in the leading cases of Codding- 
 ton v. Bay* and Stalker v. McDonald* and other cases in 
 New York follow the ruling in those cases. 4 The like rule 
 was enforced in Pennsylvania.* 
 
 72. THE RULE AS APPLIED TO BANKERS. Protec- 
 tion is also afforded the bona fide pledgee of negotiable 
 securities in cases where the wrongful misappropriation 
 thereof is the act of bankers or banking corporations, hold- 
 ing such negotiable instruments with full title. Where, by 
 reason of misplaced confidence, a banker is entrusted with 
 possession of such evidences of title as negotiable promissory 
 notes, indorsed in blank, although the purpose simply be 
 that he may collect accruing interest thereon, and the 
 banker deposits the notes, with other securities, with his 
 correspondents, as collateral security for present indebted- 
 ness and for future advances, the real owner is not allowed, 
 
 1 Gorgier e.Mieville, 8 B. & C. 45. Pctrie v. Clark, 11 S. & R 879; 
 
 5 Johns. 54; a. c. 20 Ib. 637. Royer v. Keystone National Bank, 83 
 
 6 Hill, 98. Pa. St. 248. 
 4 Scott v. BetU, Hill & D. 868; 
 
 Francia v. Joseph, 3 Edw. Ch. 182.
 
 MISAPPROPRIATION IN PLEDGE. 97 
 
 in an action of replevin, brought after the country banker 
 has become insolvent, to recover possession of the notes so 
 pledged from the indorsee holding them in good faith, for 
 value in the usual course of business, as collateral security. 1 
 A banker, with whom negotiable bills have been deposited, 
 making an indorsement thereof as collateral security for a 
 loan to himself, the property in such bills, to the extent at 
 least of the advances, passes to the bona fide indorsee as 
 against the real owner.* And a pledge of such negotiable 
 paper, entrusted to a bank director as an individual, for the 
 purpose of getting the same discounted for the benefit of 
 the owner, to the bank of which he is a director, for his own 
 past debt and a present advance, was supported as against 
 the real owner, the bank not being chargeable with notice 
 of the real transaction, as the director was not acting in his 
 official capacity in obtaining the loan. 8 
 
 The pledge of negotiable instruments by a bank, holding 
 them on deposit for safe keeping, for the purpose of secur- 
 ing the re-payment of a loan to itself, vests in the pledgees a 
 title thereto good as against all the world, to hold and dis- 
 pose of them according to the terms of the contract of 
 pledge. Such title can not be divested by a "dishonest 
 trick," nor by the fact that the pledger recovered possession 
 by an act of gross fraud or violence. 4 And where the man- 
 aging cashier of a bank has been authorized by the directors 
 thereof to transfer to another bank as collateral securitv for 
 
 1 Morris v. Preston, 93 111. 215. There was an understanding that the 
 9 Collins . Martin, 1 B. & P. 648; notes of the partners were to be 
 Treuttell v. Barandon, 8 Taunt. 100. paid through the deposit account of 
 8 Washington Bank v. Lewis, 22 the' firm. The banker became bank- 
 Pick. 24. In Bank . Hemingray, 34 rupt. After satisfying the debt for 
 Ohio St. 381, a banker induced a firm which the notes of the individual 
 to continue its deposit by positively members were held as security, the 
 holding himself out as still the holder latter, as against the assignee in 
 of several negotiable notes made bankruptcy, was entitled in equity 
 to him by the principal members of to set off the firm account against 
 the firm, when in fact he had assigned the balance on the notes. 
 them as collateral security for a debt. 4 Riugling v. Kohn, 4 Mo. App. 59. 
 7
 
 98 NEGOTIABLE COLLATERAL SECURITIES. 
 
 a loan, notes and bills discounted by the borrowing bank, 
 and a loan was made in good faith, the right of the pledgee 
 to recover was net affected by the fact that the cashier of 
 the borrowing bank gave a note, signed by himself indi- 
 vidually, and paj-able to himself as cashier, for the amount of 
 the loan, if in fact the application was for a loan to his 
 bank, and on its credit, and the loan was in good faith so 
 made. The fact that the cashier misapplied the money to 
 his own private purposes was held not to affect the validity 
 of the contract, nor to prevent the pledgee from collecting 
 the securities, and retaining enough to repay its advances. 1 
 
 73. THE RULE AS APPLIED TO EXECUTORS AND 
 ADMINISTRATORS. Generally, an executor may dispose of 
 the personal estate, including negotiable securities, of the 
 testator by sale or pledge, in connection with the manage- 
 ment of the estate, and even where the sale or pledge of 
 such securities is made for other purposes, of which the 
 person advancing money has no knowledge or notice, but 
 receives the same, in good faith, for value, the transaction 
 is sustained, for the pledgee is not bound to see to the dis- 
 position of the loan.* The rule is otherwise where the 
 pledgee is chargeable with knowledge that such disposition 
 of the assets of the estate, is a perversion, or that 
 the proceeds are to be used for purposes other than 
 the benefit thereof. Property thus acquired from an ex- 
 ecutor may be followed and recovered. 8 The pledgee will 
 
 1 City Bank v. Perkins, 4 Bosw. 420. v. Ayer, supra ; Walker v. Taylor, 4 
 
 Smith v. Ayer, 102 U. S. 320. L. T. N. 8. 845; Miller t. William- 
 
 Russell v. Place, 18 Beav. 31. The son, 5 Md. 219. The rule applied 
 
 rule applied to trustees: Loriug . to trustees: Ham v. Ham, 58 N. H. 
 
 Brodie, 134 Mass. 453; Learned . 177; Shuey v. Latta, 90 Ind. 136; 
 
 Tritch, 6 Col. 432; White . Fulton, Holden v. Upton, 134 Mass. 177; 
 
 68 Ga. 511; Ex parte Williams, 18 Head v. Bridges, 67 Ga. 227; Dodge 
 
 S C. 299. v. Meyer, 94 N. Y. 309; Sheetz . 
 
 s Coltw.Lasmer,9Cow. 320; Field Neagley, 13 Phila 506; May v. Le 
 
 . Schiefflein, 7 Johns. Ch. 150; Pe- Claire, 11 Wall. 235 ; Dows v. Beny, 
 
 trie t. Clark, 11 S. & R 377; Thorn- 18 Fed. R. 121 ; Mitchell e. Coburn, 
 
 asson v. Brown, 43 lud. 203; Smith 61 Md. 244.
 
 MISAPPROPRIATION IN PLEDGE. 99 
 
 be ordered to return the collateral securities thus wrong- 
 fully pledged by an executor, where he has received them 
 with knowledge and connivance. 1 An order to this effect 
 was entered by Lord Thurlow in a case where bonds had 
 been wrongfully pledged by an executrix for a personal 
 debt, the pledgee having notice of the misappropriation. 
 If converted into cash, the pledgee is liable for the full 
 value thereof,* and money loaned by one executor to the 
 other, upon his individual note, upon representations that 
 it is to be used in paying the debts of the estate, but is not 
 so used, is not a proper charge against the estate.* Where 
 an administrator improperly pledged negotiable notes of the 
 estate, and the notes or their proceeds passed into the hands 
 of one chargeable with knowledge of the true ownership 
 thereof, no estoppel arose to prevent such administrator 
 from recovering such notes or their proceeds from such per- 
 sons. 4 
 
 74. AND TO DIRECTORS OP CORPORATIONS. The 
 pledge of bonds or other securities of a corporation by the 
 officers thereof to themselves, or to some of their number, is 
 required to be made in good faith, the tendency being to 
 scrutinize such transactions closely and rigorously. Where 
 a pledge of such bonds is made by the officers and direc- 
 tors of a railroad company to each other to secure an in- 
 debtedness of less than four per cent, of the face of the 
 bonds, the transaction on its face is nothing less than an 
 actual fraud upon the corporation and its stockholders. 8 
 But there is no reason why a director, or officer of a corpora- 
 tion, may not receive the negotiable bonds or other securi- 
 ties thereof as collateral security, where a debt is honestly 
 due him, or he has incurred a liability, or advanced money 
 thereon. Notwithstanding the trust relations existing be- 
 
 1 Smith t>. Ayer, 102 U. S. 320. * State v. Berning, 74 Mo. 87. 
 
 9 Scott 0. Tyler, 2 Dick. 724. Cbouteau *. Allen, 70 Mo. 290, 
 
 Croft v. Williams, 88 N. Y. 384. 336; Wilbur v. Lynde, 49 C&L 290
 
 100 NEGOTIABLE COLLATERAL SECURITIES. 
 
 t\veen such officials and the company, a pledgee, so receiving 
 collateral security from a company of which he is an 
 officer, is entitled to hold the same until payment of the 
 loans. 1 
 
 75. WHAT NOTICE OF DEFECTS, ETC., WILL DEFEAT 
 THE TITLE OF THE PLEDGEE. The knowledge or degree of 
 negligence, on the part of one claiming to be a bona fide 
 pledgee of negotiable paper, of defects in the same, or of the 
 misappropriation thereof, or of the pledger's want of title 
 thereto, sufficient to defeat the claims of such pledgee, 
 must be something more than a mere suspicion of defect of 
 title, or a knowledge of circumstances which would excite sus- 
 picion in the mind of a prudent man, or even gross negligence. 
 Bad faith or fraud are the only grounds upon which the 
 title of the pledgee can be overthrown. The burden of 
 proof lies on the person who assails the right claimed by 
 the party in possession.* Every one must conduct himself 
 honestly in respect to the antecedent parties, when he takes 
 negotiable paper, in order to acquire a title, which 
 will shield him against prior equities. Although not 
 obliged to make inquiries, the pledgee must not wilfully 
 avoid the means of knowledge which he knows are available, 
 
 1 Buncombe t>. Railroad Co., 84 N. Dorchester Bank, 10 Gush 491 ; Ash- 
 
 Y. 190; s. c. 88 Ib 1; Twinlick Oil ton v. Taylor. 3 Allen 217; Sturlevant 
 
 Co. v. Marburg, 91 U. S. 587. t>. Jaques, 14 Ib. 523 ; Spooner v. 
 
 Bank of Pittsburgh t>. Neal, 22 Holmes, 102 Mass. 503; Nat. Bank 
 How. 96; Calais Steamboat Co . . Sa very, 127 Ib. 79; Treuttelc. Bar- 
 Van Pelt, 2 Black 377; Murray v. andon, 8 Taunt. 100; Sigourney v. 
 Lardner, 2 Wall. 100; Hotchkiss v. Lloyd, 8 Barn. & C. 622; B. c.5 Bing. 
 Nat. Banks, 21 Ib. 354, 859; Smith 525. In Murray . Lardner, 2 Wall. 
 . Ayer, 101 U. S. 820; Swift v. Smith, 121, a bona fide purchase for value 
 
 102 Ib. 442; Railroad Co. . Sprague, of a negotiable bond, in the usual 
 
 103 U. S. 756, 763; Wickham v. course of business, was supported, 
 Morehouse, 16 Fed. Rep. 324; Welch although the bond in fact had been 
 c. Sage, 47 N. Y. 143; Miller v. Wil- stolen from the true owner. 
 
 liams, 5 Md. 219; Worcester Bank v.
 
 MISAPPROPRIATION IN PLEDGE. 101 
 
 since such conduct, whether equivalent to notice or not, 
 would be plenary evidence of bad faith. 1 
 
 The rule was announced in the case of Gill v. Cubitt* 
 that the title of a holder of negotiable securities, although 
 paying full value, would not be supported, because received 
 under circumstances which " ought to have excited the 
 suspicion of a prudent and careful man." The rule was 
 questioned 8 and finally overruled in Goodman v. Harvey. 4 
 In New York, the influence of Gill v. Cubitt led to decisions 
 that where a negotiable security was received as payment of 
 an antecedent debt, without notice of equities, the creditor 
 was not a holder for value, in the usual course of business ;' 
 and that if a party in good faith took a negotiable security of 
 a holder without due inquiry, or with knowledge of such 
 facts or circumstances as would put a prudent man upon 
 inquiry in making purchases of personal property, he would 
 not acquire a good title to the instrument, if it appeared 
 that equities in fact existed between the antecedent parties, 
 and that vigilant inquiry would have enabled the taker to 
 
 1 Goodman v. Simonds, 20 How. Currency Bank, 54 Ib. 288, 295; 
 
 343, 346; May v. Chapman, 16 M. & Welch t>. Sage, 47 N. Y. 143; Prin- 
 
 W. 355. gle v. Phillips, 5 Sandf. 157; Good- 
 
 * 3 B & C. 466. man v. Simonds, 20 How. 343, 364 ; 
 
 ' Crook v. Jadis, 3 B. & C. 456 ; Bank v. Neal, 22 Ib. 96 ; Murray v. 
 
 Backhouse v. Harrison, 5 B. & A. Lardner, 2 Wall. 110 ; op. of Mr. 
 
 1098. Justice Clifford, Railroad Com- 
 
 4 4 Ad. & E. 870. Lord Denman, pany t>. Nat. Bank, 102 U. S. 14, 39, 
 
 in delivering judgment, said: ''We 42; Collins v. Gilbert, 94 Ib. 753; 
 
 are all of opinion that gross negli- Swift v. Smith, 102 U. S. 442 ; Uther 
 
 gence only would not be a sufficient v. Rich, 10 Ad. & E. 784 ; Stephens 
 
 answer, where a party has given v. Foster, 1 C. M. & W. 849; Arbouin 
 
 consideration for a bill ; gross negli- v. Anderson, 1 A. & E. N. S. 498 ; 
 
 gence maybe evidence of mala fides, May v. Chapman, 16 M. & W. 355; 
 
 but it is not the same thing. Where Raphael v. Bank, 17 C. B. 161 ; Bank 
 
 the bill has passed to the plaintiff v. Leighton, 2 Ex. 61. 
 
 without any proof of bad faith in * Bank of St. Albans . Gilliland, 
 
 him, there is no objection to his 23 Wend. 311; Small v. Smith, 1 
 
 title." Dut chess Ins. Co. v. Hach- Denio, 583. 
 field, 73 N. Y. 226 ; Seybel v. Nat.
 
 102 
 
 NEGOTIABLE COLLATERAL SECURITIES. 
 
 have ascertained the true character of those equities, but 
 this "legal heresy" 1 has also been abandoned. 9 
 
 76. NOTICE BY THE TERMS OF THE COLLATERAL 
 SECURITY. Where the negotiable instrument offered as col- 
 lateral speuriiy for an advance to the person presenting the 
 same, shows upon its face the existence of a trust, or that 
 the 'person offering it is not the absolute owner thereof, but 
 holds it in some fiduciary character, or that it belongs to 
 some other person, the pledgee is presumed to know the 
 true owner, and is thus chargeable with knowledge, and can 
 acquire no title as against the defrauded cestuis que trust or 
 real owner. Holding under such circumstances, the pledgee 
 is not a holder for value in good faith, in the usual course of 
 business. What will be notice sufficient under this rule to 
 charge the pledgee so as to defeat his title, is a question of 
 construction, and is usually determined by the court as a 
 matter of law.* Every person is presumed to know the con- 
 
 1 Railroad Co. v. Nat. Bank, 102 
 U. S. 14, 41, by Mr. Justice Clifford. 
 
 9 Pringle . Pringle, 5 Sandf . 157 ; 
 Welch v. Sage, 47 N. Y. 143, 147; 
 Seybel . Nat. Currency Bank, 54 Ib. 
 288, 295 ; Dutchess Ins. Co. . 
 Hachfield, 73 Ib. 226. 
 
 * Andrews v. Pond, 13 Pet. 65; 
 Fowler 0. Brantley, 14 Ib. 318; Col- 
 lins v. Gilbert, 94 U. S. 753, 758; 
 Swift v. Smith. 102 U- S. 442; Good- 
 man . Simonds, 20 How. 243; 
 Brown v. Davis, 3 T. R. 86; Nat. 
 Security Bank t>. McDonald, 127 
 Mass. 82; Nat. Bank v. Savery, Ib. 
 78; In Strong v. Jackson, 123 Mass. 
 60, 63, a case of wrongful misappro- 
 priation of negotiable instruments 
 as collateral security, the Court say : 
 " Upon an examination of the cases, 
 it will be found that it is very rarely 
 decided that any one fact is or is not 
 conclusive evidence of notice. In- 
 deed, in the nature of things, it can 
 
 scarcely happen that the question is 
 to be decided upon an isolated fact. 
 It may be that in a particular case 
 some single fact in and of itself is 
 sufficient, but generally it is not so. 
 The question is ordinarily a broader 
 one ; it is this : Do all the facts, 
 taken in connection with the subject 
 matter, with the situation and rela- 
 tion of the parties, their means of 
 knowledge, the circumstances which 
 should lead to inquiry, together 
 show such a state of facts that it 
 would be inequitable for subse- 
 quently acquired rights to supplant 
 rights previously acquired? In this 
 view, a fact, which under some cir- 
 cumstances and some situations and 
 relations of the parties would be in- 
 significant, in other relations of the 
 parties and under other circum- 
 stances would be decisive ; and thus 
 many apparently conflicting deci- 
 sions will be found harmonious."
 
 MISAPPROPRIATION IN PLEDGE. 103 
 
 tents and meaning of written instruments, and the construc- 
 tion given to commercial paper at the time of its transfer, 
 and of the order of the names upon it. 1 Pledgees advancing 
 upon negotiable instruments showing upon their face, or by 
 indorsement, that they are already held as collateral security, 
 as where an indorsement recited, " This note is held by me 
 for note signed by X," etc., are chargeable with notice as to 
 the limited interest of the pledger. 1 Where bills are in- 
 dorsed to an agent of the owner " for their account," a 
 pledgee thereof receiving them as collateral security for 
 past and future advances to^the agent, is chargeable with 
 notice, and can take no title to the securities as against the 
 real owner. 8 The words "as trustees," in the case of a 
 pledge of securities for a greater sum than authorized, is 
 sufficient to put the pledgees upon inquiry as to the extent 
 of the authority of the pledger when asking an advance for 
 his own benefit. 4 
 
 77. CASES WHERE NOTICE WAS NOT PRESUMED. 
 A negotiable promissory note, marked upon the margin 
 " This note secured by trust deed of even date herewith," 
 was received as collateral security. No notice of any claims 
 of third parties was chargeable to the pledgee from such a 
 notation. 6 Promissorj'- notes, worded " I promise to pay to 
 A., as he is the trustee under the will of B., deceased, or 
 order," were pledged as collateral notes to secure the pay- 
 ment of a personal note of the trustee, discounted by a bank, 
 the money being for his own use, the bank having previously 
 refused to discount the notes afterwards accepted as collat- 
 eral security. No notice was charged as against the pledgee 
 by reason of the wording of the notes that the trustee was 
 
 1 Swift v. Smith, 102 U. S. Treuttel . Barandon, 8 Taunt. 
 
 442. 100. 
 
 * National Security Bank v. Me- 4 Swan v. Produce Bank, 24 Hun, 
 
 Donald, 127 Mass. 82; National 277. 
 
 Bank v. Savery, Ib. 78. 6 Swift t>. Smith, 102 U. S. 442.
 
 104 NEGOTIABLE COLLATERAL SECURITIES. 
 
 acting in violation of his duty. 1 And a mere indorsement 
 of a note as "curator," is not sufficient to charge a pledgee 
 advancing money in good faith to the holder, although in 
 fact the pledge be a misappropriation. 9 A promissory 
 note, containing the words " I promise to pay to the order 
 of myself," and executed by two persons, having been 
 handed by one to the other, who misappropriated the same 
 as collateral security for a precedent debt, the title of the 
 pledgee was not affected by any notice or knowledge pre- 
 sumed from the fact that only one name was indorsed. 8 If 
 a negotiable instrument indorsed in blank is placed in the 
 hands of an agent for safe-keeping, and the agent fraudu- 
 lently appropriates and pledges the same before maturity, 
 an innocent pledgee advancing money on such paper, with- 
 out notice of equities, is a holder for value, and protected, 
 as there is nothing in the fact of the pledge of such securi- 
 ties by persons having an absolute title, to put a pledgee 
 upon inquiry. 4 
 
 78. RECOVERY OF THE PLEDGEE LIMITED TO AD- 
 VANCE. The pledgee of negotiable instruments holding the 
 same bona fide and for value, is entitled to recover from the 
 parties the full face value of the same, holding any bal- 
 ance, where the collateral notes are greater in amount than 
 the principal debt, for the use of the parties beneficially 
 interested. Where, however, the pledge of such instruments 
 has been fraudulently made by persons intrusted with the 
 legal title, the pledgee, receiving the same in good faith, 
 and for value, and without notice of the fraud, although 
 entitled to recover the full amount as against the parties 
 liable upon the securities, if necessary to reimburse himself 
 for hh advances made on the faith and credit of such title, 
 is generally subject to the equitable rule that, as against the 
 
 'Ashton v. Taylor, 8 Allen, 'First Nat. Bank, v. Fowler, 88 
 217. Ohio St. 524. 
 
 Paulette v. Brown, 40 Mo. 52. 4 Stone v. Brown, 54 Tex. 330.
 
 MISAPPROPRIATION IN PLEDGE. 105 
 
 party defrauded he is allowed to recover only the amount of 
 his loans. In such cases of misappropriation, the pledgee is 
 under no liability as to any possible surplus to the pledger 
 by whose fraud the paper was misappropriated. 1 The like 
 rule was applied in the case of a misappropriation by a 
 trustee of a promissory note belonging to the trust fund, 
 where the same was taken as collateral security for a debt 
 less than the face of the note, the cestuis que trust being 
 allowed to redeem upon paying the amount of the debt. 9 
 
 1 Dresser. Missouri R R. Co., 93 Gilbert, 29 Ib. 521; Jackson v. First 
 
 U.S. 92 ; Hotchkiss v. Nat. Banks, 22 Nat. Bank, 42 N. J. L. 177 : Stod- 
 
 Wall. 354; Morris . Preston, 93 dard v. Kiraball, 6 Gush. 469; Fisher 
 
 111. 215; Greenwall v. Hayden. 78 v. Fisher, 98 Mass. 303; Chicopee 
 
 Ky. 322; Williams v. Smith, 2 Hill, Bank v. Chapin, 8 Met. 40; Maitland 
 
 301; Watson v. Cabot Bank, 5 Sandf. v. Bank, 40 Md. 540; Belden fl.Man- 
 
 Ch. 423; Case v. Banking Assn. 4 N. ley. 21 Vt. 551 ; Collins v. Martin, 1 
 
 Y. 166; City Bank v. Perkins, 4 B. & P. 648 ; Treuttel v. Barandou, 
 
 Bosw. 420 ; Buncombe v. Railroad 8 Taunt. 100. 
 Co., 84 N. Y. 190; Allaire v. Harts- * Belden v. Manley, 21 Vt. 551. 
 home, 21 N. J. L. 663 ; Duncan v.
 
 106 NEGOTIABLE COLLATERAL SECURITIES. 
 
 CHAPTER IX. 
 
 TRANSFER AND SUB-PLEDGE OF COLLATERAL SECURITIES. 
 
 79. The pledgee's transfer of negotiable securities. 
 
 80. The sub-pledge of such collateral securities. 
 
 81. Estoppel of pledger, where pledgee has title and ownership the 
 
 sub-pledgee a holder for value. 
 
 82. Distinction between sub-pledges of negotiable collateral securities 
 
 and others non-negotiable. 
 
 83. Sub-pledges for sums larger than original advance. 
 
 84. Discharge of the sub-pledgee. 
 
 79. THE PLEDGEE'S RIGHT TO TRANSFER NEGOTIA- 
 BLE COLLATERAL SECURITIES. The pledgee of negotiable 
 instruments, receiving the same properly indorsed, where 
 required, so as to be vested with the full title thereto, may, 
 in the absence of statutory restriction or special agreement, 
 assign or transfer his principal claim against the pledger, 
 with the collateral security given to secure its payment. The 
 pledger, in such cases, has no cause of complaint, so long as 
 he is not deprived of his right to redeem such collateral 
 securities upon payment of his debt. 1 The assignment may 
 be of all the pledgee's interest in the collateral notes, or 
 they may be assigned conditionally to secure payment of his 
 own debt, or they may be delivered up to a bailee without 
 consideration. Transfer of the principal and collateral 
 notes in either of these ways is a legal disposition of them, 
 
 1 Chapman t>. Brooks, 31 N. T. 75; v. Ely, 9 How. (U. S.) 580, 601; Fen- 
 
 Hays v. Riddle, 1 Sandf . 248 ; Dun- nell v. McGowan, 58 Miss. 261 ; 
 
 combe v. N. Y. R. Co. 84 N. Y. 190, White Mountain R. R. t>. Bay City 
 
 201; s. c. 88 Ib. 1; Lewis . Mott, 36 Iron Co., 50 N. H. 57 ; Merchants 
 
 N. Y. 395; Gould . Farmers' Loan Bank v. State Bank, 10 Wall. 604. 
 & Trust Co., 23 Hun, 322 ; Baldwin
 
 TRANSFER AND SUB-PLEDGE. 107 
 
 authorized by the holder's interest as pledgee. 1 The secur- 
 ities pledged for a debt follow it, in equity, no matter how 
 the debt be modified, or into whose hands it may come. 
 Until the debt is paid, the pledge accompanies it, and 
 remains for its repayment, and is available to all who may 
 acquire title thereto.* 
 
 Where a pledgee sells or assigns collateral securities, retain- 
 ing the note or bill evidencing the original debt, and retains 
 possession until after maturity thereof, tender or payment to 
 the indorsee of collateral notes operates as a discharge of the 
 original note. Any action brought thereafter upon the note, 
 either by the pledgee or by any indorsee thereof, taking the 
 same after maturity, may be successfully defended by show- 
 ing payment or tender by the pledger to the holder of the col- 
 lateral notes. The pledger may also, after making such tender, 
 file a bill in equity, making the pledgee and the holder of the 
 collateral securities parties, and thus settle the rights of all 
 interested. 3 Where such negotiable collateral securities are 
 wrongfully assigned to a third person, without authority of 
 the debtor, the pledgee may be charged with the face value 
 thereof in payment of the principal debt. 4 
 
 Equity will refuse to sustain an unjust and unconscion- 
 
 1 Goss v. Emerson, 23 N. H. 38. fendant in whose knowledge the 
 
 * Stearns v. Bates, 46 Conn. 313 ; matter lay, it must be taken as be- 
 
 Jones v. Quinnipack Bank, 29 Ib. fore the time the bill was dishonored, 
 
 25; Lewis v. DeForest, 20 Ib. 427; and consequently at a time when the 
 
 Belcher v. Hartford Bank, 15 Ib. first pledgee was not yet entitled, by 
 
 383. virtue of his contract with the pledg- 
 
 s Talty v. Freedman's etc. Co , 93 or, to dispose of the collateral securi- 
 
 U. 8. 321. In Donald v. Suckling, ties. 
 
 L. R. 1 Q. B. 585, 611, debentures, * Hawks v. Hincliff, 17 Barb. 492. 
 
 non-negotiable, had been pledged as The like rule is applied under the 
 
 collateral for the payment of a bill of Louisiana Code, where the pledgee 
 of exchange, with power of sale. ' holding a note, or other collectible 
 
 The collateral securities were sub- instrument, sub-pledges the same, 
 
 pledged by the pledgee. The plea He is chargeable wit^i the full 
 
 failed to state whether the sub- amount of the security, unless he 
 
 pledge of the collateral securities was can show that it was worth less than 
 
 made after the maturity of the bill of its face value. Laloire . Wiltz, 29 
 
 exchange, but, as against the de- La. Ann. 329.
 
 108 NEGOTIABLE COLLATERAL SECURITIES. 
 
 able agreement between the pledger and pledgee and third 
 parties, whereby, upon default, the collateral securities are 
 absolutely forfeited, and under which upon default after a 
 sale of the collaterals realizing more than enough to pay the 
 debt, an action is brought upon the principal note. 1 
 
 80. THE SUB-PLEDGE OF SUCH COLLATERAL SECURI- 
 TIES. The pledgee of negotiable instruments may sub- 
 pledge such collateral securities to secure the re-payment of 
 an advance made bona fide by a third person to himself.* By 
 a sub-pledge of such negotiable securities, a pledgee hold- 
 ing the legal title and the apparent absolute ownership 
 thereof, may transfer to a sub-pledgee, receiving the same 
 bona fide, for a valuable advance before maturity and with- 
 out notice of equities, upon the faith of such title and pos- 
 session, a more extended right over such negotiable instru- 
 ments held as collateral security than he himself possesses 
 under the original contract of pledge, although such sub- 
 pledge in fact be a tortious act. 3 Nor is the sub-pledge of 
 
 1 Dorrill v. Eaton, 35 Mich. 302. instruments did not arise as the sub- 
 * Ex parte Sergant, L. R., 17 Eq. pledge was made for a less sum than 
 279 (Jessell, M. R.), speaking of a the amount of the original pledge, 
 mortgage or pledge with legal title In Jar vis v. Rogers, supra, Jar vis. 
 of securities, "Like every other the intestate, was considerably in- 
 mortgagee, he had a right to re-bor- debted to one Russell, who held in 
 row and to transfer his security." his possession certain negotiable 
 Langton v. Waite, L. R. 6 Eq. 165. scrip, indorsed in blank by Jarvis, 
 The court (Malins, V. C.): "It is a and subsequently made a definite 
 right which the lender of money loan of $5^0 thereon. Russell aftcr- 
 upon any security would have." To wards being in want of funds, 
 like effect, France 0. Clark, L. R. through a broker, sub -pledged the 
 22 Ch. D. 830; Merchants' Bank v. securities to the defendant, as col- 
 State Bank, 10 Wall. 604. lateral security for his own promts- 
 'Jarvis v. Rogers, 13Mass. 105; 8. sory note for $1,500, made payable 
 c. 15 Ib. 389, 417; Briggs v. Rice, to the broker, and indorsed by him 
 130 Ib. 50; Gould v. Farmers' Loan to the defendant. Subsequently the 
 and Trust Co., 23 Hun, 322. In amount due on the Russell note was 
 Draper v. Saxton, 118 Mass. 427, the reduced to $1,000. Without making 
 amount of recovery which might be any tender, an action of trover was 
 had by the sub -pledgee of negotiable brought by the representatives of
 
 TRANSFER AND SUB-PLEDGE. 109 
 
 negotiable instruments limited to the first use thereof. The 
 sub-pledgee receiving such collaterals, properly indorsed, 
 before maturity, in good faith, for value, and without notice 
 of equities, is a holder for value, in the usual course of busi- 
 ness, as against all the world, equally with the first pledgee, 
 receiving the same under like conditions. The sub-pledgee 
 may, in the absence of notice of the rights of the original 
 pledger, transfer or again sub-pledge such securities to any 
 person to the extent of his own advances ; and upon a bona 
 fide advance of a valuable consideration, made upon the 
 faith and credit of such paper, before maturity, and without 
 notice, the sub-pledgee may in turn, convey to a second 
 sub-pledgee a greater interest in such negotiable securities 
 than he himself possesses. The latter, as a holder for 
 value, in the usual course of business, is entitled to enforce 
 such collateral securities against all parties for the full face 
 value thereof, holding any surplus for the benefit of the per- 
 son or persons entitled. 1 
 
 81. ESTOPPEL OF PLEDGOR, WHERE PLEDGEE HAS 
 TITLE AND OWNERSHIP. THE SUB-PLEDGEE A HOLDER 
 FOR VALUE. A sub-pledgee of negotiable instruments, 
 
 Jarvis against the sub-pledgee. The Bame case, 15 Mass. 389, all the four 
 
 Court said: "It is enough that the judges delivering opinions refer to 
 
 defendant has received the scrip as the right of the sub-pledgee to 
 
 collateral security for a debt, and recover the full amount of his ad- 
 
 that the debt has not been dis- vance as being unquestioned, al- 
 
 charged. When that debt is paid, or though the sub-pledge, as between 
 
 a legal tender thereof made, as he the parties to the original contract 
 
 received them only to secure the of pledge, was a breach of trust, 
 
 debt, he will probably deliver them "the effect of which," as said by 
 
 to whomsoever they shall appear Parker, C. J., " was not to increase 
 
 lawfully to belong." A tender was Russell's (the pledgee) rights, al- 
 
 then made by the representatives of though, under the circumstances, 
 
 Russell, also deceased; but the sub- Rogers (the sub pledgee) acquired a 
 
 pledgee refused to deliver, as the rep- more extended right over the proper- 
 
 resentatives of Jarvis claimed the ty than Russell had." 
 scrip, and shortly thereafter tendered 1 Gould v. Farmers' Loan and Trust 
 
 the amount of his claim to the sub- Co., 23 Hun, 322. 
 pledgee. At a later hearing of the
 
 110 NEGOTIABLE COLLATERAL SECURITIES. 
 
 where the same are held with full title and apparent abso- 
 lute ownership by the pledgee, is protected to the 
 full extent of his advances thereon, although 
 exceeding the amount for which such collateral 
 securities are in fact held by the pledgee, provided 
 such sub-pledgee has received the same in good faith, before 
 maturity, for value, and without notice of antecedent equi- 
 ties, in the usual course of business ; otherwise, he can take 
 no greater rights than those of the first pledgee. 1 The 
 claims of such sub-pledgees are supported upon the 
 rule of equitable estoppel, that where a pledger of nego- 
 tiable instruments, by his indorsement and delivery thereof, 
 has given the pledgee the title and apparent absolute owner- 
 ship of such instruments, and has thus enabled him to de- 
 ceive an innocent sub-pledgee, receiving the same before 
 maturity, without notice, and for a valuable, consideration 
 advanced upon the credit of such title and ownership, the 
 pledger is estopped to set up any equities or defenses exist- 
 ing as between the pledgee and himself, to the injury and 
 loss of the sub-pledgee. In such cases, where one of two 
 innocent persons must suffer from the wrong and deceit of 
 a third person, the one who, by his affirmative acts or neg- 
 lects, has enabled the wrong and deceit to s be done, should 
 suffer the loss. Any other rule would be inconsistent with 
 the acknowledged position of a pledgee or sub-pledgee of 
 negotiable instruments, before maturity, in good faith, 
 for value, and without notice, as a holder for value, in the 
 usual course of business, with an unimpeachable title. 1 
 
 1 Jarvis v. Rogers, supra; Gould v. Rep. 396); Swift . Smith, 102 U.S. 
 
 Farmers' Loan and Trust Co., su- 442 ; Railroad Co. v. Nat. Bank, Ib. 
 
 pra. 14; Collins v. Martin, 1 B. & P. 143. 
 
 1 Bank of New York e. Vander- Fuentis . Montis, L. R. 3 C. P. 268, 
 
 hoorst, 32 N. Y. 553; Manhattan Co. 276; Langton v. Waite, L. R. 6 Eq. 
 
 0. Reynolds, 2 Hill, 140; Pough- 165; Exparte Sergant, L. R. 17 Eq. 
 
 keepsie v. Hasbrouck, 6 N. Y. 216, 279; France v. Clark, L. R. 22 Ch. 
 
 230; Richardson v. Rice, 9Tenn.290; D. 830. 
 City Bank v. Taylor 60 la. 66 (15
 
 TRANSFER AND SUB-PLEDGE. Ill 
 
 82. DISTINCTION BETWEEN SUB-PLEDGES OF NEGO- 
 TIABLE COLLATERAL SECURITY, AND OTHERS NON-NEGO- 
 TIABLE. A distinction is properly drawn between cases of 
 sub-pledge of negotiable collateral securities and of securi- 
 ties of a quasi or non-negotiable character, and pledges of 
 personal property. In neither of the last-named cases, in the 
 absence of any application of the rules of equitable estoppel, 
 can the pledgee confer any greater right or interest than 
 he possesses, and upon a tender or payment of the original 
 debt, the pledger is entitled to a return of the collateral 
 securities, and may recover from the pledgee any special 
 damages sustained by reason of the sub-pledge. The pledger 
 is entitled to such return, not withstanding the advance of 
 the sub-pledgee is larger in amount than the original indebt- 
 edness to the pledgee. 1 This distinction was referred to in 
 the argument of the case of Donald v. Suckling, in which 
 Jarvis v. Rogers* was cited as a case of sub-pledge of nego- 
 tiable securities, the decision itself being chiefly based upon 
 
 1 Donald v. Suckling, L. R. 1 Q. B. of the debt." Mellor (J.) said (p. 610): 
 585.'Cockburn (C. J.) said: " I am of ''Although the pledgee can not confer 
 opinion that the transfer of the upon any third person a better title 
 pledge does not put an end to the or a greater interest than he pos- 
 contract, but amounts only to a sesses, yet if, nevertheless, he does 
 breach of the contract upon which pledge the goods to a third person for 
 the owner may bring an action for a greater interest than he possesses, 
 nominal damages if he has sustained such an act does not annihilate the 
 no substantial damages; for sub- contract of pledge between himself 
 Rtantial damages, if the thing pledged and the pawnor, but that the trans- 
 is damaged in the hands of a third action is simply inoperative as 
 party, or the owner is prejudiced by against the original pawnor, who 
 delay in not having the thing deliv- upon tender of the sum secured, im- 
 ered to him on tendering the amount mediately becomes entitled to the 
 for which it was pledged. It seems possession of the goods, and can re- 
 to me that the contract continues in cover in an action for any special 
 force, and with it the special proper- damage he may have sustained by 
 ty created by it, until the thing reason of the act of the pawnee in 
 pledged is redeemed, or sold at the repledging the goods." Blackburn 
 time specified. The pawnor can not (J.) also agreed, 
 treat the contract as at an end, until * 13 Mass. 105; B. c. Ib. 380. 
 he has paid or tendered the amount
 
 112 NEGOTIABLE COLLATERAL SECURITIES. 
 
 the case of Johnson v. Stear 1 a pledge of dock warrants, 
 non-negotiable instruments. In the case of Talty v. Freed- 
 man's Savings and Trust Company* the collateral security 
 was a certificate issued by the District of Columbia Com- 
 missioners to the pledgor, upon a claim for certain work and 
 materials, indorsed in blank. It was not regarded as a ne- 
 gotiable instrument in any sense, although the case of Jarvis 
 v. Rogers was cited. The same distinction is briefly noted 
 by Judge Story in his work on Bailments. 1 ru fvv/vcvuc**/ 
 
 ' 
 
 83. SUB-PLEDGES FOR SUMS LARGER THAN ORIGINAL 
 ADVANCE. An illustration of the rights of sub-pledgees of 
 negotiable instruments is found in a recent case in Massachu- 
 setts. B., the holder of a negotiable promissory note for 
 $1,500, secured by mortgage, borrowed $300 of C., assigning 
 the note and mortgage as collateral security, reciting that 
 the consideration for the assignment was $300. Shortly 
 afterwards C., obtained a loan of $1,200 from D., indorsing 
 the collateral note before maturity and assigning the mort- 
 gage, as collateral security for the advance. B., brought an 
 action to redeem the note and mortgage from D. No notice 
 was presumed to the sub-pledgee from the recital of the con- 
 sideration of $300, nor was knowledge thereof sufficient to 
 establish fraud on his part. The pledgor was allowed to re- 
 deem his securities upon paying the full amount for which the 
 sub-pledgee held the note and mortgage as collateral security. 
 The Court said: " The defendant became the holder of this 
 note for a valuable consideration before its maturity, and 
 had no actual notice of any equities which would defeat his 
 right to recover an amount sufficient to secure the payment 
 of the debt for which it was pledged. The smallness of the 
 
 1 15 C. B. (N. B.) 380. transfer thereof to his own creditor, 
 
 ' 93 U. 8. 321. as if he were the absolute owner, it 
 
 * 325. " But if the pawnee should is clear that in such a case he would 
 
 undertake to pledge the property be guilty of a breach of trust, and 
 
 (not being negotiable securities) for a his creditor would acquire no title 
 
 debt beyond his own, or to make a beyond that held by the pawnee. "
 
 TRANSFER AND SUB-PLEDGE. 113 
 
 consideration certainly can not be treated as actual notice 
 that the note was subject to some unknown equity, the na- 
 ture of which it was the duty of the defendant to ascertain 
 at his peril." 1 
 
 Certain negotiable securities were deposited as collateral 
 security with A to secure loans, who sub-pledged them to 
 B to secure a loan made by B to himself, and on the same 
 day B again sub-pledged the securities with others, to 
 for a loan to himself. B shortly thereafter became in- 
 solvent, and A, in order to obtain his securities from C was 
 obliged to pay the full market value thereof. In a suit by 
 A to compel the marshalling of securities by C, which he 
 had received from B. the right of the pledgee to sub-pledge 
 the securities for an advance, was recognized, and the 
 further pledge by the sub-pledgee, having being made to C 
 who had no notice of any right, title or interest of the first 
 pledgee, entitled C to hold the same as against all parties to 
 the extent of his bona fide actual advances, as a greater in- 
 terest in such collaterals could be conveyed by the sub- 
 pledgee than he himself possessed.* 
 
 Where a sub-pledgee allows a collateral note, which is 
 for a larger sum than the principal indebtedness, to become 
 barred by the statute of limitations, and subsequently brings 
 an action on the indorsement of the principal note by the 
 first pledgee, it is a good defense thereto, that the sub-pledgee 
 by his gross negligence has become liable for the amount of 
 the collateral note, exceeding the amount due on the princi- 
 pal note. 8 
 
 84. THE DISCHARGE OF THE SUB-PLEDGEE. Where 
 negotiable collateral securities have been sub-pledged by the 
 pledgee for an advance to himself, he can discharge himself 
 from any obligation to the original pledgor, by delivering 
 
 1 Brooks v. Rice, 130 Mass. 50. * Farnell v. McGowan, 58 Miss. 
 
 8 Gould v. Farmers' Loan and 261. 
 Trust Co., 23 Huu. 322.
 
 114 NEGOTIABLE COLLATERAL SECURITIES. 
 
 up the Securities to his own pledger, the first pledgee, at 
 any time before an offer to redeem is made by the original 
 pledger. 1 Nor will an action accrue to the original pledger 
 against the first pledgee, for conversion of the negotiable 
 collateral securities where, after having made a sub-pledge 
 thereof for a loan to himself, the pledgee, before the ma- 
 turity of the orginal evidence of indebtedness, or payment 
 or tender thereof, repaid the loan made by the sub-pledgee, 
 and received back the collateral securities.* 
 
 1 Shelton . French, 33 Conn. * Jarvis v. Rogers, 15 Mass. 389; 
 489. Shelton V. French, supra.
 
 THE DUTIES OF THE PLEDGEE. 115 
 
 CHAPTER X. 
 
 THE PLEDGEE'S DUTIES AS TO COLLATERAL SECURITIES. 
 
 gSo. The primary purpose of collateral security 
 
 86. The pledgee of negotiable collateral securities under special agree- 
 
 ment. 
 
 87. The pledgee as trustee of collateral securities. 
 
 88. The pledgee's duty to present, and give notice of non-payment. 
 
 89. Limitations as to pledgee's duty in giving notice 
 
 90. The duty of the pledgee to collect collateral notes. 
 
 91. The pledgee, with title, entitled to recover face value of collateral 
 
 notes. 
 
 92. Limitations in certain cases, upon the pledgee's recovery. 
 
 93. The pledgee's receipt and collection of short collateral notes. 
 
 94. The pledgee's duty as to uncollectible collateral paper. 
 
 95. The use of over-due negotiable paper as collateral security. 
 
 96. Pledgee can not compromise nor surrender collateral securities. 
 
 97. Collateral securities can not be applied, without agreement, to other 
 
 debts. 
 
 98. "Marshalling securities," as applied to collateral securities. 
 
 99. Sub-pledgees of collateral securities, subject to like rules. 
 
 100. Application of payments and interest on collateral securities. 
 
 101. The statute of limitations, as applied to collateral securities. 
 
 102. Production and return of collateral securities on payment or tender 
 
 of debt. 
 
 103. The pledgee not required to keep identical bonds. 
 
 85. THE PRIMARY PURPOSE OF COLLATERAL SE- 
 CURITY. The primary purpose of the use of negotiable 
 instruments as collateral security for the payment of a 
 principal note or obligation of the pledger, is to place in 
 the hands of the pledgee, by indorsement and delivery, the 
 means of reimbursement for the money advanced upon the 
 principal indebtedness, if default occurs in the payment there- 
 of. The contract of pledge, under such circumstances, carries 
 with it an implication that the collateral securities may be
 
 116 NEGOTIABLE COLLATERAL SECURITIES. 
 
 made effectual to discharge the debt or obligation of the 
 pledgor. 1 A pledgee has the right to determine for himself 
 as to the occasion and mode of enforcing payment of the 
 collateral securities, so long as he acts in good faith, and in 
 the exercise of a reasonable judgment and discretion in 
 view of the rights and interests of the pledgor. 9 And 
 should the latter be dissatisfied with the judgment of the 
 pledgee, in declining to take any proceedings upon such 
 collateral securities, the pledgor may himself, upon giving 
 proper indemnity, proceed to enforce the same, as against 
 the parties bound. 8 
 
 86. THE PLEDGEE OF NEGOTIABLE COLLATERAL SE- 
 CURITIES UNDER SPECIAL AGREEMENT. The time and 
 mode of performance of the duties of the pledgee of col- 
 lateral securities, in enforcing the same by suit, or otherwise 
 realizing the same, may be made the subject of agreement 
 between the parties, in which event the rights of the par- 
 ties will be governed thereby. Only in the event of acci- 
 dent, mistake or fraud, will evidence be admissible to show 
 a parol agreement, made contemporaneously with the 
 pledge and as part of the transaction, changing the terms 
 of the written instrument. 4 And upon an agreement of the 
 pledgee, by his contract, to return the collateral securities 
 upon payment, or pay an equivalent in money, it is no de- 
 fense, the debt being paid, that such collateral securities 
 have been destroyed without his default. 8 A provision in 
 a contract of pledge that suit shall not be brought upon 
 collateral securities, is unavailing as a defense to the maker 
 
 1 Wheeler t>. Newbould, 16 K Y. erts v. Thompson, 14 Ohio St. 1 ; 
 
 89. Lee. Baldwin, 10 Ga. 208; Lam- 
 
 8 Wells v. Wells, 53 Vt. 1. berton v. Wmdom, 12 Minn. 232; 
 
 Bast 0. Bank, 101 U. S. 93; Wells Pickens v. Yarborough, 2G Ala. 417; 
 
 v. Wells, supra; Lamberton v. Win- Lawrence v. McCalmont, 2 How. 
 
 dom, 12 Minn. 232, 241; Hayes t>. 426; Soule . Union Bank, 45 Barb, 
 
 Ward, 4 Johns. Ch. 128. 111. 
 
 Bast t>. Bank, 101 U. S. 93; Rob- Drake t>. White, 117 Mass. 10.
 
 THE DUTIES OF THE PLEDGEE. 117 
 
 or indorser liable thereon, their liability being unaffected by 
 any such stipulation. 1 
 
 87. THE PLEDGEE AS TRUSTEE OF COLLATERAL 
 SECURITIES. The relation of the immediate parties to the 
 contract, where negotiable instruments have been placed in 
 the hands of a creditor by a debtor as collateral security, 
 for the payment of a valid debt or obligation, resembles 
 that of a trustee and cestui que trust. The responsibilities 
 of the pledgee to the pledger are similar to those of a trus- 
 tee : First, to collect and apply the securities at their ma- 
 turity to the payment of the debt, in the case of promissory 
 notes and bills of exchange ; though sale may be made 
 where the collateral securities are long time negotiable 
 bonds ; and, secondly, to pay over the surplus, if any, to 
 the pledger. The pledgee is also likened to a trustee, 
 as he may not deal with the trust property so as to destroy 
 or impair its value. 8 In Vermont and New Hampshire, 
 when a negotiable bill is indorsed as collateral security 
 for an antecedent debt, the general property remains in the 
 indorser, the indorsee holding it as a pledge, and taking the 
 legal title in trust, to account for the proceeds to the princi- 
 
 1 Nelson v. Eaton, 26 N. T. 410; 111. 548. Where the debt for which 
 
 Bank of Chenango v. Osgood, 4 the collateral note has been pledged 
 
 "Wend. 607, 612. is paid pending action on the secur- 
 
 * Wheeler v. Newbould, 16 N. Y. ity, but before judgment, the pledgee 
 
 392; Nelson . Eaton 26 Ib. 410; collecting the money upon the judg- 
 
 Hawks v. Hincliff , 17 Barb. 492 ; ment, holds the same as trustee for 
 
 Union Trust Co. v. Rigdon, 93 111. those who are legally or equitably 
 
 458,465; Zimpleman v. Veeder, 98 entitled thereto. Houser v. Houser, 
 
 Ib. 613; Knights v. Palmer, 3 Pick. 43 Ga. 415. The position of the 
 
 185. "A person holding property pledgee is this : that if he sue a third 
 
 or securities in pledge occupies the party, he sues as trustee for the 
 
 relation of trustee for the owner, and pledger, as regards the difference in 
 
 as such, in the absence of special the amount taken between the sum 
 
 power to do otherwise, is bound to which he has advanced and the 
 
 proceed as a prudent owner would." amount of the bill." Reid v. Furni- 
 
 Joliet Iron Co. v. Scioto etc. Co., 82 val, 1 Cr. & M. 538.
 
 118 NEGOTIABLE COLLATERAL SECURITIES. 
 
 pal. 1 The fact that a promissory note absolutely transferred 
 by indorsement and delivery so as to pass full title, was 
 deposited as a pledge may be proved by parol.* 
 
 88. THE PLEDGEE'S DUTY TO PRESENT* AND GIVE 
 NOTICE OP NON-PAYMENT. The holder of negotiable in- 
 struments as collateral security, receiving the same so as to 
 become a party thereto, is required to demand payment of 
 the same at maturity, and in case of non-payment, to give 
 proper notice to charge the parties liable thereon. The 
 pledgee having the legal title to such securities, no other 
 person can perform these duties ; and if by the pledgee's 
 failure or neglect, the indorsers or other parties thereto are 
 discharged, he is responsible for any loss. 3 It is not material, 
 in the case of bills or notes, to which the pledger is not a 
 party by indorsement, that immediate notice of non-payment 
 should be given him, where the parties thereto have been 
 properly charged. 4 In such cases the pledger is not, within 
 the custom of merchants, a party to the bill or note so as to 
 be entitled to a strict regular notice, nor discharged from 
 his principal obligation by the neglect of the pledgee to 
 give him such notice, unless he has suffered loss or damage 
 by reason of the failure of the pledgee in this respect. 8 Nor 
 
 1 Austin v. Curtis, 31 Vt. 72; Jen- Fortune, 16 S. & R. 302; Whiting 
 
 ness v. Bean, 10 N. H. 266; Will- v. Paul, 13 R. I. 40; Foot . Brown, 
 
 iams v. Little, 11 N. H. 66. 2 McLean C. C. 369; Allen v. King, 
 
 Wood v. Matthews, 73 Mo. 477. 4 Ib. 128; Childs v. Corp, 1 Paine. 
 
 Railroad Co. v. Nat Bank, 102 284. 
 
 U. S. 14; Pickens v. Yarborough, 26 Gibson v. Tobey, 53 Barb. 191, 
 
 Ala. 417; Russell v. Hester, 10 Ib. 199; Hunter v. Moul, 98 Pa. St. 13. 
 
 535; Rice v. Benedict, 19 Mich. 132; Westphal v. Ludlow, 2 McCrary, 
 
 Jennison v. Parker, 7 Mich. 355; 505; Wildes v. Savage, 1 Story, 22; 
 
 McLenore v. Hawkins, 46 Miss. 715; Douglas v. Reynolds, 7 Peters, 125; 
 
 Jones V. Hicks, 52 Ib. 682; Barrow Oxford Bank c. Haynes, 8 Pick. 
 
 t>. Rhinelander, 8 Johns. Ch. 614; 423, 428; Gibbs . Cannon, 9 8. & 
 
 Dayton v. Trull, 23 Wend. 345; Cut- R. 198; Hunter v. Moul, 98 Pa. St. 
 
 ting v. Malor, 78 N. Y. 454 ; Hunter 13. " The plaintiffs are not held to 
 
 t>. Moul, 98 Pa. St. 18 ; McLughan strict rules in regard to the present- 
 
 . Bovard, 4 Watts, 308; Ormsby v. ment at maturity of the note taken
 
 THE DUTIES OP THE PLEDGEE. 119 
 
 the failure of the pledgee to present and collect at 
 maturity collateral notes, entitle the pledger to set up such 
 default as payment of a judgment on the principal note. 1 
 
 89. LIMITATIONS AS TO THE PLEDGEE'S DUTY IN GIV- 
 ING NOTICE. Where the collateral security is an accom- 
 modation bill of exchange, and the drawee has never been 
 supplied with funds, and is bankrupt, the pledgee is not 
 responsible for any loss resulting from his failure to make 
 demand and give notice of non-payment, as the drawer has 
 suffered no injury therefrom.* The holder of a bill of ex- 
 change, unable by due diligence to ascertain the residence 
 of the drawer, is excused from giving him notice of the dis- 
 honor of the bill. 8 A negotiable promissory note of a third 
 party was indorsed and delivered to a pledgee, upon an 
 advance, showing upon its face a written memorandum, 
 " This note is collateral security for the payment of the an- 
 nexed draft of A on B erf $8,000," that being also the amount 
 of the note. Default occurred on both the bill of exchange 
 and note ; notice of non-payment was given to charge the 
 parties on the latter, but no notice was given to the drawer 
 of the bill. The maker of the note and acceptor of the bill, 
 being insolvent, the pledgee brought an action against an 
 
 as collateral security and notice of * Reeves v. Plough/41 Ind. 204. 
 non-payment to their debtor. The ' Compton v. Blair, 46 Mich. 1. 
 note was not received, although in- Or where the drawer has failed to 
 dorsed by the defendant, upon the provide other funds in place of 
 condition that they would exercise those originally deposited, he is en- 
 such diligence. It does not repre- titled to no notice. Rhett v. Roe, 3 
 sent the original debt, and to hold How. 457; Sharp v. Bailey, 9 B. & 
 the defendant it is not necessary that C. 44; Claridge v. Dulton, 4 M. & 
 the plaintiff should regularly pro- S. 226. 
 
 ceed to have the note presented and * Rhett v. Roe, 2 How. 457 ; Putnam 
 
 protested. It was not a satisfaction v. Sullivan, 4 Mass. 53 ; Duncan v. 
 
 or extinguishment of the original McCullogh, 4 S. & R. 480; Cateman 
 
 debt, and a failure to give notice of 0. Joseph, 2 Camp. 462. 
 non-payment will not necessarily de- 
 feat a recovery." Westphal v. Lud- 
 low, supra.
 
 120 
 
 NEGOTIABLE COLLATERAL SECURITIES. 
 
 indorser of the collateral note. No discharge of such 
 indorser resulted from the failure of the pledgee to give 
 notice to the drawer of the principal obligation. In such 
 case, where the action is upon a collateral undertaking 
 separate from the principal contract, the obligation upon the 
 pledgee to give notice of non-payment is not strictly en- 
 forced, and no presumption of injury arises, as a matter of 
 course, upon such failure. 1 
 
 90. THE DUTY OP THE PLEDGEE TO COLLECT COL- 
 LATERAL NOTES. The pledgee of negotiable bills of 
 exchange or notes, acquires, where the same are transferred 
 so as to make him a party thereto, the legal title in such 
 negotiable collateral securities, and is entitled to receive the 
 sum due upon the same from the parties liable thereon, and 
 in the event of default, to proceed by action to collect the 
 whole face value thereof, holding the proceeds to be applied 
 in payment of the principal indebtedness.* The pledgee, 
 
 1 Rhett v. Roe, 2 How. 457; Rey- 
 nolds v. Douglas, 12 Pet. 497; Gibbs 
 c. Cannon, 9 S. & R. 198; Warring- 
 ton v Furbor, 8 East, 242; Philips v. 
 Austin, 2 Taunt. 206 ; Wright v. 
 Simpson, 6 Ves. 732. 
 
 May v. Sharp, 49 Ala. 140; 
 Houser v. Houser, 43 Ga. 415; Zim- 
 pleman v. Veeder, 98 111. 613; 
 Loomis v. Stave, 72 Ib. 623; Valletta 
 . Mason, 1 Ind. 82; Slevin v. Mor- 
 row, 4 Ib. 425; Jones v. Hawkins, 
 17 Ib. 550; Reeves v. Plough, 41 Ib. 
 204; Williams v. Norton, 3 Kan. 
 295; Dix v. Tully, 14 La. Ann. 456; 
 Overlook v. Hills, 8 Me. 383; An- 
 droscoggin R. R. Co. v. Auburn 
 Bank, 48 Ib. 335; Bowman t>.Wood. 
 15 Mass. 534; Batchellor v. Priest, 
 12 Pick. 399; Hancock v. Franklin 
 Ins. Co., 114 Mass. 155; Jennison v. 
 Parker, 7 Mich. 355 ; McLenore t>. 
 Hawkins, 46 Miss. 715; City Bank p. 
 
 Perkins, 4 Bosw. 420; Nelson v. 
 Wellington, 5 Ib. 178; Bank of Chc- 
 nangofl. Osgood, 4 Wend. 607, 612; 
 Wheeler v. Newbould, 16 N. Y.392; 
 Wilson t>. Little, 2 Ib. 443; Flagg v. 
 Munger, 9 Ib. 492; Nelson v. Eaton, 
 26 Ib. 410 ; Nelson v. Edwards, 40 
 Barb. 279; Farwell v. Importers' 
 Nat. Bank, 90 N. Y. 483, s. c. 47 N. 
 Y. Supr. Ct. 409; Roberts. Thomp- 
 son, 10 Ohio St. 1 ; Hanna v. Hoi- 
 ton, 78 Pa. St. 334; Bcale v. Bank. 5 
 Watts, 530; Lyon . Huntingdon 
 Bank, 12 S. & R. 68; Tarbell v, 
 Sturtevant, 26 Vt. 513; Hilton v. 
 Waring, 7 Wis. 492 ; Northwestern 
 Ins. Co. v. Insurance Co., 40 Ib. 446; 
 Union Nat. Bunk v. Roberts, 45 Ib. 
 373; Foot v. Brown, 2 McLean, 369. 
 " Where promissory notes are 
 pledged as security, the transaction 
 ex vi termini imports authority to 
 collect." Nelson v. Wellington, su-
 
 THE DUTIES OF THE PLEDGEE. 121 
 
 by such action, does not become a trustee of the pledger, 
 and is not bound to use more than due diligence in the 
 prosecution thereof. 1 Nor will a power of sale given to 
 a pledgee of promissory notes as collateral security, limit or 
 impair his right to receive payment thereof, or upon de- 
 fault, to compel satisfaction.* The pledgee's right of an 
 action at law upon collateral notes, does not extend to the 
 enforcement of a limited contract of guaranty, separate and 
 independent, made by a third party with the pledgor, rela- 
 tive to the payment of the securities. 8 Under statutory 
 enactments, giving a right of action to the real party in 
 interest, a pledgee of negotiable paper, although holding 
 the same unindorsed, is entitled upon default to bring an 
 action thereon, and to recover. 4 The rule is applied to the 
 assignment of a non-negotiable note with delivery. 5 Such 
 action may be brought by the pledgee by agreement of the 
 parties and at the pledger's request, the title of the securi- 
 ties still remaining in him, in his own name, although he 
 holds no title thereto, by proper indorsement and deliv- 
 ery.' Nor is indorsement necessary to enable a pledgee 
 to sue upon negotiable collateral securities, where the 
 same are payable to " bearer," and may pass from hand to 
 hand. 7 
 
 91. THE PLEDGEE, WITH TITLE, ENTITLED TO RECOV- 
 ER FACE OF COLLATERAL NOTES. The transfer before 
 
 pra. " By an assignment of collat- ton, 5 Bosw. 178 ; Nelson . Eaton, 
 
 eral security, a privity in contract is 26 N. Y. 410; Nelson v. Edwards, 
 
 established, which invests the as- 40 Barb. 279. 
 
 signee with the ownership of the 8 National Bank v. Grand Lodge, 
 
 collateral for the purposes of domin- 98 U. S. 123. 
 
 ion over the debt assigned. He alone * White v. Phelps, 14 Minn. 271. 
 
 is empowered to receive the money 6 Hilton v. Waring, 7 Wis. 492. 
 
 to be paid upon it, and to control it Lobdell v. Merchants' Bank, 33 
 
 in order to protect his rights." Han- Mich. 408. 
 
 na v. Holton, supra. 7 Louisiana State Bankfl.Gaienne, 
 
 1 Cardin v. Jones, 23 Ga. 175. 21 La. Ann. 555; Houser v. Houser, 
 
 8 Third Nat. Bank v. Harrison, 10 43 Ga. 415. 
 Fed. Rep. 243; Nelson v. Welling-
 
 122 NEGOTIABLE COLLATERAL SECURITIES. 
 
 maturity of a negotiable promissory note, so as to make the 
 pledgee a party, although as collateral security for a prin- 
 cipal indebtedness less in amount than the notes held aa 
 collateral, vests an absolute title in the pledgee in such col- 
 lateral, irrevocable except upon payment of the principal 
 debt. The pledgee is entitled to recover of the parties to 
 such collateral note the whole amount of its face, holding 
 any surplus for the benefit of persons who are entitled to 
 it. 1 It is immaterial to the maker of such collateral paper 
 what the pledgee advanced upon the note, or upon what 
 terms the pledger and pledgee may settle. His obligation, 
 as expressed in the collateral security, is an independent 
 undertaking, and may be enforced by a pledgee advancing 
 value in good faith, without notice, free from antecedent 
 equities.* The pledgee of negotiable bonds is also entitled 
 to collect their whole face value, applying the proceeds to 
 the payment of the principal debt, and holding any surplus 
 for those to whom it belongs. 8 The pledgee of bills of 
 exchange, properly indorsed, upon the pledgor becoming 
 insolvent, may prove for the full amount ; 4 and bills of 
 exchange, being offered for discount, and a bank advanced 
 a part of the face value, taking a guaranty of a third per- 
 son as additional security, such third person is entitled to 
 sue the acceptor for the full amount of the bill, subject to 
 the same trust as to any surplus as in other cases. 5 Where, 
 upon the realization of such collaterals, a deficiency re- 
 mains, the pledgee may bring a personal action against the 
 pledgor, or may sue upon the principal note.' 
 
 >Tooke t>. Newman, 75 111 215 ; 'Tarbell 0. Sturtevant, 26 Vt. 513; 
 
 McLenore v. Hawkins, 46 Miss. 715 ; Witkins v. Jeffers, 30 Ga. 153. 
 
 Jones v. Hicks, 52 Ib 582; Knights 'Jerome v. McCarter, 94 U. 8. 
 
 c. Palmer, 3 Pick. 185 ; Thayer v. 739 ; Hancock t>. Franklin Ins. Co., 
 
 Mann, 19 Pick. 536; Tarbell tJ. Slur- 114 Mass. 155. 
 
 tevant, 26 Vt. 513 ; Plant's Manuf. * Ex pane Newton, L. R. 16 Ch. 
 
 Co. v. Favey, 20 Wis. 200. Where D. 330 ; In re Commersal, Ib. 187; 
 
 the money obtained was misapplied ex parte Phillips, 1 M. & D. 232. 
 
 by an agent of the pledgor. City * Reid v. Furnival, 1 Cr. & M. 538. 
 
 Bank v. Perkins, 4 Bosw. 420. Faulkner t>. Hill, 104 Mass. 188,
 
 THE DUTIES OF THE PLEDGEE. 123 
 
 92. LIMITATIONS IN CERTAIN CASES UPON THE 
 PLEDGEE'S RECOVERY. Where negotiable promissory notes, 
 pledged as collateral security, are accommodation paper 
 without consideration, or subject to an equitable set-off, or, 
 in cases of misappropriation, as between the makers and 
 payees and indorsers thereof, and the collateral securities 
 are of greater amount than the loan represented by the 
 principal evidence of indebtedness, the recovery of the 
 pledgee against the makers upon an action thereon, is lim- 
 ited to the amount of his advances. The pledgee in such 
 cases of fraud is a holder for value of the collateral note, 
 as against the makers of such paper, to the extent only of 
 his interest at the time he acquires the title, or has notice of 
 the defenses to it. 1 A third party who has executed nego- 
 tiable paper, so as to charge persons dealing with it with 
 notice that it is to be used as collateral security may show, 
 upon suit thereon by a pledgee, the identity, nature and 
 amounts of the demands for which it was authorized to be 
 pledged.* The recovery of a pledgee of bills of exchange 
 where there had been a failure to indorse them so as to pass 
 the legal title, was limited to actual advances. 8 The same 
 rule as to recovery was applied where negotiable bonds had 
 been pledged by a corporation as collateral security for the 
 payment of its obligations, the pledgee, in an action against 
 the company upon his collateral securities, was restricted to 
 the amount of the debt they were given to secure. 4 
 
 1 Stoddard v. Kimball, 6 Cush.469; equitable set off against the insol- 
 
 Chicopee Bank v. Chapin, 8 Met. 40; vent payee. Nor was the pledgee 
 
 Fisher v. Fisher,98 Mass. 303; Stalk- allowed attorney's fees in prosecut- 
 
 er T. McDonald, 6 Hill, 93; Young ing the action, although occasioned 
 
 v. Lee, 12 N. Y. 551 ; Huff v. Wag- by the maker attempting a com- 
 
 ner, 63 Barb. 215 ; Farwell v. Im- plete defense to the note. Bank v, 
 
 porters' Nat. Bank, 90 N. Y. 483. Hemingway, 34 Ohio St. 381. 
 
 The pledgee of a negotiable note, * Garton v. Union City Nat. Bank, 
 
 having the legal title by indorse- 34 Mich. 229. 
 
 ment, was limited in his recovery * Ex parte Phillips, 1 M. & D. 
 
 upon an action thereon against the 232. 
 
 maker, to the amount of his debt, 4 Jesup v. Bank, 14 Wis. 331. 
 where the latter was entitled to an
 
 124 NEGOTIABLE COLLATERAL SECURITIES. 
 
 93. THE PLEDGEE'S RECEIPT AND COLLECTION OP 
 SHORT COLLATERAL NOTES. A pledgee, holding negotiable 
 promissory notes or bills of exchange maturing at a day 
 earlier than the principal obligation, is entitled to receive 
 the money (being a party to the instrument) or, in event of 
 default, upon demand, may proceed to enforce payment by 
 action against the parties liable thereon. The authority of 
 the pledgee as to the money thus received, which takes the 
 place of the collateral securities theretofore held, extends, 
 until the maturity of the principal note, only to the reten- 
 tion of the same. 1 The pledgee has no right to apply the 
 proceeds of the notes held as collateral security in payment 
 of the loan until it is due and payable. Bo^h parties to the 
 contract of pledge are entitled, the one to receive, and the 
 other to pay, at the maturity of the principal note, and are 
 not compellable to do so before, or by installments. Before 
 the money, so received, can be applied by the pledgee in 
 satisfaction of the principal debt, in the absence of agree- 
 ment, default in the payment thereof must have occurred. 5 
 Standing in the place of the collateral security, the pledgee, 
 holding the proceeds of short negotiable collateral notes, 
 pledged to secure the payment of a demand note, is not 
 entitled to apply them in payment until demand. 3 The 
 pledgee, in accounting upon settlement with the pledger for 
 his collections upon short collateral notes, is required to 
 credit such sums only as he was able legally to collect. 4 A 
 negotiable promissory note of a third party intrusted to a 
 broker for sale, was fraudulently pledged with other secur- 
 ities, for a loan, and the note maturing before the loan 
 became due, the maker was obliged to pay its full value to 
 
 1 Farwell v. Importers' etc. Nat. Wilson v. Little, 2 N. Y. 443-, 
 
 Bank, 90 N. Y. 483, 490; 8. c. 47 N. Lewis v. Varnum, 12 Abb. Pr. 305; 
 
 Y. Supr. Ct. 409; Garlick v. James, Garlick v. James, 12 Johns. 148. 
 
 12 Johns. 148; Jones . Hawkins, 17 * Lewis t>. Varnum, 12 Abb. Pr. 
 
 Ind. 550; Wheeler v. Newbould, 16 305. 
 
 N. Y. 362; Nelson . Eaton, 26 Ib. Blouin v. Hart, 30 La. Ann. 714. 
 410, 417.
 
 THE DUTIES OF THE PLEDGEE. 125 
 
 the pledgee. The maker gave notice to the pledgee of the 
 misappropriation of his note, and claimed a lien on any sur- 
 plus arising from the sale of other securities immediately 
 upon notice of the fraud. He received so much of such 
 surplus arising from the other securities as equaled the 
 amount of his payment. 1 
 
 94. THE PLEDGEE'S DUTY AS TO UNCOLLECTIBLE' 
 COLLATERAL PAPER. If a negotiable promissory note, in- 
 dorsed as collateral security, proves to be uncollectible, the 
 duty of the pledgee is to return the same to the pledgor. 
 The pledgee is not required to bring a useless action to 
 enforce the payment of such paper, but may at once upon 
 default, sue upon the principal note.* No presumption of 
 payment of the principal debt, however, arises from the 
 retention of collateral securities, the makers of which are 
 notoriously insolvent. 3 Although a pledgor may insist upon 
 active measures to collect, if he anticipates the insolvency of 
 parties liable on collateral securities, the right is only en- 
 forced upon equitable terms. 4 A pledge by one of several 
 joint debtors, all insolvent, of a note of a third person, also 
 insolvent, as collateral security, without any restriction, 
 confers upon the pledgee an implied authority to release the 
 maker of such collateral note upon the payment of a sum 
 less than its face. 6 
 
 95. THE USE OF OVER-DUE NEGOTIABLE PAPER AS 
 COLLATERAL SECURITY. The pledgee of a promissory note 
 of a third person, receiving the same, after dishonor, as col- 
 lateral security, is bound only by an implied promise of the 
 
 1 Farwell v. Importers' etc. Bank, 4 Lamberton v. Windom, 12 Minn. 
 
 90 N. Y. 483. 232, 241; Hayes v. Ward, 4 Johns. 
 
 s Clark v. Young, 1 Cranch, 181; Ch. 123. 
 
 Wood v. Matthews, 73 Mo. 479; * Exeter Bank v. Gordon, 8 N. H. 
 
 Smith v. Felton, 85 Ind. 223. 66, 82. 
 
 Powell v. Henry, 27 Ala. 612.
 
 126 NEGOTIABLE COLLATERAL SECURITIES. 
 
 use of ordinary care and diligence in the collection thereof. 1 
 The parties to the contract of pledge of such paper may 
 agree as to whether collection of them by action should be 
 attempted, or upon further default in payment, a sale should 
 be made thereof.* Generally, the pledgee holding dishon- 
 ored paper, after an unsuccessful attempt to secure payment 
 by the parties thereto, is entitled to sell the same, after 
 reasonable notice to the pledger, at public sale. 8 The 
 pledgee, without consent, is not at liberty to extend the 
 time of payment of such paper. 4 A pledge of a bill of ex- 
 change, dishonored, but which had been paid and taken up 
 by the pledger, was supported, although made by delivery 
 merely, as against a mortgage covering the bills and other 
 property. 5 The recovery of the pledgee of over-due paper 
 is restricted, where received as collateral security for a debt 
 of less than its face, to the amount of the debt, unless the 
 pledgee, as a party to the paper, be liable to the pledgor or 
 some third person for the difference. Upon proof of specific 
 payments to the pledgor, before transfer, to an amount 
 exceeding the difference between the debt and the face value 
 of the paper, the pledgee can only recover the balance due, 
 although less than the debt.* 
 
 Past due commercial paper, negotiated as collateral 
 security, is subject in the hands of the pledgee to all de- 
 fenses and equities which existed and attached to the paper 
 itself in the hands of the original holder, but not to equities 
 
 1 Craig t>. Parkis, 40 N. Y. 181; * Rice v. Benedict, 19 Mich. 132; 
 
 Ward. Morgan, 5 Sneed, 59; Noland Mullen v. Morris, 2 Pa. St. 85; 
 
 e. Clark, 10 B. MOD. 239;.Lindley v. Whipple v. Blackington, 97 Mass. 
 
 Chase, 104 Mass. 253; Wnkeraan v. 476; Union Trust Co. . Rigdou, 93 
 
 Goudy, 10 Bosw. 408; Rice v. Bene- 111. 458. 
 
 diet, 19 Mich. 132. The pledgee has ' Potter v. Thompson. 10 R. 1. 1. 8. 
 
 no right to determine for himself 4 Wakeman v. Goudy, 10 Bosw. 
 
 whether the collateral note is collect- 408. 
 
 ible, It is incumbent upon him to ' Sanders t>. Davis, 13 B. Mon. 
 
 ascertain the fact by a resort to the 432. 
 
 ordinary process of the law. Craig Bond v. Fitzpatrick, 8 Gray 536. 
 t>. Parkis, supra.
 
 THE DUTIES OP THE PLEDGEE. 127 
 
 or defenses arising out of collateral matters. 1 A set-off 
 against the payee is no defense against the holder of a prom- 
 issory note, transferred after maturity as collateral secur- 
 ity.* But the indorsee of a negotiable note receiving the 
 same dishonored is subject to the equities arising from a 
 misappropriation by the payee of collateral securities given 
 for its payment, and of the proceeds of which only a part was 
 credited upon the note, in seeking to collect the same from 
 the maker. 8 Where such negotiable instruments are sold 
 or pledged, after maturity, by one who is not their owner, 
 and who in fact is not authorized to pledge the same, 
 the pledgee acquires no title or rights thereto, and is not 
 protected as against the claims of the true owner, who has 
 been defrauded. 4 
 
 96. PLEDGEE CANNOT COMPROMISE NOR SURRENDER 
 COLLATERAL SECURITIES. The pledgee of negotiable se- 
 curities as collateral security is not permitted, in the ab- 
 sence of special agreement, in his dealings with the secur- 
 ities, to accept, anything less in discharge or satisfaction 
 of them, from the parties bound, than the face value of such 
 paper. Any trade, or compromise, or rebate made by the 
 pledgee with the maker or other parties to such collaterals, 
 whereby the same are surrendered for less than the face 
 value thereof is a breach of the duty of the pledgee and is 
 not sustained. 5 Any arrangement whereby the securities 
 are transferred for less than is due thereon to a party already 
 
 1 Simpson . Hall, 47 Conn. 417; 65; Foley . Smith,;6 Wall. 493; Ver- 
 
 Robinson v. Lyman, 10 Ib. 30; Fair- milye v. Adams, 21 Ib. 143. 
 
 child . Brown, 11 Ib. 49. 6 Wood v. Matthews, 73 Mo. 479 ; 
 
 8 Wilkinson . Jeffers, 30 Ga. 153. Garlick v. James, 12 Johns. 146; De- 
 
 Creech v. Byron, 115 Mass. 324. puy v. Clark, 12 Ind. 427; Hawks v. 
 
 * btern v. Germania Bank, 34 La. Hinchcliffe, 17 Barb. 492; Union 
 Ann. 1119; Henderson v. Case, 31 La. Trust Company v. Rigdon, 93 111. 
 Ann. 215; Bird v. Cockrem, 28 Ib. 471; Zimpleman v. Veeder, 98 Ib. 
 70; Davis. Bradley, 26 Ib. 555; Civ. 613; Stevens v. Hulbert Bank, 31 
 Code, Lou. 2452 ; Fowler v. Brantly, Conn. 147 ; McLenoro v. Hawkins, 
 14 Pet. 318; Andrews v. Pond, 13 Ib. 46 Miss. 715.
 
 128 NEGOTIABLE COLLATERAL SECURITIES. 
 
 bound for the full amount, is a compromise, notwithstand- 
 ing a power of sale has been given by the contract of 
 pledge. 1 But a compromise is sustained where it is made 
 upon the agreement of all parties, even where made for a 
 less sum than that authorized, if a credit be given on the 
 principal note for the proper amount, and where this is 
 done, the pledgee may collect the balance of the principal 
 debt.* Where one of several joint insolvent debtors has 
 pledged to the creditor the note of a third person, also 
 insolvent, as collateral security, without any restriction, 
 the creditor has an implied authority to release the maker 
 upon his paying part of the sum due on the collateral note. 1 
 And cases may occur where a debt is not well secured and 
 the pledgee may take less than is due and surrender the 
 note. But this cannot be done where the debt is well 
 secured. 4 
 
 Where negotiable promissory notes held as collateral 
 security, are fraudulently surrendered to the maker by the 
 pledgee, at a sum considerably beloW their face value, the 
 pledgor has his election to bring his action against the 
 maker to recover the residue of the face of the notes so 
 surrendered, or against the pledgee in tort for disposing of 
 the collateral notes in a fraudulent manner. In such cases 
 the pledgor may recover as damages the face value of such 
 securities, subject to the equitable set-off of the principal 
 
 1 Union Trust Co. v. Rigdon, 93 Where a collateral note was sold un- 
 111. 471. An absolute power of sale, der a power of sale, the maker there- 
 without notice, of the pledged col- of but not the pledger being notified, 
 lateral paper was given, upon de- it was a compromise, and not such a 
 fault, and the pledgee transferred the sale as contemplated under the con- 
 fame, which had matured in his tract of pledge. Zimpleman v. Vee- 
 hands, to the maker thereof for less der, 98 111. 613. 
 than its face, and for an amount pre- * Thayer . Putnam, 12 Met. 297. 
 cisely sufficient to pay the principal ' Exeter Bank v. Gordon, 8 N. H. 
 debt. Such a transaction was a com- 66, 82. 
 
 promise, and not a sale, even under 4 Zimpleman t. Veeder, 98 111.613. 
 the extensive ; powers conferred.
 
 TflE DUTIES OP THE PLEDGEE. 129 
 
 debt, if unpaid. 1 The pledgee may show in defense, that 
 the collateral securities were accommodation paper, for 
 which no value was paid, or that there was a legal defense 
 to the notes so surrendered.* Where a valid delivery had 
 been made of the principal debt, with the collateral se- 
 curities, to a third party, and the latter wrongfully sur- 
 rendered the collateral notes to the maker thereof, the first 
 pledgee is not liable in trover for such conversion." 
 
 97. COLLATERAL SECURITIES CANNOT BE APPLIED 
 
 WITHOUT AGREEMENT TO OTHER DEBTS. In cases where 
 
 negotiable securities have been pledged for the payment of 
 a particular debt or obligation, the pledgee is not permitted, 
 in the absence of a special agreement, to retain the same, 
 after payment or discharge of such debt or obligation, as 
 collateral security for other special or general indebted- 
 ness of the debtor. 4 Where, however, the pledger, after 
 depositing collateral security for a specific debt, less in 
 amount than the value of such collateral paper, agrees that 
 the surplus, if any, arising from the sale or collection there- 
 of shall be a pledge for other debts, such contract is en- 
 forced. In the application of the proceeds of such col- 
 laterals, the money is applied first to the debts of the 
 oldest standing. 6 Where a pledge of negotiable securities 
 had been made by a bank on one account, and subsequently 
 
 1 Garlick v. James, 12 Johns. 146; Bank v. Leland, 5 Met. 259; Han- 
 
 Depuy v. Clark, 12 Ind. 427; Union cock . Franklin Insurance Co., 114 
 
 Trust Co. v. Rigdon, 93 111. 471; Mass. 155; Hathaway v. Fall River 
 
 Hawks v. Hinchcliffe, 17 Barb. 492. Nat. Bank, 131 Ib. 14; Chester . 
 
 * Union Trust Co. . Rigdon, supra. Wheelwright, 15 Conn. 562; Teuto- 
 
 * Goss v. Emerson, 23 N. H. 38. nia Nat. Bank v. Loeb, 27 La. Ann. 
 4 James' App., 89 Pa. St. 54; Buck- 110; Latham v. Chartered Bank of 
 
 ley t>. Garrett, 60 Ib. 333; Selden v. India, L. R. 17 Eq. 205; Wyckoff o. 
 
 National Bank, 69 Ib. 424 ; Wilmer- Anthony, 90 N. Y. 442; Talmadge 
 
 ding . Hart, Hill & D. Supp. 305; v. Third Nat. Bank, 91 N. Y. 531. 
 Robinson. Frost, 14 Barb.536; Lane 8 Jones v. Benedict, 83 N. Y. 79, 
 
 . Bailey, 47 Ib. 395; Duncans 88; Pattison v. Hull, 9 Cow. 747, 775 
 
 Brenr-an, 83 N. Y. 487; Jarvis v. n. b. 
 Rogers, 15 Mass. 397; Neponset 
 9
 
 130 NEGOTIABLE COLLATERAL SECURITIES. 
 
 another pledge of other securities was made on another 
 account, and the pledgor, after returning the consideration 
 for the second pledge, became bankrupt, and some of the 
 securities given on the first occasion proved worthless, the 
 pledgee was allowed to appropriate certain of the collaterals 
 pledged on the second transaction in order to make himself 
 whole on the first, as against an assignee in bankruptcy 
 seeking to set aside the application of the securities by a 
 summary objection to proof by the pledgee of an inde- 
 pendent debt due to him arising out of a deposit account. 1 
 
 98. MARSHALLING SECURITIES " AS APPLIED TO 
 COLLATERAL SECURITIES. The election of the pledgee, 
 holding several collateral securities for the principal debt, 
 as to which of the said securities shall be resorted to, in 
 order to enforce payment of the original debt, is subject to 
 the equitable principle known as " marshalling securities." 
 By this rule a creditor having a lien upon two funds for 
 payment of his debt, and a subsequent creditor alien upon 
 one only of such funds, the former is required to exhaust 
 his remedy against the fund which is especially given for 
 his security before resorting to that in which the subsequent 
 creditor is interested. The rule, however, is never en- 
 forced in cases where it would cause an injury or damage to 
 a creditor holding such liens upon separate funds, or would 
 work injustice to other parties.* The rule was applied 
 where a merchant had forwarded his note to a broker for sale, 
 and the proceeds, less commissions, remitted. The broker 
 
 1 In re McVey, 13 Fed. Rep. 448. ternational Ins. Co., L. R. 2 Ch. D. 
 
 * Cheeseborough v. Millard, 1 476 ; Heyman v. Dubois, L. R. 13 Eq, 
 
 Johns. Ch. 409, 413; Door v. Shaw, 158; in re Mower's Trusts, L. R. 8 
 
 4 Johns. Ch. 17; Wiggin v. Dorr, 3 Eq 110; Merchants' Bank v. Maud, 
 
 Sumn. 310; Greenwood v. Tyler, 1 R. 18 W.R.312; Farquharson v. Flower, 
 
 & M. 187; Morrison v. Kuntz, 15 111. L. R. 8 Ch. D. 109; Tomkinso. Colt- 
 
 193; Dumont v. Fry, 13 Fed. Rep. hurst, L. R. 1 Ib. 626; Trumper v. 
 
 423; Hazard. Fiske, 83 N. Y. 287; same, L. R 14 Eq. 295; ex parte 
 
 ex parte Kendall, 17 Ib. 520; Aid- Alston, L. R. 4 Ch. 168 
 rich v. Cooker, 8 Ves. 388; in re In-
 
 THE DUTIES OF THE PLEDGEE. 131 
 
 fraudulently pledged the note, with other collaterals, to a 
 bank, to secure a loan to himself, of which the merchant re- 
 ceived nothing. The merchant, learning of the misappro- 
 priation, gave notice to the bank, and claimed to be 
 subrogated to any surplus arising from other securities held 
 by it, after payment of the loan. Subsequently, and before 
 the maturity of the loan, the note fell due, and was paid 
 without suit. Upon realizing the other securities the bank 
 held a surplus in its hands. The merchant was entitled to 
 be paid from such surplus, his voluntary payment not affect- 
 ing his right of recovery. 1 
 
 99. SUB-PLEDGEES OP COLLATERAL SECURITIES SUB- 
 JECT TO LIKE RULES. The like rule is applied to sub- 
 pledgees of collateral securities. Where such sub-pledgee 
 holds securities belonging to several persons which are 
 wrongfully sub-pledged by the pledgee thereof, he is re- 
 quired to proceed pari passu in the application of the 
 securities to the payment of the debt. A sacrifice of the 
 securities of any one pledger is not permitted ; and in the 
 event that the sub-pledgee shall have sold the securities of 
 of any one pledger, realizing sufficient to pay off all of the 
 liabilities of the pledgee, and leaving the other securities in 
 his hands, a court of equity will, at the suit of the pledgor 
 whose securities have been sold, order the remaining securi- 
 ties to be disposed of and the proceeds so applied as to 
 secure the payment of the debt in equitable proportions.* 
 A pledged negotiable bonds to B for value, who sub-pledged 
 them to C for value, and C again sub-pledged them to D, a 
 trust company, together with other collaterals, fora specific 
 loan, other loans being due from C to D, secured by col- 
 laterals. C became insolvent, and B redeemed the securi- 
 ties of A by paying D their full market value. Subse- 
 quently upon a sale by D of the other collateral securities 
 
 1 Farwell v. Importers' Nat. Bank, Abb. N. C. 381, which is approved in 
 90 N. T. 483. Farwell v. Importers' Nat. Bank, 
 
 4 Gould v. Central Trust Co., 6 supra.
 
 132 NEGOTIABLE COLLATERAL SECURITIES. 
 
 pledged for the specific loan, a surplus was left after paying 
 the same, although all the securities held by D were not 
 equal to the amount of the loans. D, under the equitable 
 doctrine of marshalling of assets, was required to apply the 
 other securities held for the specific loan to its satisfaction 
 before resorting to the securities of A, and as upon such ap- 
 plication a surplus remained in D's hands, the same was paid 
 to the pledgee. 1 
 
 100. APPLICATION OP PAYMENTS AND INTEREST ON 
 COLLATERAL SECURITIES. Where collateral securities are 
 received by the pledgee for a specific loan or debt, under a 
 contract giving the pledgee the power upon default of con- 
 verting such securities into available funds, the law, upon 
 such realization, makes an application of the money in 
 the payment at maturity of the loan or debt. Upon such 
 application, the debt or loan is paid, so that no action 
 thereon can be maintained against the pledger. For any 
 surplus remaining in the hands of the pledgee after satisfac- 
 tion of the debt, the pledgor has his action as for money 
 had and received.* Where the principal note is by its 
 terms payable by instalments, some of which are over-due, 
 the holder, may, in the absence of special directions from 
 the pledgor, apply the proceeds of collateral securities in 
 payment of such over-due instalments as he may desire.* 
 
 The pledgee of negotiable instruments, such as bonds or 
 long-time notes, bearing interest, is entitled to collect in- 
 terest accruing thereon, and to give proper receipts, 
 accounting to the pledgor therefor upon payment of the 
 debt at maturity. 4 Such collections upon collateral securi- 
 ties, in the case of promissory notes, indorsed thereon 
 from time to time, are deemed as payments upon the 
 
 1 Gould v. Farmers' L. & T. Co., * Saunders t>. McCarthy, 8 All. 42. 
 
 23 Hun. 322. * Androscoggin R. R. Co. v. Au- 
 
 Hunt v. Nevers.15 Pick. 500, 504 burn Bank, 48 Me. 335; Whipple v. 
 
 (Shaw, C. J.); In re Litchfield Bank, Blackington, 97 Mass. 476; Hancock 
 
 28 Conn. 575. v. Franklin Ins. Co., 114 Ib. 155.
 
 THE DUTIES OP THE PLEDGEE. 133 
 
 original note or other evidence of indebtedness by the 
 principal debtor at the time such funds are received, 1 and 
 operate as a stay to the running of the statute of limita- 
 tions on the original debt.* The pledgee is chargeable 
 with interest where he uses the money, so collected, for his 
 own purposes. 1 It is not a conversion of pledged securities, 
 where a railroad company having pledged its own bonds as 
 collateral security, the pledgee cut therefrom, and collected 
 the interest coupons as they became due. The collection 
 of such dividends is properly within the powers of the 
 pledgee. 4 
 
 101. THE STATUTE OF LIMITATIONS, AS APPLIED TO 
 
 COLLATERALS. The statute of limitations defeating simply 
 the remedies upon a debt, does not operate in law as a dis- 
 charge of the debt itself which remains, so that, where 
 negotiable instruments have been deposited as col- 
 lateral security for the payment of a loan or debt, the 
 pledgee is entitled to retain possession of the same as against 
 the pledgor notwithstanding the statute of limitations might 
 be pleaded to an action on the original note. 8 Under the 
 Louisiana code, so long as the pledgee retains possession of 
 collateral securities, prescription or limitation does not run 
 against a negotiable promissory note or other evidence of 
 debt. 6 A payment made to the pledgee by a third party on 
 a note held as collateral security, made without authority of 
 the pledgor, and without any new promise from him, does 
 not stop the running of the statute as against the principal 
 evidence of indebtedness. 7 A pledgee re-delivered a note 
 
 1 Whipple v. Blackington,97Mass. 5 Chouteau v. Allen, 70 Mo. 290, 
 
 476; Haven v. Hatheway, 20 Me. 341. 
 
 345 ; Porter v. Blood, 5 Pick. 54. Blauc v. Hartzog, 23 La. Ann. 
 
 8 Whipple t>. Blackington, supra. 199 ; Police Jury v. Duralde, 22 Ib. 
 
 1 Morgan v. Mechanics' Banking 107; Citizens' Bank v. Knapp, Ib. 
 
 Assn., 19 Barb. 584. 117. 
 
 4 Androscoggin R. R. Co. . Au- ' Harper v. Fairley, 53 N. Y. 443. 
 burn Bank, supra.
 
 of an insolvent person to the pledgor, upon an agreement 
 that anything received thereon should be credited on the 
 debt, and the pleclgor collected a dividend, as agent of 
 the pledgee, handing over the proceeds, together with the 
 note, on the same day. The running of the statute was 
 stopped by such payment. 1 
 
 102. PRODUCTION AND RETURN OF COLLATERALS ON 
 PAYMENT OR TENDER OP DEBT. Upon payment or tender 
 of the debt the pledger is entitled to a return of the col- 
 lateral securities which he has deposited with the pledgee,* 
 but a mere offer to pay, without an actual tender, is not suffi- 
 cient, 8 and a tender having been made, it must be kept 
 good where suit is brought by paying the same into court. 4 
 Upon a demand for payment of a promissory note made 
 upon an indorser thereof, the note containing a statement 
 that collaterals had been deposited with authority to the 
 pledgee to sell, without notice, in case of non-payment, the 
 indorser demanded of the notary a return of the collaterals 
 upon payment, which he tendered. The notary, failing 
 to produce the same, the indorser was discharged, as to con- 
 stitute a valid demand the collaterals must be produced or 
 had in readiness to be surrendered on payment. 8 Where 
 promissory notes secured by mortgage were pledged as col- 
 lateral security for a loan, and upon default in payment of 
 the loan the pledgee foreclosed the mortgage, the only relief 
 of the pledger, after tender of the amount due, and a de- 
 mand for the return of his collateral securities, is in equity, 
 an action for trover not being sustainable.' 
 
 1 Whipple v. Blackington, 97 * Lewis v. Mott, 86 N. Y. 402 ; 
 
 Mass. 476. Strong v. Blake, 46 Barb. 222; Bate- 
 
 Bank of Rutland??. Woodruff, 84 man v. Poole, 15 Wend. 637; Ed- 
 
 Vt. 89; Hale t>. Rider, 5 Cush. 231; mondson v. McLeod, 16 N. Y. 543. 
 Spalding v. Bank, 9 Pa. St. 28 ; Stu- * Smith v. Felton, 85 Ind. 223. 
 art v. Bigler, 98 Ib. 80; Lewis t>. Ocean Nat. Bank v. Faut, 50 N. 
 
 Mott, 86 N. Y. 402 ; Ocean Nat. Y. 474. 
 
 Bank . Faut, 50 Ib. 474 ; Whipple Rice . Dillingham, 73 Me. 59. 
 t>. Blackington, 97 Mass. 476.
 
 THE DUTIES OF THE PLEDGEE. 135 
 
 103. THE PLEDGEE NOT REQUIRED TO KEEP IDEN- 
 TICAL BONDS. The pledgee of negotiable coupon bonds, 
 receiving the same as collateral security for a loan, or having 
 purchased the same upon margins for a principal, holding 
 the bonds as security for advances and charges, is not per- 
 mitted to speculate in such bonds while so held. Such 
 bonds are like shares of stock in an incorporated company, 
 without "ear-marks," and in the absence of a special con- 
 tract by the parties that the pledgee shall retain the identi- 
 cal bonds, the duty of the pledgee is regarded as satisfied 
 so long as he always retains a similar number of like bonds 
 in his possession, so that upon payment of the debt at any 
 time and at maturity, the collateral securities may be re- 
 turned to the pledger. 1 Where bonds so held as security 
 have fluctuated very greatly in value, and upon tender, other 
 like bonds, then become worthless, are offered, it is neces- 
 sary for the pledgee to show he has always retained a suffi- 
 cient number of like bonds to meet his obligations under 
 the contract of pledge, non constat, that he sold the bonds 
 when they were of value, and has re-purchased them since 
 their depreciation. 1 
 
 1 Levy D. Loeb, 85 N. Y. 365; Stu- * Stuart v. Bigler, supra, 
 art . Bigler. 98 Pa. St. 80; Gilpin 
 t>. Howell, 5 Ib. 41.
 
 136 NEGOTIABLE COLLATERAL SECURITIES. 
 
 CHAPTER XI. 
 
 THE ENFORCEMENT OF COLLATERAL SECURITIES. 
 
 104. The pledgee's action on principal note while holding collateral 
 securities. 
 
 105. The pledgee's action on the principal note supported. 
 
 106. Production of collateral securities upon action on the princi- 
 
 pal note. 
 
 107. And the principal note upon suit on collateral paper. 
 
 108. Collateral paper unaffected by merger of note into judgment. 
 
 109. Action upon antecedent debt not affected by receiving collateral secu- 
 
 rities, without more. 
 
 110. Nor, if transferred as collateral security for simple contract debts. 
 
 111. Election of pledgee as to enforcement of collateral securities. 
 
 112. Liabilities of parties to negotiable collaterals, when unaffected. 
 
 113. Concurrent remedies upon the principal note and collateral se- 
 
 curities. 
 
 114. The care in collection of collaterals required of the pledgee. His 
 
 responsibility for loss. 
 
 115. The pledgee, when not liable for mere delay in collection of col- 
 
 lateral securities. 
 
 116. The pledgee, when not liable for negligence of agent. 
 
 104. THE PLEDGEE'S ACTION ON PRINCIPAL NOTE, 
 
 WHILE HOLDING COLLATERAL SECURITIES. The negotia- 
 
 tiable promissory note or bill of exchange executed and 
 delivered by the pledgor, upon securing an advance, as his 
 own personal obligation in respect thereto, is the principal 
 evidence of the indebtedness as compared with the collateral 
 notes indorsed to the pledgee to secure its payment. The 
 promise of the maker to pay a certain sum at a certain time 
 to a certain person therein named, or order, is not affected 
 by the deposit of promissory notes of third parties as col- 
 lateral security, and the pledgee is entitled to proceed by 
 action upon default in payment of the principal note, at
 
 THE ENFORCEMENT THEREOF, 137 
 
 maturity, to enforce the personal liability of the pledger 
 irrespective of the fact that he holds the notes of other 
 persons as collateral security. The pledger is entitled to a 
 return of such collateral paper only upon the condition of 
 first repaying the moneys advanced, or making a due 
 tender thereof to the pledgee. 1 The only condition prece- 
 dent to the right of action of the pledgee against the pled- 
 ger upon his personal obligation, is the failure of the latter 
 to pay his note at maturity. Upon such default, the right of 
 action immediately accrues.* 
 
 105. THE PLEDGEE'S ACTION ON THE PRINCIPAL 
 NOTE SUPPORTED. The obligation of the pledger upon his 
 personal note, when sued thereon by the pledgee, is not 
 discharged or affected by the fact that the pledgee has 
 failed to collect when due, the note of a third person held 
 as collateral security, and still retains possession thereof, 
 where there was no gross neglect or bud faith on the part 
 of the pledgee in relation thereto. The pledgee is entitled 
 to recover the whole face of the principal note. 3 Nor where, 
 having sold the negotiable collateral notes deposited, the 
 pledgee himself became the purchaser, and the relation of 
 
 1 Sonoma Valley Bank v. Hill, 59 son, 35 N. J. Eq. 160; Bank v. 
 Cal. 107; Robinson v. Hurley, 11 "Woodruff, 34 Vt. 89. Where an in- 
 Iowa, 410; Rich v. Boyce, 39 Md. solvent corporation had pledged to 
 314; American Nat. Bank v. Harri- a bank bills and notes to secure the 
 son Wire Co., 11 Mo. App. 446; payment of indebtedness, part of 
 Winthrop Savings Bank v. Jackson, the collateral security being still 
 67 Me. 570 ; Royal Bank v. Railroad held by the pledgee, an action by it, 
 Co., 100 Mass. 444; Beckwith v. Sib- under 322 of Civ. Code of Cal., 
 ley, 11 Pick. 482; Townsend v. against a stockholder in such cor- 
 Newell, 14 Ib. 332 ; Whitwell v. poration to recover his ratable pro- 
 Brigham, 19 Ib. 117; Hale v. Rider, portion of the indebtedness, was 
 5 Cush. 231 , Taylor . Cheever, 6 supported, the liability of the stock- 
 Gray. 148; Butterworth v. Kennedy, holder making him a principal debt- 
 5 Bosw. 143; Langdon . Buel, 9 or. Sonoma Valley Bank v. Hill, 
 Wend 80, 83; Case v. Boughton, 11 supra. 
 
 Ib. 106; Elder v. Rouse, 15 Ib. 218; * Taylor v. Cheever, 6 Gray, 146. 
 
 Munger v Albany City Bank, 85 N. * Marschuetz . Wiight, 50 Wis. 
 
 Y. 580; Farmers' Ins. Co. v. Wilkin- 175.
 
 1&8 
 
 NEGOTIABLE COLLATERAL SECURITIES. 
 
 the pledge continuing, an action is brought upon the prin- 
 cipal note. The pledger is not entitled to set off the full 
 value of the securities at the time of the void sale as against 
 his liability upon the note. 1 The pledgee may attach the 
 property of the pledgor to respond to the execution in his 
 action upon the principal demand.* A debtor procured a 
 note of a third person, and pledged it as collateral security 
 for his own note, the pledgee having indorsed the same, 
 obtaining discount of the collateral note. At maturity, the 
 note was dishonored, and the pledgee was obliged to take 
 it up. Other notes were then substituted, one being paid, 
 the second protested. The pledgee then sued upon the 
 principal note. He was allowed to enforce the note with- 
 out surrendering the unpaid collateral note until he had, 
 been paid his debt. 8 The loss of the collateral security by 
 theft, without negligence, before the matr.rity of the prin- 
 cipal note, is no defense as against an action on the note, 
 the duty of the pledgee relative to the safe-keeping of such 
 collateral security, an United States government bond, be- 
 ing an independent promise, and not a condition of the 
 promise in the principal note. 4 
 
 106. PRODUCTION OP COLLATERAL SECURITIES UPON 
 ACTION ON THE PRINCIPAL NOTE. The pledgee of nego- 
 tiable collateral paper, although entitled, upon default, to 
 enforce pa3 r ment of the principal obligation, and to retain 
 such collateral securities until payment, should be ready, in 
 such action, in order to entitle himself to judgment, to pro- 
 duce the negotiable collateral securities, or account satis- 
 factorily for their non-production, as they may have passed 
 before maturity into the hands of bcna fide holders for value, 
 without notice, 8 being the rule enforced in actions upon 
 
 1 Killian . Hoffman, 6 Bradw. 4 Winthrop Savings Bank . Jack- 
 
 200. son, 67 Me. 570. 
 
 Whitwell v. Brigham, 19 Pick. Stuart v. Bigler, 98 Pa. St. 80; 
 
 117. Spalding v. Bank, 9 Ib. 28; Lucas 
 
 Hunter t. Moul, 98 Pa. St. 13. . Harris, 20 111. 167; Carr . Field-
 
 THE ENFORCEMENT THEREOF. 139 
 
 negotiable instruments. 1 Nor is it a good reason for the non- 
 production of such negotiable collateral securities, that they 
 have, since the time of pledge, become valueless, as non 
 constat, they may have been negotiated by the pledgee while 
 they were stiil of value. 8 Upon the non-production of nego- 
 tiable collateral securities, and failure to account therefor, 
 the pledgee is charged with the face value of the same, as 
 they may have passed before maturity to an innocent in- 
 dorsee, without notice of antecedent equities, the pledgee 
 having the full title to them. 8 Upon proof that the maker 
 of a negotiable promissory note indorsed as collateral secur- 
 ity, was solvent for some time after its maturity, the pledgee, 
 seeking to enforce the principal note, and failing to produce 
 the negotiable collateral note, was charged with the face 
 value thereof, as a payment upon such principal obligation. 4 
 If such negotiable collateral securities are placed in the 
 hands of a third party selected by the pledgor, and are not 
 under the control of the lender, no defense against an action 
 upon the principal indebtedness arises from the loss of them. 5 
 An objection founded upon the non-production of negotia- 
 ble collateral securities upon which judgment had been 
 entered, comes too late when raised for the first time in an 
 appellate court.* 
 
 107. AND OF THE PRINCIPAL NOTE UPON SUIT ON 
 COLLATERAL PAPER. The same rule as to production of 
 securities when seeking judgment, is applied where suit is 
 
 en, 18 Ib. 77, 81; Ocean Nat. Bank and . Robinson, 7 B. & C. 90; Crow 
 
 v. Faut, 50 N. Y. 474. See Matte- . Clay, 9 Ex. 604; Anderson v. Heath, 
 
 son v. Matteson, 55 Wis. 452. A 4 M. & S. 308. 
 
 creditor, who holds a bill of ex- * Stuart v. Bigler, 98 Pa. St. 80. 
 
 change as collateral security, can not * Spalding v. Bank, 9 Pa. St. 28; 
 
 prove his debt in the English bank- Lucas . Harris, 20 111. 167 ; Carr v, 
 
 ruptcy courts without producing the Fielden, 18 Ib. 77, 81. 
 
 bill. Ex parte Jacobs, 8 R. 17 Eq. 4 Commercial Bank v. Martin, 1 
 
 575; ex parte Ash worth, 18 Ib. 705. La. Ann. 844; Goodall v. Richard- 
 
 1 Smith v Rockwell, 2 Hill, 482 ; son, 14 N. H. 567. 
 
 Bateman v. Poole, 15 Wend. 637; Bank v. Peabody, 20 Pa. St. 454. 
 
 Rowley v. Ball, 3 Cow. 303; Haus- Compton v. Blair, 46 Mich. 1.
 
 140 NEGOTIABLE COLLATERAL SECURITIES. 
 
 brought upon the collateral paper. In such cases the pro- 
 duction of the negotiable evidences of principal indebted- 
 ness is necessary where a bond and mortgage were given as 
 collateral security for the payment of a negotiable promis- 
 sory note, upon a suit to foreclose the mortgage the produc- 
 tion and cancellation of the note was required before judg- 
 ment was entered. No one would be entitled to enforce its 
 collection after judgment, unless it had passed before matur- 
 ity into the hands of a bona fide person advancing value 
 thereon, without notice of equities. The non-production of 
 negotiable evidences of debt, when seeking to foreclose 
 security given for their payment, is prima facie evidence of 
 their satisfaction. 1 Where such negotiable evidences of debt 
 have been merged into a judgment, the note need not be 
 produced upon subsequent proceedings upon the securities 
 given to secure their payment. The judgment rendered 
 upon the note is then the evidence of the debt.* Where 
 judgment has been entered upon the principal debt, the col- 
 lateral securities of a third person pledged for the payment 
 are not merged in such judgment, and the pledgee is entitled 
 to sue the pledger upon his indorsement of such collateral 
 notes, notwithstanding the judgment upon the principal 
 debt. 1 
 
 108. COLLATERAL PAPER UNAFFECTED BY MERGER 
 OF NOTE INTO JUDGMENT. No change is created in the 
 relations of parties to a contract of pledge by a judgment 
 having been entered upon the principal note. The pledgee 
 is entitled to retain and collect all collateral securities until 
 such judgment is fully paid. 4 A distinction is drawn be- 
 
 'Matteson v. Matteson, 55 Wig. U. 8.206; Wyman v. Cochranc, 35 
 
 452; Bergen t>. Urbahn, 83 N. Y. 49; 111. 154. 
 
 Jackson v. Willard, 4 Johns. 43; Stcele . Lord, 80 Hun. 27: Bank 
 
 Langdon v. Buel, 9 Wend. 80; Lucas of Chenango v. Hyde, 4 Cow. 509. 
 
 t>. Harris, 20 111. 167. 4 Smith v. Strout, 63 Me. 205 ; Com- 
 
 * Conn. Mo. Ins. Co. v. Jones, 8 stock t>. Smith, 23 Ib. 202; Chapman 
 
 Fed. Rep. 303; Ober v. Gallagher, 93 c. Lee, 64 Ala. 483 ; Whitwell tx
 
 THE ENFORCEMENT THEREOF. 141 
 
 tween payment of the debt by the pledger and a rendition 
 of judgment upon the debt as to his rights to a return of 
 collateral securities. Obtaining judgment is only one step 
 to obtaining satisfaction. Demand made in an action upon 
 a note for the surrender of the collateral securities as a con-* 
 dition precedent to judgment, was refused. 1 Nor where the 
 pledgee has proved for the whole amount of his debt in 
 insolvency proceedings against the pledger.*' Nor will a 
 judgment on a note held as collateral merge or extinguish 
 the principal debt.* 
 
 109. ACTION UPON ANTECEDENT DEBT NOT AFFECTED 
 
 BY RECEIVING COLLATERAL SECURITY. No presumption 
 
 arises from the acceptance of negotiable promissory notes of 
 the debtor or of a third person for a pre-existing debt, that 
 the same are received in payment; nor does such acceptance, 
 in the absence of agreement, express or implied, suspend 
 or impair the rights of the creditor to enforce the principal 
 indebtedness. 4 The taking of other securities of equal or 
 inferior degree does not, in such cases, ipse facto, discharge 
 
 Brigham, 19 Pick. 117; Beckwith . 34 Vt. 89. If the antecedent debt 
 
 Sibley, 11 Ib. 483; Fisher v. Fisher, has passed into judgment, and the 
 
 98 3Iass. 803 ; Sonoma Valley Bank note given is dishonored, the judg- 
 
 v. Hill, 59 Cal. 107; Buncombes. N. ment may be enforced either at law 
 
 Y. etc. R. R. 84 N. Y. 193, 201 ; s. c. or in equity. Morris v. Harveys, 75 
 
 88 N. Y. 1 ; Butler v. Miller, 1 Ib. Va. 726. Suit can not be maintained 
 
 496, 500; Waldron v. Zacharie, 54 in Vermont on the original indebted- 
 
 Tex. 503. ness where the promissory note of 
 
 1 Hale v. Rider, 5 Cush. 231. the debtor, or of a third person, tas 
 
 s In re Litchneld Bank, 28 Conn. been given in payment, whether the 
 
 575. new note be paid or not. Hutching v. 
 
 3 Hawks v. Hinchcliffe, 17 Barb. Olcutt 4 Vt. 549; Torrey v. Baxter, 
 
 492. 13 Ib. 452 ; Farr v. Stevens, 26 1 b. 299; 
 
 Tobey v. Barber, 5 Johns. 68; Collamer v. Langdon, 29 Ib. 32; 
 
 Jaffray v. Cornish, 10 N. H. 505; Wait . Brewster, 31 Ib. 516. In 
 
 Peter v. Beverley, 10 Pet. 532; Darst Kentucky the receipt of such paper 
 
 v. Bates, 95 111. 512; Wilhelm v. in discharge of an antecedent debt 
 
 Schmidt, 84 111. 183, 188 ; Mclntyre suspends the right of action on the 
 
 t. Kennedy, 29 Pa. St. 448; Farmers' original debt. Alexander v. Bank, 2 
 
 Ins. Co. . Wilkinson, 35 N. J. Eq. Met. 534; Greenwell v. Hayden, 78 
 
 160; Bank of Rutland v. Woodruff, Ky. 332.
 
 142 NEGOTIABLE COLLATERAL SECURITIES. 
 
 a lien attaching by reason of an original security, unless an 
 agreement of the parties that such should be its effect be 
 shown. 1 Such agreement may be established either by 
 proof of an express contract, or by proof of circumstances 
 which justifies its implication.* If negotiable paper be in- 
 dorsed as collateral security for an antecedent debt, and is 
 dishonored while in the hands of the pledgee, the right of 
 the latter to recover upon the original debt is not affected. 8 
 And an action upon the original debt is maintainable, where 
 such negotiable collateral notes, having been discounted 
 by the pledgee at a bank with the help of his own credit, 
 are dishonored. 4 
 
 In New York the decisions are that the acceptance by a 
 creditor of a new promise payable at a future day, from his 
 debtor in payment of an antecedent indebtedness, is no de- 
 fense to a suit upon the original cause of action, even if 
 there be an express agreement between the parties that the 
 new security shall be a satisfaction of the old. The reason 
 for refusing to give validity to the new promise of the debt- 
 or is that it lacks the essential requisite of a valuable con- 
 sideration. 5 The rule, however, is qualified, so as not to be 
 
 1 Schank t>. Arrowsmith, 9 N. J. Eq. Waydall . Luer, 5 Hill, 448 
 
 323; Freeholders v. Thomas, 20 Ib. (Judge Cowen). The case was after- 
 
 41; Hutchinson . Swartsweller, 32 wards reversed (3 Denio, 410) but 
 
 Ib. 205; "Wildrick 0. Swain, 34 Ib. on the point in question the authori- 
 
 167; Lord . Bigelow, 124 Mass. 185; ty of Judge Cowen's opinion was not 
 
 Whitwell n. Brigham, 19 Pick. 117; shaken. The rule was followed in 
 
 Comstock 0. Smith. 23 Me. 202; Cole v. Sackett, 1 Hill, 516; Hill 0. 
 
 Drake 0. Mitchell, 3 East. 251 ; Bel- Beebe, 13 N. Y. 556; Rice v. Dewey, 
 
 shaw0. Bush, 11 C. B. 191; Peacock 64 Barb. 455. Contra: Meyers v. 
 
 v. Purcell, 14 C. B. N. 8. 728; Nat. Welles, 5 Hill, 463, and in Feldman 
 
 Sav. Bank 0. Tranah, L. R. 2 C. P. 0. Beier, 78 N. Y. 293, the court, al- 
 
 556; Cohen 0. Hole, L. R. 3 Q. B. D. though citing the above cases, say: 
 
 871. "It may be assumed that, as there was 
 
 * Wildrick v. Swain, supra; no express agreement that the note 
 Farmers' Ins. Co. v. Wilkinson, 35 should be received in full satisfac- 
 N. J. Eq. 169. tion and discharge of the past due 
 
 Hunter v. Moul. 98 Pa. St. 18. interest, the creditor was not pre- 
 4 Alcock D. Hopkins. 6 Cush. 484; eluded from collecting the same." 
 
 Small 0. Franklin Co., 99 Mass. 277. Merely taking the note of a debtor
 
 THE ENFORCEMENT THEREOF. 143 
 
 applied in cases where a negotiable note of a third person, 
 indorsed by the debtor, or a third person has become surety 
 upon a new note, there being no agreement to take either 
 the note or the additional liability of the surety, as collateral 
 security for the original antecedent debt. 1 Where a cred- 
 itor of a partnership, after the dissolution thereof, and know- 
 ing that one of the co-partners had agreed to assume and 
 pay the debts of the firm, received the negotiable note of 
 such partner in payment, and extended the time of payment, 
 the other partners were discharged.* 
 
 110. NOR, IF TRANSFERRED AS COLLATERAL FOR 
 
 SIMPLE CONTRACT DEBTS. In Massachusetts, where nego- 
 tiable promissory notes of a third party are received, upon 
 an agreement by the creditor to release a pre-existing simple 
 contract debt upon payment of such collateral notes at 
 maturity, the notes not being paid, the creditor is restored 
 to his remedy upon the original debt. 8 If such collateral 
 notes are discounted by the indorsee at a bank, with the 
 help of his own credit, and are not paid, the original cause 
 of action is revived. 4 Such collateral notes may be returned 
 at maturity, upon their dishonor. 5 Suit may be brought 
 upon such original simple contract debt, without returning 
 the collateral notes, after failure to collect the same. 4 The 
 same rule is in force in England, in cases where a negotiable 
 instrument is given and accepted on account of a simple 
 contract debt. The holder, upon its non-payment, may sue 
 
 in payment and giving a receipt in * Arnold . Camp, 12 Johns 409; 
 
 full, does not of itself establish an Millerd . Thorn, 56 N. Y. 402 ; 
 
 agreement to take the note absolutely Waydall v. Duer, supra. 
 
 in payment, and is not an extin- ' Lord v. Bigelow, 124 Mass. 185; 
 
 guishment of the original debt. Put- Dows v Ssvett, 134 Mass. 140; The 
 
 nam v. Lewis, 8 Johns. 389; Buswell Kimball, 3 Wall. 45. 
 
 . Pioneer, 37 N. Y. 312; Muldon v. * Alcock v. Hopkins, 6 Gush. 484. 
 
 Whitlock, 1 Cow. 290; Feldman v. 5 Small v. Franklin Mining Co., 99 
 
 Beier, supra. Mass. 277. 
 
 1 Waydall v. Duer, Colec. Sackett, Comstock v. Smith. 23 Me. SOS; 
 
 and Rice v. Dewey, supra. Whitwell v. Brigham, 19 Pick. 117.
 
 1-14 NEGOTIABLE COLLATERAL SECURITIES. 
 
 upon the original debt, 1 if he has taken the proper steps to 
 charge the parties to the negotiable collateral security. 8 
 
 111. ELECTION OP PLEDGEE AS TO ENFORCEMENT 
 OF COLLATERAL SECURITIES. The pledgee, holding several 
 securities in pledge upon the same debt, is entitled 
 to elect upon which he will proceed, subject to equitable 
 considerations as to the rights of third persons of whose 
 claims he has notice. Unless restricted by agreement, the 
 pledgee may proceed upon default upon all of the collateral 
 securities held by him, or upon one or more of them, in 
 order to obtain satisfaction of the principal indebtedness. 
 The pledgee holds all surplus avails of such collateral 
 securities, after payment of his debt, for the benefit ot the 
 pledger, or of third persons equitably entitled thereto. 8 
 The pledgee is required in such election to act in good faith. 
 Should he resort specially to one collateral security held by 
 him, equal in value to the amount of the principal debt, 
 and by his fraudulent and wrongful sale thereof, realize 
 much less than the value of such security, leaving a por- 
 tion of the principal debt unpaid, and is proceeding to sell 
 the remaining collateral notes, such sale is unauthorized, 
 and the pledgee liable to account for the full value of the 
 collateral securities. 4 
 
 1 Drake t>. Mitchell, 3 East. 251 ; to any or all to compel satisfaction 
 
 National Sav. Bank v. Tranah,L. R. of the debt. Andrews v. Section, 
 
 2 C. P. 556; Cohen . Hole, L. R. 3 2 Bid. 629: Chapman . Clough, 6 
 
 Q. B. D. 371. Vt. 123; Third Nat. Bank v. Harri- 
 
 Belshaw v. Bush, 11 C. B. 191; son. 10 Fed. Rep. 243, 253; Ayres 
 
 Peacock v. Pursell, 14 C. B. N. S. v. Watson, 57 Pa. St. 123; Union 
 
 728; Valpy v. Oakley, 16 Q. B. 949; Bank v. Laird, 2 Wheat. 390; Ober 
 
 Miles v. Gorton, 2 Cr. & M. 512. v. Gallagher, 93 U. S. 199. Ex parte 
 
 ' Buchanan v. International Bank, Mure, 2 Cox, 63; Darlow . Cooper, 
 
 78111. 500. "The law does not re- 34 Beav. 281; Kellock's case, L. R. 
 
 quire a party to rely upon one kind 3 Ch. 776. 
 
 of security; a claim may be secured 4 Mowry v. First Nat. Bank, 54 
 
 in as many different modes as the Wis. 38. 
 parties may desire." He may resort
 
 THE ENFORCEMENT THEREOF. 145 
 
 112. LIABILITIES OF PARTIES TO NEGOTIABLE COL- 
 LATERAL NOTES WHEN UNAFFECTED. The liabilities of 
 parties to negotiable instruments held by the pledger, and 
 indorsed by him to the pledgee as collateral security to se- 
 cure the payment of a principal and independent debt, are 
 fixed by the order in which their names appear upon the 
 paper; and the pledgee thereof, holding by indorsement, so 
 as to be a party thereto, for an advance, in good faith, with- 
 out notice, of equities, is a holder for value, in the usual 
 course of business, and entitled, upon default and notice, to 
 sue the parties thereon. Nor is it material to the parties, 
 bound upon such collateral note, that the pledgee may hold 
 other collateral securities to secure the same debt, as their 
 obligation to pay is an independent contract complete in 
 itself. Where such negotiable collateral securities, executed 
 by different makers, were indorsed as security for a princi- 
 pal note, although the pledgee, a bank, had a sufficiently 
 large deposit to satisfy the principal note, and the renewals 
 thereof, and the personal liability of the pledgor upon his 
 own note, and a power of sale of the collaterals under the 
 contract of pledge, yet its failure to resort to either was no 
 defense to the liability of the parties bound upon the nego- 
 tiable collateral securities in an action thereon by the 
 pledgee. ' Where a negotiable promissory note of a third 
 party, properly indorsed, is received before maturity from 
 the payee and indorser as "collateral security for a valuable 
 consideration, without notice, in good faith, the pledgee may 
 recover thereon against the maker, although the latter has 
 paid the note to the pledgor and payee, subsequently to and 
 without notice of the indorsement. 2 The like rule is en- 
 
 1 Third Nat. Bank v. Harrison, 10 428; Steere V. Benson, 2 Bradw. 
 
 Fed. Rep. 243. 560; Dix v. Tully, 14 La. Ann. 460. 
 
 2 City Bank v. Taylor, 60 la. 66 The maker of negotiable paper is not 
 
 (15 C. L. N. 131) ; Fennell v. McGow- discharged if before its maturity, 
 
 an, 58 Miss. 261 ; Vallette v. Mason, and after its transfer, even as collat- 
 
 1 Smith (Ind.) 89; Williams v. Smith, eral security, he makes payment to 
 
 2 Hill, 301 ; Mayo v. Moore, 28 111. any other than the real holder. 
 
 10
 
 146 NEGOTIABLE COLLATERAL SECURITIES. 
 
 forced in cases where the maker, being chargeable with no- 
 tice of the indorsement of his note as collateral security, pays 
 the same to the payee and pledger. 1 Such payment ma}' be 
 made by the consent of or authority of the pledgee, or 
 may be subsequently ratified by him.* Where the pledgee 
 of negotiable collateral notes is not liable for any surplus 
 arising from the collection of them to the pledgor or third 
 parties, the enforcement of such collateral securities against 
 the parties thereto is restricted to the amount of the 
 advances made. 1 
 
 113. CONCURRENT REMEDIES UPON THE PRINCIPAL 
 NOTE AND COLLATERAL SECURITIES. The pledgee holding 
 negotiable collateral securities for the payment of the 
 pledgee's principal obligation, is entitled to proceed with 
 the enforcement of both the principal and collateral securi- 
 ties, at the same time, and to judgment and execution, 
 although entitled to but one satisfaction. 4 A suit upon the 
 principal indebtedness may be commenced, although a suit 
 is in progress upon the negotiable promissory note of a third 
 party received as collateral security, and the pledgee has at- 
 tached property of persons liable thereon to answer the 
 judgment. 8 The entry of a judgment upon the principal 
 indebtedness is not a bar to proceedings against the pledgor 
 and other persons, makers and indorsers of collateral 
 notes.' Negotiable bonds of a corporation having been sold 
 to a bona fide purchaser for value, and other bonds pledged 
 as collateral securities for those sold, the pledgee, in an ac- 
 
 Richardson v. Rice, 9 Tenn. 290, 23 Hun, 559; Royal Bank T. Grand 
 
 citing Gosling . Griffin to same Junction Ry. Co., 100 Mass. 444; 
 
 point, in note. Chapman v. Lee. 64 Ala. 483. He 
 
 1 Fennell c. McGowan, supra. may recover the costs paid by him 
 
 * City Bank v. Taylor, supra. in each suit. Plants' etc. Co. v. 
 
 * Vallette v. Mason, and Williams Fahey, 20 Wis. 200; Hilton v. War- 
 . Smith, supra. ing, 7 Ib. 492. 
 
 4 Com. Exch. Ins. Assn. v. Bab- Chapman v. Clough, 6 Vt. 123. 
 cock, 57 Barb. 233; Butler . Miller, Stecle v. Lord, 30 Hun, 27. 
 1 N. Y, 496 ; Sickles v. Richardson,
 
 THE ENFORCEMENT THEREOF. 147 
 
 tion upon both classes of bonds, was given a judgment for 
 the face value of all he held, whether as vendee or pledgee. 
 T T ntil payment of the actual indebtedness to the pledgee, 
 the pledgors had no equity to set up that some of the bonds 
 were held as collateral security. 1 
 
 114. THE CARE IN COLLECTION OF COLLATERALS 
 REQUIRED OF THE PLEDGEE HlS RESPONSIBILITY FOR 
 
 LOSS. Where negotiable instruments made by a third 
 party are used as collateral security for the promissory note 
 or bill of exchange of the pledgor, so that the pledgee 
 of them becomes a party thereto, and such collateral paper 
 matures before the principal debt, the duty and obligation 
 of the pledgee in the collection thereof, is performed by the 
 exercise of reasonable and ordinary care and diligence. 
 More than this is not required of the pledgee.* Although 
 in such cases, where he has become a party to the collateral 
 security, it is not enough for him to keep the same in safety, 
 as no one but the pledgee can make demand of payment 
 and give notice of dishonor, or upon default, bring an action 
 to enforce payment by legal process. 8 Generally, the most 
 important consideration as to the pledgee's duty relative to 
 collateral securities is, that perfect good faith should be ob- 
 served by him in his dealings therewith. If he acts in good 
 faith, the pledgor can not complain. Only in cases of 
 
 1 Royal Bank v. Grand Junction and insist upon its payment before 
 
 Ry. Co., 100 Mass. 444. maturity, even if it will be paid, and 
 
 'Reeves v. Plough, 41 Ind. 204; the maker afterwards becomes in- 
 
 Kiser v. Ruddick, 8 Blackf. 882; Me- solvent. Such demand is not with- 
 
 Lenore v. Hawkins, 46 Miss. 715; in the rule of ordinary diligence. 
 
 Jones v. Hicks, 52 Ib. 682; Noland Roberts v. Thompson, 14 Ohio St. 1. 
 
 v. Clark, 10 B. Mour. 239; Childs v. * Roberts v. Thompson, supra. 
 
 Corp, 1 Paine C. C. 284; Lawrence But where the collateral is simply :i 
 
 v. McCalmont, 2 How. 426. A ne- receipt for a note in which the 
 
 gotiable note of a third party was pledgor had a part interest only, the 
 
 pledged before due as collateral se- pledgee is not bound to pursue its 
 
 curity, the debtor waiving demand collection, and that if uncollectible 
 
 and notice of non-payment. The the loss fell upon the pledger, 
 
 pledgee is not required to demand Smouse v. Bail, 1 Grant's Cas. 397,
 
 148 NEGOTIABLE COLLATERAL SECURITIES. 
 
 fraud or gross negligence on the part of the pledgee will he 
 be held to stricter account. 1 
 
 If upon a pledge of negotiable collateral securities, so as 
 to convey the title thereto, the pledgee, because of his gross 
 negligence, or by his tortious transfer of them or dealings 
 therewith, fails to collect the same of the parties bound 
 thereon, when it might have been done, and the pledger is 
 injured and the amount of the collateral paper lost, the 
 pledgee is chargeable with the face of such collateral securi- 
 ties as in payment and discharge of the principal debt.* 
 Where the opportunity of collecting collateral bills or 
 notes is lost by the insolvency of the parties thereto, by 
 reason of the supine negligence of the pledgee, when with 
 ordinary care the same might have been enforced, the latter 
 is liable to account for the full loss and darfiage of the 
 pledger. 8 Such responsibility of the pledgee is limited to 
 the actual loss. 4 The liability of the pledgor a3 indorser 
 upon such negotiable collateral notes of third parties is, in 
 such cases of gross negligence, discharged. 8 
 
 115. THE PLEDGEE, WHEN NOT LIABLE FOR MERE 
 DELAY IN COLLECTION OP COLLATERAL SECURITIES. The 
 
 1 Black River Bank v. Page, 44 N. 614; Howard v. Gardner, 10 N. Y. 
 
 Y. 453. 261; Baker e. Briggs, 8 Pick. 129. 
 
 * Powell v. Henry, 27 Ala. 612; Where promissory notes secured by 
 
 Cooke v. Chancy, 14 Ib. 65; Wood mortgage were held as collateral se- 
 
 . Mathews, 73 Mo. 481; Lyon v. curity and an action was brought 
 
 Huntington Bank, 12 S. & R. 69; for damages on account of neglect 
 
 Spalding t>.Barr,9 Pa. St. 28; Wake- to foreclose, the measure of damages 
 
 man v. Goudy, 10 Bosw. 208; Rob- recovered was only the actual loss 
 
 erts v. Thompson, 10 Ohio St. 1; caused by the pledgee's neglect, 
 
 Whittaker . Charleston Gas Co., 16 as the land might still be ample se- 
 
 W. Va. 717; Noland . Clark, 10 B. curity. Steele c. Brown, 75 111. 
 
 Mon. 239; Westphal v. Ludlow, 2 452. Lamberton v. Windom, 12 
 
 McCrary, 505; Stuart v. Bigler, 98 Minn. 232; Wakeman v. Goudy, 10 
 
 Pa. St. 80. Bosw. 208; Slevin v. Morrow, 4 Ind. 
 
 Hannah v. Holton, 78 Pa. St. 425; Lyon v. Huntington Bank, 12 
 
 834. 8. & R. 61. 
 
 4 Grove v. Roberts, 6 La. Ann. 210; * Whitten . Wright, 34 Mich. 92. 
 Barrow v. Rhinelander, 3 Johns. Ch.
 
 THE ENFORCEMENT THEREOF. 149 
 
 pledgee of negotiable collateral securities, however, is not 
 held to strict responsibility in proceeding at once, upon de- 
 fault, in the enforcement thereof. Mere delay in so doing 
 is not sufficient to create any liability upon his part to the 
 pledger. 1 Where there is no suspicion that the maker is 
 embarrassed, and no request on the part of the pledger 
 that collection should be promptly made, the pledgee is not 
 answerable for a subsequent actual loss. 9 And where the 
 pledgee has information upon which he is certain that a suit 
 upon the collateral note would be fruitless, he is not re- 
 quired to sue the same.* The pledgee of negotiable col- 
 lateral paper in order to be charged, upon failure to collect, 
 with the face value thereof, as a payment pro tanto of the 
 principal debt, must have been guilty of such bad faith or 
 gross negligence that it would be unjust and inequitable to 
 the pledgor were he not so charged. 4 In case of delay on 
 the part of the pledgee to enforce the payment of collateral 
 securities and possible depreciation in the value of them, 
 after the maturity of the principal note, the pledgor, upon 
 the equitable condition of paying or tendering the amount 
 of his debt, becomes entitled to a return of the collateral 
 paper while it remains of value. 5 Although he will have 
 no right to call for a return of such collateral securities 
 upon a payment or tender of but an aliquot or other portion 
 of the debt ;' the pledgee having a right to retain all the 
 collateral securities until actual satisfaction of his whole de- 
 mand or tender of the sum due. 7 
 
 116. THE PLEDGEE, WHEN NOT LIABLE FOR NEGLI- 
 GENCE OF AGENT. The pledgee of negotiable collateral 
 securities who has employed an agent or attorney in con- 
 
 1 Steger . Bush, S. & M. Ch. 172. ham, 87 Pa. St. 394; In re Kettera's 
 
 4 Goodale . Richardson, 14 N. H. Est. 17 Ib. 424. 
 
 567. In re Kettera's Est. supra. 
 
 3 Smith v Felton, 85 Ind. 223. 7 Hunter v. Moul, 98 Pa. St. 13; 
 
 4 Wells v. Wells, 53 Vt. 1. Benoir v. Peguin, 40 Vt. 199 ; Jones 
 8 Androscoggin Bank v. Auburn . Merchant's Bank, 4 Robt. 221 ; 6 
 
 Bank, 48 Me. 335; O'Neill v. Whig- Ib. 162.
 
 160 NEGOTIABLE CO! > ATKRAL SECURITIES. 
 
 nection with the collection or realization thereof, is not 
 liable, where he has exercised reasonable care and judg- 
 ment in his selection, by reason of the misconduct or gross 
 negligence of the person or persons employed. 1 If a pled- 
 gee of negotiable paper deposits the same in a bank or 
 agency, for the purpose of having collections made, and 
 such bank or agency fails or neglects to take the proper 
 steps to charge the parties liable thereon, an action against 
 the bank or agent may be brought in favor of anyone bene- 
 ficially interested in such collateral securities. The pledgee 
 himself is entitled to an action, the amount recovered being 
 applied, at the maturity of the principal note, as a payment 
 upon the same. The pledger, upon payment of the debt, 
 being entitled to an immediate return of the collateral se- 
 curities, a right of action against the bank or agency at 
 once accrues in his favor, as the real party in intercut." 
 
 1 Commercial Bank v. Martin, 1 * McKinster r. Bank of Tl tir-a, 9 
 
 Lou. Ann. 344; Exeter Bank v. GOT- Wend. 46 ; 11 Ib. 473: W'hitoev t>. 
 
 don, 8 N. H. 66; Goodale v. Rich- M. U. Exp. Co, 104 M*<, 153. 
 ardson, 14 Ib. 567,
 
 THE PLEDGEE'S SALE. 151 
 
 CHAPTER XII. 
 
 PLEDGEE'S SALE OF COLLATERAL SECURITIES. 
 
 117. The pledgee of bills and notes has no right of sale. 
 
 118. The right of sale under contract. 
 
 119. The pledgee's relief in equity to obtain sale of collateral paper. 
 
 120. The pledgee's right to sell negotiable bonds, on default. 
 
 121. The requirements of a valid sale. 
 
 122. Notice of sale of collateral paper when provided for by contract. 
 
 123. Notice of sale by pledgee, when sufficient. 
 
 124. Right of pledgee of negotiable bonds, upon default, to enforce 
 
 mortgage securities. 
 
 125. The title of bona fide purchasers for value, at sale of collateral 
 
 securities. 
 
 126. The pledgee as purchaser of negotiable collateral paper. 
 
 117. THE PLEDGEE OF BILLS AND NOTES HAS NO 
 RIGHT OF SALE. The pledgee of negotiable instruments 
 such as bills of exchange and promissory notes, so as to be- 
 come a party thereto, as collateral security for the payment 
 of a principal note or obligation, is not entitled, upon de- 
 mand of payment and default of the principal debt, and 
 notice to the pledgor, to offer such negotiable collateral 
 securities, at either public or private sale, in the absence 
 of authority by special contract so to do. 1 Negotiable col- 
 Fletcher 0. Dickinson, 7 Allen, Conn. 275; Whittaker "0. Charleston 
 23; Nelson v. Edwards, 40 Barb. Gas Co., 16 W. Va. 717. In Joliet 
 279; Same v. Wellington, 5 Bosw. Iron Co. v. Scioto etc. Co., 82 111. 
 178; Brookman v. Metcalf, 5 Ib. 429; 548, the Court (Dickey, J.) says: 
 Brown v. Ward, 3 Duer, 660; Lam- "The pledge of commercial paper 
 berton v. Windom, 12 Minn. 232; as collateral security for the pay- 
 Zimpleman . Veeder, 98 111. 613; ment of a debt does not, in the ab- 
 Morris Canal Co. v. Lewis, 12 N. J. sence of a special power for that 
 Eq. 321 ; In re Litchfield Bank, 28 purpose, authorize the party to
 
 152 NEGOTIABLE COLLATERAL SECURITIES. 
 
 lateral securities, such as bills and notes, are held by the 
 pledgee under a quasi trust in favor of the plndgor, and are 
 of such a character that a public or private sale is generally 
 made at a sacrifice. The solvency or circumstances of parties 
 to the collateral paper may not be well known and few per- 
 sons will purchase, and those for speculation, and at low 
 prices. The pledger is not required to submit his negotiable 
 collateral securities to an ordeal to which commercial paper 
 is unusually subjected, arid which must be destructive of its 
 value except in rare cases. 1 The rule disapproving of sales 
 of negotiable collateral securities either at public or private 
 sale, without express contract authorizing such sale, applies 
 where such collateral bills or notes mature later than the 
 original debt or obligation, 8 but does not apply to long time 
 paper or negotiable bonds. 1 
 
 118. THE BIGHT OF SALE UNDER CONTRACT. A 
 power of sale of such negotiable instruments held as collat- 
 eral security may be given by the contract of pledge. Sucli 
 a power is not against public policy, nor is it open to any 
 objections as to its validity. 4 Such a power given by con- 
 tract, however, so far as it enables the pledgee to extin- 
 
 whom such paper is so pledged, to 187. "It will rather be presumed 
 sell the securities so pledged upon that it was the intention of the par- 
 default of payment, either at public ties to the contract that the creditor 
 or private sale. He is bound to hold should, if he resorted to the pledge 
 and collect the same as it becomes in place of the personal liability of 
 due, and apply the net proceeds to the debtor, accept the money upon 
 the payment of the debt so secured, the hypothecated securities as it be- 
 From the very nature of the case, came due and payable, and apply it 
 property can only be applied as se- to the satisfaction of the debt." 
 curity through the process of sale ; Wheeler v. Newbould, 16 N. Y. 
 not so, with bonds, mortgages, or 392. 
 
 promissory notes." Union Trust * Fraker . Reeve, 36 Wis 85. 
 
 Co. u. Rigdon, 93 111. 458; Zimple- * Union Trust Co. v. Rigdon, 93 
 
 man v. Veeder, 98 Ib. 613; Walker 111.458. The power to "negotiate" 
 
 c. Carleton, 97 Ib. 582. collateral notes, upon default, in- 
 
 1 Wheeler v. Newbould, 5 Duer, eludes the right of sale. Fraker 
 
 29; affirmed 16 N. Y. 392. Reeve, 36 Wis. 85. 
 
 * Nelson v. Wellington, 5 Bosw.
 
 THE PLEDGEE'S SALE. 153 
 
 guish the right of the pledger to redeem, will as other con- 
 tracts affecting equities of redemption, be construed favor- 
 ably for the interests of the pledger, so far as is consistent 
 with the rights of the pledgee. The power of sale must be 
 exercised with a view to the interest of the pledgor as well 
 as of the pledgee, and a sale must not be forced for barely 
 enough money to secure the payment of the debt ; and de- 
 mand of payment of the debt should generally precede it. 1 
 The terms of the contract govern the rights of the parties 
 as to the time, place, and notice of sale, and must be strictly 
 pursued. 2 Where these are not prescribed, the sale should 
 be made openly, at a public place, and after proper notice to 
 the pledger. 8 It is no part of the duty of a pledgee of 
 negotiable securities having a power of sale of securities to 
 constantly watch the market, and take advantage of the 
 most favorable opportunities for selling. 4 Such power of 
 sale, upon default in payment, is not construed as excluding 
 the right of the pledgee to sue upon such collateral notes. 
 It is rather an additional power given him for the realiza- 
 
 1 Sparhawk v. Drexel, 42 Bank R. day, is unreasonable. Stevens v. 
 
 450; Union Trust Co. v. Rigdon, su- Hurl burl Bank, 31 Conn. 149. A 
 
 pra; Zimpleman v Veeder 98 Ib. * form of notice for public sale: "Sale 
 
 613; Wilson . Little, 2 N. Y. 443. of Collateral Securities. Notice is 
 
 3 Union Trust Co. . Rigdou, su- hereby given that the undersigned 
 pra The power of sale in this case, will, on the * * day of * * * 
 which formed a pan of the body of at * * o'clock, * M., of said day, 
 the principal note, was: " I hereby sell, at public vendue, to the highest 
 give the said A, its assignor assigns, bidder at [a public place or Ex- 
 authority to sell the said collateral change], all the following collateral 
 notes, or any part thereof, on the securities, to wit [describing the 
 maturity of this nole, or at any time same]. Terms of sale, cash. * * 
 thereafter or before, in the event of * *" This notice may be used for 
 such securities depreciating in value, sales under contract (see 3, n. T), 
 at public or private sale, without ad- Special notice should be given to 
 vertizing the same, or demanding the pledgor, and in case of sub- 
 payment, or giving notice." pledge, both to the original pledgor 
 
 8 Fraker v. Reeve and Wheeler v. (if known) and to the pledgee. Bur- 
 
 Newbould, supra. A sale, after notice cap v. Nat. Bank, 96 N. Y. 125, 129. 
 
 to pay or give security on the same 4 Whitin . Paul, 13 R. I. 40.
 
 154 NEGOTIABLE COLLATERAL SECURITIES. 
 
 tion of his collateral securities. 1 The pledge of a note to 
 one creditor as collateral security with a power of sale, 
 does not affect the right of other creditors to levy upon the 
 pledgee's reversionary interest therein, and to sell the same, 
 subject to the rights of the pledgee.* It is questionable 
 whether a valid sale can be made of a collateral note to the 
 maker, at private sale, at any rate for less than its face 
 value. Such a sale, without the consent of the pledger 
 previously obtained, would be " very suspicious." 8 
 
 119. THE PLEDGEE'S RELIEF IN EQUITY TO OBTAIN 
 SALE OF COLLATERAL PAPER. Applications are rarely 
 made to courts of equity for assistance in obtaining the real- 
 ization by sale of negotiable collateral paper, such as bills of 
 exchange and promissory notes. No ground exists, except 
 in exceptional cases, for the aid of a court of equity, as the 
 pledgee, receiving such collateral securities, indorsed where 
 required so as to become a party thereto, and possessing the 
 full legal title, has a complete remedy by an action at law 
 against the parties bound thereon. Equitable relief was 
 given in a case, where the maker of the collateral note 
 resided in New York, the pledger and pledgee in San Fran- 
 cisco. The maker had no property or estate in California 
 subject to legal process, and upon presentment of the note 
 to him for payment at maturity, it was protested. Upon a 
 bill filed by the pledgee, a court of equity decreed that the 
 note should be sold at a judicial sale, and that in the event 
 of any deficiency occurring, a supplementary decree there- 
 for should be entered as against the pledgor. 4 A pledgee 
 
 1 Third Nat. Bank t>. Harrison, 10 * Donohoe v. Gamble. 88 Cal. 354. 
 
 Fed. Rep. 243; Nelson . Eaton, 26 The court say: "The same reasons 
 
 N. Y. 410; Nelson v. Wellington, 5 which would require the pledgee to 
 
 Bosw. 178; Nelson v. .Edwards, 40 pursue the maker with leg;il process 
 
 Barb. 279. in the State of New York would 
 
 * Pickens . Webster, 31 La. Ann. equally demand that he should 
 
 879. follow him to Europe, South Amer- 
 
 a McLenore v. Hawkins, 46 Miss, ica, or any other foreign country, 
 
 715. where he might be known to be
 
 THE PLEDGEE'S SALE. 155 
 
 holding a negotiable bond issued by a railroad company in 
 the United States, was given an order of sale by an English 
 court of chancery, and allowed to purchase the same him- 
 self, he not conducting the sale. 1 And a bill in equity was 
 sustained for a foreclosure and sale of collateral securities 
 with a short time for redemption, where the pledgee held 
 the full legal title to the same.* But upon a pledge of city 
 certificates, indorsed in blank so as to pass the title thereto, 
 as collateral security for the payment of the pledger's note, 
 and both parties resided in the city issuing the certificate, 
 the pledgee having a complete remedy at law, the aid of 
 equity to decree a judicial sale of the collateral security was 
 refused.* 
 
 120. THE PLEDGEE'S RIGHT TO SELL NEGOTIABLE 
 BONDS, ON DEFAULT. The pledgee of long-time bonds 
 issued by the government, municipal or other corporations, 
 payable to bearer or holder, and negotiable by delivery, 
 holding the same as collateral security for the payment of 
 promissory notes or bills of exchange, maturing at early 
 dates, has the right, even in the absence of contract, to sell 
 such collateral securities upon default in payment of the 
 original debt, under proper conditions as to notice of the 
 time, place and manner of sale. 4 The presumption is that 
 a pledgee is entitled to sell such long-time bonds, and coup- 
 ons thereto attached, as stocks, public securities, goods, and 
 
 domiciled. This would impose a * Whitaker v. Charleston Gas Co., 
 
 hardship on the pledgee which evi- 16 W. Va. 717. 
 
 dently was not within the contem- 4 Jerome v. McCarter, 94 U. S. 734 ; 
 
 plation of the parties. We think he Fletcher v. Dickinson, 7 Allen, 23; 
 
 may go into a court of equity for a Wasuburn. Pond, 2 Ib. 474; Han 
 
 foreclosure and sale of the note for cock v. Franklin Ins. Co., 114 Mass, 
 
 whatever it will bring in the market 155; Brown . Ward, 3 Duer, 660; 
 
 at a judicial sale." , Morris Canal & B. Co. . Lewis, 12 
 
 1 Carter t>. Wake, L. R 4 Ch. D. ' N. J. Eq. 321 ; Duffield v. Miller, 92 
 
 405. Pa. St. 286; Alexander R. R. Co. v. 
 
 'France v. Clark, L. R. 22 Ch. Burke, 22 Gratt. 254; Newport 
 
 D. 830; Smith v. Coale, 12 Phila.177. Bridge Co. . Douglass, 12 Bush, 673.
 
 156 NEGOTIABLE COLLATERAL SECURITIES. 
 
 chattels are sold, upon demand and default in payment of 
 the principal debt, and after due notice of sale. Such col- 
 lateral securities differ essentially from the ordinary nego- 
 tiable notes and bills of exchange, or notes and bonds, 
 secured by mortgage. 1 The right to sell such long-time 
 bonds is an incident of the pledge thereof, and part of the 
 security, and passes with the collateral securities into the 
 hands of any bona fide holder advancing money thereon, in 
 the due course of business. 8 The rule is otherwise where 
 bonds issued by a railroad company are payable upon condi- 
 tion, so that no bidder at a public sale can, by mere inspec- 
 tion of the paper, form any just judgment as to the value 
 thereof. In such a case, a sale by the pledgee is not 
 approved. 8 
 
 If the pledgee of negotiable bonds and other secur- 
 ities having upon default in payment of the principal 
 debt, and upon due notice, a right of sale of such collateral 
 securities, fails to exercise such right, but continues to 
 retain the securities in his possession, his title thereto con- 
 tinues to be that of a pledgee, and does not ripen into an 
 absolute ownership. 4 The right of a pledgee of such nego- 
 tiable bonds to sell is not defeated by the subsequent insol- 
 vency of the pledger. 5 A pledgee, holding such collateral 
 securities in value largely in excess of the principal debt, 
 will be restrained from selling the whole. 6 
 
 The holder of certain railroad bonds as collateral secur- 
 ity sought by bill in chancery to foreclose the equity of 
 redemption of the pledger, alleging that if such bonds were 
 sold, enough would not be realized to satisfy the debt, but 
 
 1 Morris Canal and Banking Co t>. 7 All. 23; Wasliburn v. Pond, 2 Ib. 
 
 Lewis, supra. 474. Brown v. Tyler, 8 Gray, 135; 
 
 'Alexander R. R. Co. v. Burke, Hunt v. Nevers. 15 Pick. 500; in re 
 
 supra. Litchfield Bank, 20 Conn. 575; White 
 
 Joliet Iron and Steel Co. t. Scio- Mountain R R Co . . Bay state 
 
 to Fire Brick Co..82 111. 548. ^ Co>> 5Q N H 5? 
 
 Hancock . Franklin Ins. Co., 114 , Jerome McCarter> 94 u. 3.734 
 
 Mass. 155; Whipple t. Blackington, , Fitzgerald . Blockcr.32 Ark. 743. 
 97 Mass. 476 ; Fletcher v. Dickinson,
 
 THE PLEDGEE'S SALE. 157 
 
 that by holding the bonds until they were redeemed he 
 would obtain payment of his debt. The court refused to 
 decree a foreclosure, but ordered a sale of the bonds and 
 allowed the pledgee himself to become the purchaser, lie not 
 conducting the sale. 1 This decision was distinguished in a 
 late case, as relating to the powers of a simple pledgee only, 
 and where the collateral securities were transferred so as to 
 pass the legal title thereto, the holder was given an order 
 for foreclosure, with a short time for redemption.* 
 
 121. THE REQUIREMENTS OP A VALID SALE. In the 
 
 absence of special contract, the sale of negotiable bonds 
 held as collateral secuiity should be made at auction, at a 
 public place, after demand of payment of the principal obli- 
 gation, and default, and reasonable notice of the time and 
 place of sale. 3 A sale of bonds, held as collateral security 
 for a loan, payable on demand, made without demand or 
 notice, is irregular, to be affirmed or not at the election of 
 the pledgor. 4 Where such bonds had been sub-pledged, a 
 notice of the proposed sale to the pledgee thereof, upon de- 
 fault, is not sufficient, as it is the duty of the pledgee to give 
 notice also to the pledgor. Nor will the error be cured by 
 a notice of thirty days in which to redeem. 5 A sale of 
 bonds, held as security for the payment of advances, with- 
 out authority and without notice, is a conversion, and 
 
 1 Carter v. Wake, L. R. 4 Ch. D. sale. The pledgor was allowed to 
 
 405. elect either to confirm the sale, and 
 
 8 France v. Clark, L. R. 22 Ch. claim the benefit of the surplus, or 
 
 D. 830. repudiate the sale, and hold the de- 
 
 8 Washburn v. Pond, 2 Allen, 474; fendant responsible for the bonds. 
 
 Fletcher r>. Dickinson, 7 Ib. 23; Strong v. Mechanics' Nat. Bank, 45 
 
 Stearns v. Marsh, 4 Denio, 227. In N. Y. 718. 
 
 the City of New York it should be * Siokes v. Frazier, 72 111. 428 ; 
 
 made at the Merchants' Exchange. Middlesex Bank v. Minot, 4 Met. 
 
 Brown v. Ward, 3 Duer, 660; Cortel- 325. The rule may be waived by 
 
 yon v. Lansing, 2 Caines' Gas. 203 A express agreement. Chouteau v. 
 
 pledgee, being unable to give notice, Allen, 70 Mo. 290. 
 
 or make demand upon the pledgor, Fletcher v. Dickenson, 7 All. 25. 
 sold the bonds pledged at private
 
 158 NEGOTIABLE COLLATERAL SECURITIES. 
 
 renders the pledgee liable for any subsequent enhancement 
 in value. 1 
 
 122. NOTICE OF SALE OF COLLATERAL PAPER WHEN 
 PROVIDED BY CONTRACT. The parties to a contract of pledge 
 of negotiable bonds and coupons, payable to bearer or holder, 
 may stipulate that the pledgee shall have the right to sell 
 such collateral securities, upon default of payment of the 
 principal debt, at public or private sale, without notice to 
 the pledgor. Such bonds generally have a recognized value 
 in the market, and the good or bad faith of the pledgee in 
 the realization of such collateral securities is a matter of 
 easy proof.* A bona fide sale of such collateral paper, 
 made after default, under a power of sale, vesting the title 
 in a purchaser for value, in good faith, is not affected by a 
 tender of the debt and charges made subsequently thereto. 3 
 The usual requirements of demand and notice do not apply 
 where by the contract of pledge, a power of sale is given 
 upon default in payment of the principal debt at a definite 
 time. 4 And notice is considered waived where compliance 
 with the terms of the contract of pledge requiring notice, 
 are rendered absolutely impossible by circumstances over 
 which the pledgee has no control. 8 
 
 123. NOTICES OF SALE BY PLEDGEE WHEN SUFFI- 
 CIENT. Whether the notice by the pledgee of sale of 
 negotiable collateral securities is sufficient to constitute 
 
 1 Reed v. Lambert, 10 Abb. Pr. N. bonds as security, with power of 
 
 S. 428. sale after notice. It afterwards failed 
 
 1 Loomis v. Stave, 75 111. 623 and closed up, and thereafter trans- 
 
 Chouteau v. Allen, 70 Mo. 290. acted no business, nor had any offl- 
 
 * Loomis t>. Stave, supra. cers. As performance of the condi- 
 
 4 Chouteau v. Allen, supra, where tion had been rendered impossible 
 
 the pledge of the bonds as collateral by the act of the party for whose 
 
 was made in the body of the note, benefit it was made, the bonds were 
 
 the power of sale to arise "on the allowed to be sold without notice, 
 
 non-performance of this promise." See Strong v. Mechanics' Nat. Bank, 
 
 8 City Bank v. Babcock, Holmes, 45 N. Y. 718. 
 180. The bank had pledged certain
 
 THE PLEDGEE'S SALE. 159 
 
 such sale a valid transaction, is a question of fact depend- 
 ing upon the particular circumstances of each case. The 
 pledger has no cause for complaint where notices of the 
 sale of municipal bonds held in pledge were published in a 
 newspaper in a city where the bonds, were issued and at the 
 place of sale thirty days prior thereto, and that such bonds 
 sold at the place of sale for more than in the city where 
 issued, and the sale itself was bona fide. 1 Actual notice to 
 the pledgor, a reasonable time before the sale, is sufficient, 
 and will excuse want of formal notice. 8 But notice after 
 the sale is not sufficient, for although the pledgor, having 
 notice, might not have been able to raise funds to pay his 
 debt and redeem his collateral securities, he has a right to 
 be present at the sale to see that it is conducted in a proper 
 manner, and to advance his interests by securing greater 
 competition. 8 Where negotiable railroad bonds were 
 pledged as collateral security for the payment of certain 
 notes, less in amount, with authority to sub-pledge the 
 securities to a bank for other notes indorsed by the pledgor ; 
 and, upon default in payment of the notes held by the sub- 
 pledgee, the bonds were sold in New York, at public auc- 
 tion, after advertisement, for much less than their value, 
 with the knowledge and assent of the pledgee, but of which 
 sale the pledgor received no notice ; the loss resulting from 
 such sale was applied in payment of the notes held by the 
 pledgee, who had failed to give the pledgor notice of the 
 intended sale, as was his plain duty under the facts of 
 the case. 4 
 
 124. RIGHT OP PLEDGEE OP NEGOTIABLE BONDS, 
 
 UPON DEFAULT, TO ENFORCE MORTGAGE SECURITY. 
 
 Pledgees of negotiable coupon bonds of railroad and other 
 corporations, secured by mortgage or trust deed, are entitled 
 
 1 Washburn 0. Pond, 2 Allen, Alexandria R R Co. v. Burke, 
 474. 22 Gratt. 254. 
 
 * Stokes v. Frazier, 72 111. 428. * Wasliburn v. Pond, supra.
 
 160 NEGOTIABLE COLLATERAL SECURITIES. 
 
 to require foreclosure and sale of the property covered by 
 such mortgage or trust deed, upon default. 1 Upon such 
 foreclosure proceedings, the bona fide holder of bonds as 
 collateral security for a valuable consideration, is not 
 limited to proof of the amount of his actual advances, but is 
 entitled to prove the full face value of the bonds held by 
 him as collateral security, and to share in the distribution 
 accordingly, not receiving however more than the amount 
 of the actual indebtedness secured. 8 This rule is applied 
 in cases where it is evident that the mortgaged property is 
 insufficient to pay the debts with which it is encumbered. 
 If allowed to prove only for the sums for which the bonds 
 are held as collateral security, they would probably form 
 an insufficient security ; but if the sale should realize more 
 than sufficient to pay all the debts, the distribution of the 
 proceeds remain under the direction of the court. Should 
 the pledgees receive an excess over the amount of the debt 
 for which the bonds are pledged, such surplus will be 
 held in trust for the parties entitled. 8 
 
 125. THE TITLE OF BONA FIDE PURCHASERS FOB 
 
 VALUE, AT SALES OF COLLATERAL SECURITIES. Upon a 
 
 sale of negotiable collateral paper, whether coupon bonds, 
 bills of exchange, or promissory notes, made in good faith, 
 by the pledgee, in pursuance of a valid contract of pledge, a 
 bona fide purchaser thereof for value is vested with an 
 unimpeachable title to such collateral securities as against 
 all parties. No relation of pledger and pledgee exists 
 
 1 McCurdy's App. 65 Pa. St. 290; ized to raise money for the use 
 
 Jesup r>. City of Racine, 14 Wis. 331 ; of (he company on its negotiable 
 
 Ackerson v. Lodi Branch R. R. Co., bonds, raised funds on his individual 
 
 98 N. J. Eq. 542. note, pledging the bonds as col- 
 
 * Buncombe v. N. Y. etc. R. R. Co., lateral, the money being applied 
 
 84 N. Y. 190; s. c. 88 Ib. 1; Jesup v. to the use of the corporation. 
 
 City of Racine, supra; Ackerson v. Rice's App, 79 Pa. St. 168. 
 
 Lodi Branch R. R. Co., supra. The * Jerome v. McCarter, 94 U. S. 734; 
 
 same rule as to amount of recovery Rice v. Southern R. R. Co., 9 i'hila. 
 
 was enforced where a person, author- 294.
 
 THE PLEDGEE'S SALE. 161 
 
 between the pledger who has permitted his collaterals to be 
 sold upon default, and the purchaser, who has paid value 
 therefor at such sale .nor is there any privity of contract 
 between them, nor the assumption by the purchaser of any 
 of the duties of a trustee in relation thereto. The bona fide 
 purchaser for value acquires at such sale the title of the 
 pledgor absolutely, and the negotiable collateral paper being 
 under-due, takes the same free from antecedent equities. 1 
 The fact that the negotiable collateral securities sold for 
 less than the amount due thereon is immaterial, as affecting 
 the title of the purchaser, if the sale be valid and the pur- 
 chase made in good faith and for value. 9 Upon a valid sale 
 of negotiable bonds, held as collateral security, purchasers 
 thereof, for value, in good faith, are bona fide holders for 
 value for the full face of such collateral paper, although the 
 amount of the principal debt for which the collateral security 
 was given is less than the value of the bonds at the time of 
 the sale. 8 Where, however, the purchaser is chargeable 
 with notice that the sale of such negotiable collateral 
 securities is fraudulent and unauthorized, he can acquire no 
 rights or title as against the defrauded pledgor, although 
 the pledgee offered such collateral notes for sale, as the in- 
 dorsee with full title. 4 
 
 126. THE PLEDGEE AS PURCHASER OF NEGOTIABLE 
 COLLATERAL PAPER. Where, upon a sale of negotiable 
 collateral paper by a pledgee, without authority, the pledgee 
 himself becomes the purchaser thereof, the relations ot the 
 parties to the contract of pledge are not affected. The 
 pledgee is not permitted by such an act to change his 
 
 1 Lewis v. Mott, 36 K Y. 395; 57 ; Jerome v. Me Carter, 94 U. S. 734, 
 
 Duncombfl. N. T. etc. R.B. Co., 84 739; Allen . Dallas Ry Co., 3 
 
 Ib. 190; Union Trust Co. e. Rigdon, Woods C. C. 316. 
 
 93 111. 458; Stokes . Frazer, 92 111. 9 Zimpleman v. Veeder, 98111. 613. 
 
 428 ; Newport Bridge Co. v. Douglas, * Jerome v. McCarter, 94 U. 8. 734. 
 
 12 Bush, 673; White Mountain R. R. * Goldsmith v. Trustees, 25 Minn. 
 
 Co. . Bay State Iron Co., 50 N. H 202. 
 11
 
 162 NEGOTIABLE COLLATERAL SECURITIES. 
 
 relations with the pledger from that of a pledgee, under ob- 
 ligations, upon payment to re-deliver such collateral securi- 
 ties at once, to the favored position of a bona fide purchaser 
 for value, with an absolute title thereto. The pledger, 
 whether such sale would have been beneficial to him or not, 
 is entitled to regard the possession of the pledgee, under such 
 sale and purchase, as in continuance of the pledge relations 
 of the parties. 1 But a pledgee was allowed to become a 
 purchaser of negotiable bonds where such bonds having 
 been pledged by agreement, a judgment was also entered 
 upon the secured and other indebtedness of the pledger, 
 and the bonds were sold under an execution levied there- 
 under. 1 And also in a case where upon a bill in chancery 
 for relief it was shown that the collateral security was a 
 long-time railroad bond, and that enough would not be 
 realized at a judicial sale to pay the principal debt, the 
 pledgee was allowed to become the purchaser in order that 
 he might not be forced to part with his security. 1 
 
 1 Walker v. Castle, 97 111. 582; Sickles . Richardson, 23 Hun. 
 Stokes v. Frazier, 72 111. 428; Strong 659. 
 
 v. Nat. Bank, 45 N. Y. 718 ; Bank v. Carter 0. Wake, L. R. 4 Ch.D.605. 
 Dubuque Railroad Co., 8 Iowa, 277; 
 Killiau v. Hoffman, 6 Bradw. 200.
 
 THE PLEDGOR'S EIGHTS. 163 
 
 CHAPTER XIII. 
 
 THE PLEDGOR'S RIGHTS AS TO COLLATERAL SECURITIES. 
 
 127. The pledger's transfer or repledge of collateral securities. 
 
 128. Pledger entitled to surplus proceeds from collaterals. 
 
 129. And to collateral securities upon payment or tender of debt. 
 
 130. The re-delivery of collateral securities to the pledgor 
 
 131. The pledger's remedy upon conversion of collaterals by pledgee. 
 
 132. Relief of the pledgor in equity. 
 
 133. Equitable conditions of such relief. 
 
 127. THE PLEDGOR'S TRANSFER OR RE-PLEDGE OP 
 COLLATERAL SECURITIES. The pledgor of negotiable in- 
 struments as collateral security, although he has indorsed 
 the same to the pledgee so as to pass the legal title thereto, 
 retains such a residuary interest therein that in cases 
 where such collateral paper is of greater value than the debt 
 he may make a further disposition of them by pledging the 
 same for another loan, and the rights thus acquired are 
 protected. Where the indorsement of such negotiable col- 
 lateral notes has been made by the pledgor in blank, and 
 they remain so indorsed in the hands of the pledgee, the 
 pledgor is permitted to make a further transfer by special 
 indorsement to a third party, who is entitled to maintain an 
 action thereon in his o\vn name as indorsee, upon his dis- 
 charge of the debt for which the notes were held as collat- 
 eral security before obtaining judgment. 1 A re-pledge of 
 the collateral securities by the pledgor binds the pledgee, 
 upon notice, as to any surplus after the repayment of his own 
 advances.* Where collateral notes were transferred for a 
 
 1 Fisher v. Bradford, 7 Greenl. 28; 405 ; Ferguson v. Union Furnace Co., 
 
 Pierce v. Kearney, 5 Hill, 2; 9 Wend. 345; Sanders V. Davis, 13 B. 
 
 Thompson v. Hewitt, 6 Ib. 254. Hour. 342. See Hartley v. Russell, 
 
 a Whitaker v. Sumner, 20 Pick. 2 Sim. & S. 214
 
 164 NEGOTIABLE COLLATERAL SECURITIES. 
 
 loan for less than half their value, and the pledger made a re- 
 pledge of the same for another loan, and the maker died and 
 the pledger became insolvent, the first pledgee, having fore- 
 closed the title of the second pledgee, and the pledger's 
 trustees having disclaimed, was allowed to prove for the 
 full face of the collaterals against the maker's estate, the 
 actual recovery to be limited to the amount due on the 
 principal debt, interest, and costs. 1 
 
 128. THE PLEDGOR ENTITLED TO SURPLUS PROCEEDS 
 FROM COLLATERAL SECURITIES. Where the collateral se- 
 curities deposited by the pledger for his principal note are 
 greater in amount than the note, and the pledgee has col- 
 lected the same by suitor in some other manner has realized 
 the value thereof, the pledgor is entitled to the surplus 
 remaining after the payment of the debt and proper charges 
 in and about the collection of the securities. This residuary 
 interest of the pledgor in the collateral notes is sufficient, 
 where the act of the pledgee is a valid realization of them, 
 to sustain an action for the surplus as for money had and 
 received to his use. Where the act of sale is a tort, the 
 action may be for conversion of the collateral notes, and 
 the damages recovered will be subject to the set-off of the 
 amount of the debt ; or the tort may be waived, and the 
 other action brought.* Demand should be made for the 
 surplus, as interest thereon will otherwise only run from 
 the time of the service of the summons in the action for 
 money had and received. 8 A government bond, payable 
 in fourteen years, was pledged as collateral security for a 
 negotiable note for the same amount, due in three months. 
 The note not being paid at maturity, the pledgee continued 
 to hold the collateral bond until the note was outlawed ; 
 
 1 In re Burrell, L. R 7 Eq. 899. Hauser t>. same, 43 Ga. 415; Rice v. 
 
 *Thayer v. Mann, 19 Pick. 535; Benedict, 19 Mich. 182; Rohrle . 
 
 Hancock t>. Franklin Ins. Co., 114 Stidger, 50 Cal. 207; Hilton . War- 
 
 Mass. 155; Hunt v. Nevers, 15 Pick, ing, 7 Wis. 492. 
 
 600; Overstreet v. Munn, 36 Ala. 666; Hunt v. Nevers, 15 Pick. 500.
 
 THE PLEDGOR'S BIGHTS. 165 
 
 but shortly before the maturity, the pledger tendered the 
 amount of his note in currency and demanded his collateral 
 bond. The pledgee refused to deliver, and at its maturity, 
 collected the bond in gold, then worth $1.74 in currency. 
 The pledger brought an action for money had and re- 
 ceived, and was given a judgment for the surplus, after 
 paying the debt. 1 
 
 129. AND TO COLLATERAL SECURITIES UPON PAY- 
 MENT OR TENDER OF DEBT. The pledger is entitled to a 
 re-delivery of the collateral securities deposited by him, 
 upon payment of the principal debt, or a tender thereof.* 
 After such payment or tender, the pledgee has no authority 
 to transfer such securities. The debt being discharged, his 
 interest therein is at an end. 8 The pledger is also entitled 
 to a re-delivery of collaterals upon a mutual rescission of 
 the contract ; 4 but a mere offer to pay, without an actual 
 tender, is not sufficient to entitle the pledger to bring an 
 action to recover such collateral securities. 1 And if upon 
 suit, reliance is placed upon a tender of the principal debt, 
 the pledgee is required to keep the tender good by paying 
 the money into court. 8 The rule does not apply in the case 
 of a wrongful sale of such collateral securites by the 
 pledgee. The pledgee having already received the pro- 
 
 1 Hancock v. Franklin Ins. Co., v. Hills, 8 Me. 383; G. & S. W. R. R. 
 
 114 Mass. 155. Co.. Stahl, 103 111. 67; Schoole v. 
 
 'Whipple v. Blackington, 97 Sail, 1 Sch. & Lef. 176; Merchants' 
 
 Mass. 476; Hale v. Rider, 5 Cush. Bank v. Maud, 18 W. R. 312. See 
 
 231 ; Bowditch v. Green, 3 Met. 360; Walker v. Jones, L. R. 1 P. C. 50. 
 
 Bank of Rutland v. Woodruff, 34 Vt. 8 Bowditch v. Green, 3 Met. 80. 
 
 89; Benon v. Paquin, 49 Ib. 199; 4 Burlingame v. same, 7 Cow. 92; 
 
 Spalding v. Bank, 9 Pa. St. 28; Stu- Rice v. Peet, 15 Johns. 503. 
 
 art v. Bigler, 98 Ib. 80; Farwell V. 5 Lewis v. Mott, 36 N. Y. 402; 
 
 Importers' Nat. Bank, 90 N. Y. 483, Strange v. Blake, 46 Barb. 222; 
 
 489; Wilson v. Little 2 Ib. 448 ; Bateman v. Poole, 15 Wend. 637; 
 
 Lewis v. Mott, 36 Ib. 402; Ocean Edmundson . McLeod, 16 N. Y. 
 
 Nat. Bank v. Faut, 50 Ib. 477; Me 543; Talty v. Freedmen's Trust Co., 
 
 Lean v. Walker, 10 Johns. 471 ; Over- 93 U. S. 321. 
 
 street . Munn, 36 Ala. 649; Over-lock l Smith v. Felton, 85 Lid. 223.
 
 166 NEGOTIABLE COLLATERAL SECURITIES. 
 
 ceeds of such securities, to require a tender of the prin- 
 cipal debt before action on the tort would be useless, as 
 the amount of the debt is usually deducted from the dam- 
 ages. 1 Where a creditor accepts collateral security from 
 an administrator without knowledge of the insolvency of 
 the estate, he is not required to re-assign, and accept a 
 dividend, upon the estate proving insolvent.* 
 
 130. THE RE-DELIVERY OP COLLATERAL SECURI- 
 TIES TO THE PLEDGOR. A pledgee may, upon agreement 
 or at his pleasure, re-deliver collateral securities to the 
 pledger without affecting his right to proceed upon the 
 original demand, even although there are other creditors to 
 whom nominally the pledgee occupies the relation of trus- 
 tee, if there be no violation of his duty in that character. 8 
 Upon a relinquishment of securities, it is not champerty, 
 where a debtor gives to the creditor a lien on other securi- 
 ties in the hands of a third person, with authority to sue 
 the latter, and agreeing to use his best endeavors to assist 
 in adjusting his accounts with the holder and in recovering 
 his securities. The transaction is simply an assignment of 
 an equity of redemption in such securities in exchange for the 
 prior securities surrendered. 4 Where bonds were pledged 
 as collateral security, and upon maturity, the pledgee 
 received other collateral securities for a valuable considera- 
 tion, upon an agreement to surrender the bonds, and no 
 demand was made therefor, and no opportunity given for 
 re-delivery, the pledgee was not answerable for a subse- 
 quent depreciation in the value thereof, while in his pos- 
 session.* 
 
 131. THE PLEDGOR'S REMEDY UPON CONVERSION OF 
 COLLATERALS BY PLEDGEE. After a wrongful sale by the 
 
 1 Fletcher v. Dickinson, 7Allen,23. * Hartley . Russell, 2 Sim. & 8. 
 
 1 Kittera's Est., 17 Pa. St. 416; 244. 
 
 Strange v. Adams. 30 Vt. 220. Williamson v. McClure, 37 Pa. St. 
 
 In re Dyott's Est. 2 W. & S. 463. 402.
 
 THE PLEDGOR'S RIGHTS. 167 
 
 holder of negotiable paper as collateral security, the pledgor 
 is entitled to his action of tort against the wrong-doer. 
 Nor is he required, as a preliminary to the commencement 
 of the same, to tender the amount due nor demand a return 
 of the securities, in case where by the tortious sale the 
 pledgee has realized more than enough to pay the debt of the 
 pledgor. Under such circumstances, a tender of the amount 
 of the principal notes would be a useless ceremony. 1 
 Where the pledgee has sold the whole of such marketable 
 securities at a sacrifice, when a partial sale would have 
 realized enough to have discharged the indebtedness for 
 which they were held as collateral security, he may be re- 
 quired to replace those sold in excess; or, if the pledgor has 
 bought other securities in its place, may be required to pay, 
 as damages, the difference between the price for which the 
 excess sold, and that paid by the pledgor to replace it. 1 
 The acceptance by the pledgor of the surplus arising from 
 an illegal sale is no waiver of the right to damages arising 
 from the sale. 3 But the tort may be waived, and the sale 
 ratified, and by an action for money had and received, the 
 pledgor may recover any surplus remaining in the hands of 
 the pledgee after the satisfaction of the debt. 4 
 
 Where, pending suit upon the principal note, the 
 pledgee, without the knowledge of the pledgor, sells the 
 collateral securities for the amount of the debt, but gives no 
 credit therefor, the pledgor having paid the judgment upon 
 the principal note, is entitled to recover from the pledgee the 
 amount received by him upon such sale. 6 Nor will it be 
 any defense to an action for the conversion of bonds held as 
 collateral security, where a tender of payment of the debt 
 and demand for the return of the collaterals had been made, 
 that afterwards the pledgor used the money and failed to 
 bring it into court, as the amount due and tendered would 
 
 1 Fletcher v. Dickinson, 7 All. 23; 8 Ibid. 
 
 Cortelyou v. Lansing, 2 Caines' Cas. 4 Hancock v. Franklin Ins. Co., 
 
 203. 114 Mass. 155. 
 
 8 Fitzgerald v. Blocker, 32 Ark. 742. Dorrill . Eaton, 35 Mich. 302.
 
 168 NEGOTIABLE COLLATERAL SECURITIES. 
 
 necessarily be deducted and allowed to the defendant in 
 fixing the amount of damages. 1 The same sale of damages, 
 the value of the collaterals at the time of conversion, less 
 the amount of debt, was approved in a Massachusetts case.* 
 The circulating bills of a bank were pledged as col- 
 lateral security for a loan, under an agreement that they 
 should not be put into circulation until default. Soon 
 after default, the pledgee still holding the bills, the bank 
 became insolvent, but the pledgee, having knowledge 
 thereof, sold the bills, without notice to the bank or its re- 
 ceiver, and then claimed the balance of the loan from the 
 assets of the bank, and the holders of the bills also filed 
 claims. The sale of the bills being unauthorized, the rule of 
 damages applied was the actual injury suffered, being the 
 amount of dividends paid the holders of the bills, which was 
 applied in reduction of the claim of the pledgee upon the 
 original loan. 8 
 
 132. RELIEF OP PLEDGOR IN EQUITY. Equitable 
 aid and relief is usually extended to the pledger of negotia- 
 ble instruments, where he seeks, upon proper terms, to re- 
 deem collateral securities, and the transactions between 
 the parties to the contract of pledge, and third persons 
 interested, are complicated, or it is sought to avoid a multi- 
 plicity of suits, or upon any other recognized head of 
 equity jurisprudence. 4 A court of equity will take 
 jurisdiction of such matters upon the ground that such col- 
 lateral securities constitute a trust fund, and that it has 
 jurisdiction to order an account thereof, to convert the 
 securities into cash, and distribute the proceeds arising 
 
 1 Wyckofl v. Anthony, 90 N. Y. Hasbrouck v. Vandcrvoort. 4 Sandf. 
 
 442. % Sup. Ct. 74; Hart t>. Ten Eyck, 2 
 
 * Hancock v. Franklin Ins. Co., 114 Johns. Ch. 100; Conyngham's App. 
 Mass. 155. 54 Pa. St. 474; Stephens v. Hartley, 
 
 In re Litchfield Bank, 28 Conn. 2 Mont. 504; Cole v. Whitman, 10 
 
 595. Conn. 121. See Tally v. Frccdmen's 
 
 * French v. Gibbs, 105 111. 523; Savings Co., 93 U. S. 321, 326.
 
 THE PLEDGOR'S EIGHTS. 169 
 
 from the sale. Especially is this the case where there is, in 
 the contract of pledge, no time set for the repayment of the 
 loan, and several years have elapsed since the completion of 
 the transaction in which the pledge of collaterals was 
 made. 1 A bill for an accounting, and for redemption of 
 pledged collaterals, was sustained after a lapse of fifteen 
 years and a colorable sale of the property under foreclosure 
 of the mortgages executed to secure the payment of the 
 bonds given in pledge.* 
 
 In cases in which no time has been fixed by the contract 
 of pledge of collateral securities, within which the pledgor 
 shall have the right of redemption, the time of redemption, 
 where a bill in equity to redeem has been filed by the 
 pledgor, is not tolled by the statute of limitations upon the 
 debt, since equity will render a decree to do justice be- 
 tween the parties irrespective of the statute. 8 A bill in 
 equity to redeem collateral securities, brought after a 
 lapse of seven years, the securities having then very 
 greatly increased in value, was not approved. 4 Nor where 
 the pledgee's possession had continued for so long a time as 
 to raise a presumption that the pledgor had relinquished 
 his title in satisfaction of his debt. 5 The pledgor and his 
 representatives may be barred by laches where their rights 
 are dependent upon compliance with statutory provisions, 
 or controlled thereby. 6 
 
 133. EQUITABLE CONDITIONS OF SUCH RELIEF. 
 A court of equity will not lend its aid to a pledgee of 
 collateral securities, where there has been a want of com- 
 
 1 Stokes v. Frazier, 72 111 428, al- * Lockwood v. Cliaustilet, 1 Mod. 
 
 though a fear was expressed that it 278; Lockwood v. Ewer, 2 Atk. 303. 
 
 was carrying the jurisdiction of a 8 White Mountain R. R. v. Bay 
 
 court of equity to its "furthest State Co., supra, 
 
 limits." * International Bank v. Jenkins, 
 
 s White Mountain R. R. Co. a.Bay 104 111. 143; Cleveland . Borem. 24 
 
 State Iron Co ., 50 N. H. 57. N. Y. 613 ; Gifford v. Holmes, 98 U. 
 
 * Kemp v. Westbrooke, 1 Ves. Sen. 8. 252. 
 278 (Lord Chancellor Hardwicke.)
 
 170 NEGOTIABLE COLLATERAL SECURITIES. 
 
 pliance with the terms of a statute requiring, to validate the 
 contract of pledge, delivery to and continued possession by 
 the pledgee of negotiable securities. In such a case equity 
 will not consider as done what the parties intended to do, 
 so as to complete the transfer of title. Such equitable 
 powers will not be exercised, to the injury of third persons, 
 who have suffered detriment and acquired consequent rights 
 by reason of such failure to comply with the statutory re- 
 quirements. 1 Nor will it restrain the collection of a judg- 
 ment on the principal debt to the amount of a draft pledged 
 as collateral security therefor, which was given for accom- 
 modation, and the parties to which had become insolvent, 
 and relief is sought seven years after the protest of the 
 collateral bill.* Relief in equity will only be given upon 
 the principle that "he who asks equity must do^equity," so 
 that a bill in chancery for the return of collaterals will not 
 be sustained unless the debt has been paid, or a tender 
 made, 8 following the rule at common law that nothing short 
 of an actual payment or tender of the debt will entitle a 
 pledger to a return of the collateral securities. 4 Where 
 negotiable promissory notes or other negotiable securities 
 are pledged to secure the payment of a specific debt, a bill 
 to redeem is sustained, upon payment of such debt, although 
 the pledgee have other demands against the pledger. 5 
 
 1 Casey t>. Cavaroc, 96 U. 8. 467. * Jones c. Merchants' Bank, 4 
 
 Compton t>. Blair, 46 Mich. 1. Robt. 221 ; 6 Ib. 162. 
 
 * Creswell . Lanahan, 2 MacAr. 8 Brown v. Runals, 14 Wis. 693; 
 
 484; Duncombe r>. Railroad Co., 84 Vanderzee 0. Willis, 8 Brown's Ch. 
 
 N. Y. 190; s. c. 88 Ib. 1. 20.
 
 USURIOUS LOANS. 171 
 
 CHAPTER XIV. 
 
 USURY, AS APPLIED TO COLLATERAL SECURITIES. 
 
 134 Usury, as applied to negotiable collateral paper. 
 
 135. The rule as to collateral securities. 
 
 136. The pledgee, not entitled to collect collateral accommodation paper 
 
 on usurious loan. 
 
 137. No enforcement of collateral securities upon void usurious loan. 
 
 138. Estoppel of borrower on usury, by his affirmative acts. 
 
 139. Recovery of National Banks on collateral securities for usurious loans. 
 
 140. When usury not available as a defense to collateral paper. 
 
 141. Usury not affected by taking new securities. 
 
 142. Revival of original valid debt, where new securities usurious. 
 
 134. USURY, AS APPLIED TO NEGOTIABLE COLLAT- 
 ERAL PAPER. The rights and remedies of the holder of 
 negotiable securities, given upon a loan tainted with usury, 
 are generally the subject of statutory regulation. The effect 
 of such usury in the transaction of loan is, under some 
 statutes, to render the entire contract, and the negotiable 
 notes given in connection therewith, absolutely void, and 
 therefore incapable of enforcement in the hands of any 
 holder, even for value. More generally, where an actual 
 loan of money has been made, of which the maker of nego- 
 tiable promissory notes tainted with usury, had and retains 
 the benefit, he is required to pay the valid portion of his 
 debt, the penalty, upon proof of usury, being a forfeiture 
 either of all interest, or of double the amonnt of the usuri- 
 ous interest, or such other penalty as is consistent with tho 
 theory that usury renders a contract of loan not void, but 
 voidable. The like rules prevail as to the rights and rem- 
 edies of the lender as to negotiable collateral paper, made 
 by third parties, given to secure the payment of usurious
 
 172 NEGOTIABLE COLLATERAL SECURITIES. 
 
 loans. Where the principal note is void because of usury, 
 the pledgee can acquire no greater or better title to the col- 
 lateral securities, given for its payment, the indorsement 
 thereof being as void as the making of the principal notes. 
 Where the more equitable rule prevails, the pledgee is 
 allowed to enforce the payment of the collateral notes, where 
 received before maturity, for an advance, without notice, 
 given upon an usurious loan, as any other holder for value, 
 in the usual course of business. A loan must be in contem- 
 plation of the parties, and the contract between them must 
 be to pay a greater interest than the law allows, to consti- 
 tute usury. Where such is the contract, it is immaterial 
 that the illegal interest is secured by an independent instru- 
 ment, or is included in the amount of the principal note. 1 
 
 135. THE RULE AS TO COLLATERAL SECURITIES. 
 As between parties to a contract of loan tainted with 
 usury, the illegal consideration affects the title of the lender 
 as well to the negotiable collateral securities received as to the 
 principal note given for the loan. The title of the pledgee 
 to the collateral incident is not more favored than to the 
 principal evidence of the debt. Where the latter is declared 
 void by statute, the pledgee, although holding the negotia- 
 ble collateral paper by indorsement so as to become a party 
 thereto, is not allowed to retain such securities as against 
 thepledgor, the indorsement being void under such statutes, 
 nor to enforce them as against the parties thereto. 1 The in- 
 
 1 Nichols t>. Fearson, 7 Pet. 103; Ramsdell t>. Morgan, 16 Wend. 574; 
 
 Postlewait c. Garrett, 8 T. B. Hour. Dean v. Howell, Hill & D. 39; Fish 
 
 345; State v. Boatmen's Savings v. DeWolf, 4 Bosw. 573; Western 
 
 Inst. 48 Mo. 189; Motte . Darrell, 1 Reserve Bank t>. Potter, Clarke's Ch. 
 
 McCord, 350 ; Leonard t>. Cox, 10 432; DeWitt v. Brisbane, 16 N. Y. 
 
 Neb. 542; Clark v. Badgeley, 9 N. 651; Saltmarsh e. Tuthill, 13 Ala. 
 
 J. L. 233; White . Wright, 3 B. & 410; Carlisle . Hill, 16 Ib. 406; 
 
 C. 273; Sheldon v. Haxtun, 91 N. Gaither v. Fanners' & Mech. Bank, 
 
 Y. 124; Siegert z/. Hamel, Ib. 752. 1 Peters, 87; Harrison t>. Hauiell, 5 
 
 Corcoran t>. Powers, 6 Ohio St. Taunt. 780. 
 19; Marks t>. McGhee, 35 Ark. 217 ;
 
 USURIOUS LOANS. 173 
 
 oident falls with the principal, and as the debt is illegal and 
 void, no title is acquired to the collateral securities which 
 can exclude the equitable rights of third persons. 1 A bill 
 in equity may be brought to compel the surrender of such 
 collateral securities pledged for the payment of an usurious 
 debt,* or an injunction will be issued to restrain the pledgee 
 from selling the same, or to stay an action thereon. 8 
 
 Where the contract for loan, represented by the borrow- 
 er's personal obligation, does not disclose us.ury, and a vol- 
 untary deposit of negotiable collateral paper to secure pay- 
 ment thereof has been made, in the absence of statutory 
 provision making such loan void, the pledger is required to 
 repay the money actually loaned, with legal interest, before 
 entitled to the aid of a court of equity to obtain a return of 
 the collateral securities. 4 If the borrower shall have repaid 
 the money obtained upon a usurions loan, although the con- 
 tract was void, neither the borrower, nor his representatives, 
 can recover at law the principal debt and illegal interest 
 paid, although a court of equity would require the illegal 
 interest to be returned. 5 Payments of such interest are gen- 
 erally applied in discharge of the principal debt.' Where ne- 
 gotiable collateral paper, to a large amount, was pledged to 
 secure the payment of promissory notes created upon a loan of 
 
 1 Bailey v. Smith, 14 Ohio St. 396. Tiffany V. Boatmen's Inst. 18 
 
 Usury in a debt secured by mort- "Wall. 375. 
 
 gage does not affect the validity of ' Moniteau Nat. Bank v. Miller, 
 
 the mortgage, and is not available 73 Mo. 187; Bank v. Slemmons, 34 
 
 in defense of an action at law Ohio St. 142; In re Wild, HBlatchf. 
 
 founded thereon. Kelly v. Mobile 243; Overholt v. Nat. Bank, 82 Pa. 
 
 etc. Assn. 64 Ala. 501. St. 490. But where a party has 
 
 * Peters v. Mortimer, 4 Edw. Ch. given a note, secured by mortgage, 
 
 279. a subsequent grantee of the land, in 
 
 1 Caldwell v. Warehouse Co., 1 redeeming, is not allowed to deduct 
 
 Hun, 718 ; Peters v. Mortimer, su- any usurious interest paid by his 
 
 pra. grantor, but may defend against 
 
 4 Causey . Yates, 6 Humphr. 60 ; such interest remaining unpaid. 
 
 King . Green, 6 Allen, 139; Astley Perrin v. Poulson, 53 Mo. 309. 
 v. Reynolds, 2 Stra. 915; Fitzroyj>. 
 Gwiliim, 1 Term R. 153.
 
 174 NEGOTIABLE COLLATERAL SECURITIES. 
 
 money, upon an agreement that the proceeds of the collat- 
 eral notes should be applied in payment when the principal 
 notes became due, and before maturity a large amount was 
 collected on the collateral notes, although such proceeds 
 were used by the pledgee in the interval without consent, 
 the act was not such an appropriation as to create a defense 
 of usury as to the original note. The pledgee, having thus 
 used the proceeds, was charged with interest. 1 
 
 136. THE PLEDGEE, NOT ENTITLED TO COLLECT COL- 
 LATERAL ACCOMMODATION PAPER ON USURIOUS LOAN. 
 Accommodation paper, made by 'a third person for the pur- 
 pose of being used as collateral security for a void usurious 
 loan, is also equally void with the principal evidences of in- 
 debtedness, and no recovery can be had by the pledgee as 
 against the accommodation maker, or other parties thereto.* 
 It is a good defense to an action by an indorsee against an 
 accommodation indorser of a negotiable promissory note that 
 the same was received by the indorsee as collateral security 
 for the payment of an usurious loan between himself and the 
 maker. 8 The rule is applied to sub-pledges of accommoda- 
 tion paper as collateral security for an antecedent debt, with- 
 out more, where the pledgee held the paper as collateral 
 security for a loan void by statute on account of usury. The 
 sub-pledgee, receiving no better title (the transaction occur- 
 ring in New York) than the pledgee, and the collateral note 
 being void in the hands of the latter, no recovery can be 
 had by the sub-pledgee. 4 
 
 137. No ENFORCEMENT OP COLLATERALS UPON VOID 
 
 USURIOUS LOAN. The assignment of bonds and mortgages 
 as collateral security for the payment of an illegal usurious 
 loan, is a void transaction, and the pledger may maintain an 
 
 1 Morgan v. Mechanics' etc. Assn. ' Dunscombe . Bunker, 8 Met. 8; 
 
 19 Barb. 584. Weinser v. Shelton. 7 Mo. 237. 
 
 Clark t>. Loomis, 5 Duer, 468; * Bell . Lent, 24 Wend. 230. 
 Corcoran t>. Powers, 6 Ohio St. 19.
 
 USURIOUS LOANS. 175 
 
 action of trover to recover the securities. 1 A bond for four 
 thousand dollars, secured by mortgage, was assigned with 
 the mortgage, as collateral security for a loan of two thous- 
 and dollars, upon an usurious agreement that the pledgees 
 should retain the interest on the four thousand dollars bond 
 and when the full amount of the bond was paid, should 
 pay the pledgor two thousand dollars. The pledgees, 
 without authority, foreclosed the mortgage security, and 
 sold the property, becoming the purchasers thereof for two 
 thousand dollars, and subsequently selling the same for five 
 thousand dollars. The pledgor was entitled, the assignment 
 being void as the loan was usurious, to recover the value of 
 the bond and mortgage at the time of the assignment.* 
 
 138. ESTOPPEL OF BORROWER ON USURY BY HIS 
 AFFIRMATIVE ACTS. Where a person borrows money upon 
 a bond and mortgage, he may deprive himself of the right 
 to interpose the defense of usury by his own affirmative 
 acts, as where he has given a certificate that the bond and 
 mortgage executed by him are good and valid, and that he 
 has no defenses, equities, or set-offs, at law or in equity. 
 Where this has been done, if the bond and mort- 
 gage are in the hands of an innocent person who has 
 advanced a valuable consideration thereon, without notice 
 of equities, on the faith and credit of the representations 
 contained in such certificate, the mortgagor is estopped to 
 set up any defense of usury in the original transaction. 1 
 This rule is applied in favor of the second assignee of a bond 
 and mortgage, receiving the same for value, even with 
 
 1 Schroeppel v. Corning, 5 Denio, Dal ton v. Smith, 86 N. Y. 176. 
 
 236; s.c., 6 N. Y. 107; Edwards v. Wegh. Boy Ian, 85 N. Y. 394; 
 
 Skinning, 1 Brev. (8. C. Eq.) 549; Smith v. Munroe, 84 Ib. 354; Ash- 
 
 Callunan v. Shaw, 24 la. 441; Garth ton's App. 73 Pa. St. 153; Horn . 
 
 9. Cooper, 12 Ib. 364; Tregoning . Coke, 51 N. H. 287; Ryall v. 
 
 Attenborough, 7 Bing. 97 ; Har- Rowles, 2 W. & T. Lead Cas. Eq. 
 
 greaves v. Hutchinson, 2 Ad. & E. pt. 2, 1673. 
 12.
 
 176 NEGOTIABLE COLLATERAL SECURITIES. 
 
 notice, if the first assignee holds the same free from equi- 
 ties. His title is supported by the title of his assignor. 1 
 
 139. RECOVERY OF NATIONAL BANKS ON COLLAT- 
 ERALS FOR USURIOUS LOANS. The provisions of the 
 National Bank Act relative to usury, and the penalties im- 
 posed therefor, supersede the provisions of the state laws 
 concerning usury.* The United States Supreme Court have 
 refused to declare invalid the indorsement of a promissory 
 note given to a national bank as collateral security, in a 
 transaction of loan open to the taint of usury, as the penalty 
 thus sought to be added was additional to those provided 
 by the National Bank Act. 8 The right of action to recover 
 double the amount of interest on a usurious loan to a 
 national bank, as provided by Section 5197 of the National 
 Bank Act, accrues upon the actual payment of the borrower 
 of the amount of illegal interest to the bank, and can be 
 maintained whether the debt is paid or not. 4 This right 
 of the borrower on an usurious loan is transferred to an as- 
 signee in insolvency or bankruptcy appointed to wind up his 
 estate.* 
 
 140. WHEN USURY NOT AVAILABLE AS DEFENSE 
 TO COLLATERAL PAPER. A loan made under a contract 
 
 1 Wegh v. Boylan, 85 N. Y. 394. 22 Ohio St. 492; Citizens' Nat. Bank 
 
 The rule as to sub-assignees is en- t>. Leming, 8 Int. Rev. Rcc. 132. 
 
 forced in Ashton's App. 73 Pa. St. Contra: First Nat. Bank v. Lamb, 
 
 153; McConnell v. Wenrich, 16 Pa. 50 N. Y. 95. 
 
 St. 365; Mott v. Clark, 9 Ib. 405. Gates v. National Bank, 100 U. 
 
 Gates v. National Bank, 100 U. S. 239, 250. 
 
 8. 239 ; Barnett v. National Bank, 98 * Monongehela Nat. Bank v. Over- 
 
 Ib. 555; Farmers' Nat. Bank t>. Dear- holt, 96 Pa. St. 327. 
 
 ing. 91 Ib. 29 ; Tiffany . Missouri Crocker v. Nat. Bank, 4 Dillon. 
 
 State Bank, 18 Wall. 409; Davis t>. 358; Wright v. Nat. Bank, 18 N. B. 
 
 Randall, 115 Mass. 547; Central Nat. R. 87; Nichols e. Bellows. 22 Vt. 
 
 Bank v. Pratt, Ib. 539; Nat. Bank 281; Gray v. Bennett, 3 Met. 522; 
 
 of Erie v. Brown, 72 Pa. St. 209 ; Mouongehela Nat. Bank v. Overholt, 
 
 Wiley v. Sturbuck, 44 Ind. 298; supra. Contra : Brombey v. Smith, 
 
 First Nat. Bauk v, Guarlinghouse, 5 N. B. R. 152.
 
 USURIOUS LOANS. 177 
 
 tainted with usury cannot be assailed by a stranger, or 
 one not a party to it, nor claiming under the party in- 
 juriously affected by it, in cases where such contract is not 
 absolutely void by statute but only voidable at the election 
 of the borrower, or those privy in interest or in contract 
 with him. 1 The rule is applied in the case of makers 
 of valid negotiable promissory notes, pledged as collateral 
 securicy on an usurious loan. The defense of usury in the 
 original loan is not allowed to be interposed upon an action 
 by the pledgee on the collateral note. Such makers not 
 being either parties or privies to the loan tainted with usury, 
 cannot litigate the validity of the indorsement under which 
 the collateral notes are held.* But where such collaterals, 
 taken on an usurious contract, are rendered void by statute, 
 no action can be brought on the collateral notes by the 
 pledgee, against the parties thereto, as the indorsement to 
 him is also void. 8 Although the plea of usury is a personal 
 one, intended for the benefit of the borrower, a surety or 
 accommodation indorser may take advantage of it. 4 Nor 
 will the usury paid to one lender affect the claims of an- 
 other lender to the enforcement of negotiable collateral 
 paper given as security for the payment of the money 
 loaned, where the money was obtained as one loan by a note 
 broker for a customer, with whom the collateral notes were 
 deposited.* 
 
 The defense of usury is not available to the mortgagor 
 as against an assignee of a bond and mortgage which had 
 been transferred under a general assignment for the benefit 
 of creditors* or as collateral security for payment of a 
 
 1 Dix v. Van Eyck, 2 Hill, 522 ; * Williams v. Tilt, 36 N. Y. 319. 
 Post v. Dart, 8 Paige, 649; Shufelt . * Gaithers . Farmers' Bank, 1 Pet. 
 
 Shufelt, 9 Ib. 145; Johnson v. Hen- 37 ; Harrison V. Hamell, 5 Taunt. 
 
 ry, 10 Johns. 185; Sands v. Church, 780. 
 
 6 N. Y. 347; Billard c. Raynor, 30 * Gray . Brown, 22 Ala. 273. 
 Ib. 197; Billington . Waggoner, 33 5 Little . Baker, Hoffm. Ch. 487. 
 Ib. 31; Williams v. Tilt, 36 Ib. 319; Chapin v. Thompson, 89 N. Y. 
 
 Green v. Kemp, 13 Mass. 515; Bridge 270; Wilkinson v. Dodds, 1 Johns. 
 
 v. Hubbard, 15 Ib. 103; DeWolf v. Cas. 158 ; Berry v. Van Beuren, 17 
 
 Johnson, 10 Wheat. 367, 393. Johns. 436.
 
 178 NEGOTIABLE COLLATERAL SECURITIES. 
 
 note given by a partnership. 1 In a suit by the assignee of 
 a bond and mortgage against the mortgagor to foreclose the 
 security, the mortgagor is not permitted to set up usury in 
 the transfer between the mortgagee and the assignee. 4 The 
 rule, however, is otherwise as between the original par- 
 ties. 3 
 
 Nor will equity grant relief to a mortgagor, alleging 
 usurious consideration in a transaction where a mortgage was 
 given to secure the payment of a loan, against a threatened 
 sale of the property or other enforcement thereof, except 
 upon the equitable condition that the mortgagor shall pay 
 to the bona fide holder of the debt, for value, the principal 
 sum, with legal interest. His position, under such circum- 
 stances, is different from that of one defending against an. 
 usurious contract. 4 Nor can a purchaser of a mere equity 
 of redemption in premises covered by a usurious mortgage, 
 who purchased subject to the lien of the mortgage, set up 
 usury as a defense thereto. 5 And where the statute upon 
 which the defense of usury rests has been repealed, it will 
 no longer be available to any party.' 
 
 141. USURY NOT AFFECTED BY TAKING NEW SE- 
 CURITIES. The taint of usury attaching to the original 
 evidences of indebtedness is not eliminated or defeated by 
 the mere substitution of new securities in lieu of the old, 
 or by renewals of the same, in which the original usurious 
 consideration enters.' As between the parties, the original 
 
 1 Stevens a. Reeves, 33 N. J. Eq. 6 Ewell <c. Daggs. 103 U. S. 143 
 
 427. (2 Sup. Ct. Rep. 408). 
 
 * Western Reserve Bank t. Potter, * Dunning v. Merrill, Clark's Ch. 
 
 Clarke's Ch. 432. 252; Price v. Lyons Bank, 33 N. Y. 
 
 8 Hackenstein v. Love, 98 Pa. St. 55; Tuthill v. Davis, 20 Johns. 285; 
 
 518. Reed t. Smith, 9 Cowen,647; Camp- 
 
 4 Clark . Finlon, 90 HI. 348 ; bell v. McHarg, 9 la. 354 ; Tony v. 
 
 Tooke v. Newman, 75 Ib. 215 ; An- Grant, 10 S. & M. 89; Nelson 0. Har- 
 
 thony v. Lawson, 84 Ark. C28. ford, 11 Neb. 465; Moniteau Nat. 
 
 'Pinnell *. Boyd, 33 N. J. Eq, Bank v. Miller, 73 Mo. 187; Over- 
 
 190; Dolman v. Crane. 14 Ib. 63. holt v. Nat. Bank, 82 Pa. St. 490-
 
 USURIOUS LOANS. 179 
 
 taint of usury attaches itself as well where a further 
 security is given or a guaranty is subsequently made, i\i 
 in the case of renewal of the original note or the substitu- 
 tion of a new security. 1 Where parties have calculated 
 interest upon the old securities at a higher rate than that 
 authorized by law, and made a settlement on such basis, 
 and the debtor gives such new notes, secured by a mortgage, 
 for the whole sum including the illegal interest, such new 
 notes, and the mortgage given to secure their payment, are 
 voidable, and can not be enforced as to the excess above the 
 legal interest. 8 But, though a past usurious contract be the 
 basis on which the parties deal, yet if that contract be not 
 absolutely void, a subsequent agreement which frees the 
 transactions from all usurious taint, will be valid. A con- 
 tract tainted with usury in one state may be a valid basis for 
 a new contract in another state. 8 And where an usurious 
 contract has been mutually abandoned, and the notes 
 given therefor surrendered, if the parties agree upon 
 the payment of the original loan, to the extent that it 
 was a valid transaction, and the debtor gives new notes 
 therefor, an action thereon by the payee is supported, as 
 being founded upon a valuable consideration, free from the 
 the taint of usury. 4 
 
 142. REVIVAL OF ORIGINAL VALID DEBT WHERE NEW 
 SECURITIES ARE USURIOUS. If a security founded upon a 
 prior one be tainted with the vice of usury, and the prior 
 
 Walker v. Bank of Washington, 3 * Burnkisel v. Firman, 22 Wall. 
 
 How. 62: Harrison v. Hannah, 5 170; Morris v. Way, 16 Ohio, 469; 
 
 Taunt. 780; White v. Wright, 4 B. Sanford v. Wheeler, 13 Conn. 165; 
 
 & C. 273. Only to the extent of the Mowry v. Bishop, 5 Paige, 98 ; Nel- 
 
 usury in the old notes. Curtis v. son v. Hurford, 11 Neb. 465. 
 
 Valiton, 3 Mont. 153. * DeWolf v. Johnson, 10 Wheat. 
 
 1 Bridge v. Hubbard, 15 Mass. 96 ; 367. 
 
 Brinkerhoff . Foot, 1 Hoffm. Ch. * Sheldon . Haxtun, 91 N. Y. 
 
 291; Powell . Waters, 8 Cow. 669; 124. 
 Reed . Smith, 9 Ib. 647; Vickey v. 
 Dickson, 35 Barb. 96.
 
 180 NEGOTIABLE COLLATERAL SECURITIES. 
 
 one free from it, but has been given up and cancelled, and 
 the new security is thereafter adjudged void, the valid note 
 may be revived and enforced as if the one tainted with 
 usury had never been given. 1 Such cancellation and sur- 
 render of the prior securities under such circumstances are 
 without consideration. If the latter securities are adjudged 
 invalid, the creditor or pledgee has lost his debt without 
 fault on his part, and contrary to the intent of both parties 
 to the contract under which the change of securities 
 took place. Upon such failure of consideration, and 
 fraud and mistake, a court of equity will annul the cancel- 
 lation and revive the securities. 1 
 
 1 Star 0. Ellis, 6 Johns. Ch. 395 ; Burnhisel v. Firman, 22 Wall 
 Loomis v. Hudson, 18 Iowa, 416; 170, 178. 
 Hore v. Beecher, 12 Sim. 465; East 
 India Co. v. Donald, 9 Ves. 284.
 
 PART II. 
 
 NEGOTIABLE NOTES AND MORTGAGES. 
 
 CHAPTER XV. 
 
 THE INDORSEE'S TITLE TO THE NEGOTIABLE NOTE. 
 
 143. The negotiable note and the mortgage security. 
 
 144. The transfer of note carries mortgage security. 
 
 145. The mortgagee, as trustee for the indorsee. 
 
 146. Cases where security does not follow debt. 
 
 147. The indorsee subject to record, and should record assignment. 
 
 148. The indorsee subject to equities, under fraudulent mortgages. 
 
 149. Mistake in mortgage security, no defense against bona fide indorsee. 
 
 150. The recovery of the indorsee of mortgage notes. 
 
 151. The indorsee of mortgage notes, as affected by payments to mortgagee. 
 
 152. The indorsee of outstanding notes, when subject to payments. 
 
 153. The remedy upon the note, distinct from the security. 
 
 154. Concurrent remedies of indorsee of note and mortgage . 
 
 155. Equitable aid to the mortgagor and maker of negotiable notes. 
 
 156. The mortgage security enforced, although note barred. 
 
 157. The contra rule. 
 
 158. Application of proceeds of security to mortgage notes under priority 
 
 rule. 
 
 159. Application of proceeds where, upon default, all notes become, and 
 
 pro rata. 
 
 160. The equity of the assigned note preferred. 
 
 143. THE NEGOTIABLE NOTE AND THE MORTGAGE 
 SECURITY. A convenient form of security for money loaned 
 is found in the negotiable promissory note, secured by a 
 mortgage of real estate. The note itself, being a negotiable 
 instrument, has all the advantages of commercial paper in 
 hands of a holder for value in good faith, and represents the 
 
 (181)
 
 182 NEGOTIABLE NOTES AND MORTGAGES. 
 
 personal liability of the borrower, which can be enforced at 
 maturity and upon default as in the case of ordinary nego- 
 tiable paper. Nor does it lose its negotiable character where 
 secured by mortgage by an indorsement and delivery thereof 
 apart from the mortgage. The mortgage itself offers a secur- 
 ity collateral and subsidiary to the personal obligation, of 
 which it is an incident. In common with other collateral 
 securities a payment of the principal note discharges the 
 mortgage security ; and if the security is foreclosed and 
 sold, equity applies the proceeds in payment of the note. 
 The negotiable note, jeceived before maturity, in good faith, 
 for value, and without notice, is free of antecedent equities, 
 and the mortgage security, as an incident thereof, passes 
 generally as free therefrom as the note ; for the borrower, 
 if he wishes to insist upon the equities of a non-negotiable 
 mortgage security, should give a non-negotiable bond as rep- 
 resenting the principal indebtedness. By indorsement of the 
 note before maturity and assignment of the mortgage, and 
 delivery, notes and mortgages executed by third persons, 
 are used as collateral security for the holder's own notes and 
 obligations. The pledgee of notes and mortgages, receiving 
 the same without notice, is a purchaser for value, 
 to the extent of his advances, and is entitled upon default in 
 the negotiable paper or of the conditions of the mortgage 
 security, to enforce such collateral securities, equally with 
 any other bona fide indorsee and assignee for value, to the 
 full amount thereof, irrespective of the personal evidences 
 of indebtedness of the borrower and pledgor in his posses- 
 sion. 1 
 
 'National Bank v. Whitney, 103 Keohane V. Smith, 97 Ib. 156, 159; 
 
 TJ. 8. 99; Swift . Smith, 10211). 443; McCracken v. German Ins. Co., 48 
 
 National Bank . Matthews, 98 Ib. Md. 47; Pierce . Faunce, 47 Me. 
 
 621; Carpenter t>. Longan, 16 Wall: 513; Briggs v. Rice, 130 Mass. 50; 
 
 271; Beach e. Mosgrove, 16 Fed. Smiths. Burgess, 133 Ib. 511 ; Logan 
 
 Rep. 307; Hayden v. Snow, 9 Biss. v. Smith, 62 Mo. 455; Bell v. Simp- 
 
 511; Wright v. Ross, 86 Cal. 414; son, 75 Ib. 485; National Bank . 
 
 Preston v. Case, 42 Iowa. 549; Inter- Bigler, 83 N. Y. 17; Lewis v. Kirk, 
 
 .cati-jnal Bankc. Jenkins, 104 111. 143; 28 Kan. 497; Wells . Wells, 53 Vt.
 
 INDORSEE S TITLE TO NOTE. 
 
 183 
 
 144. THE TRANSFER OF NOTE CARRIES MORTGAGE 
 SECURITY. The transfer of a negotiable promissory note, 
 by indorsement and delivery, or by delivery merely, where 
 indorsed in blank or payable to bearer, the payment of which 
 is secured by a mortgage or deed of trust, carries with it, 
 in equity, the mortgage or deed of trust security. The in- 
 dorsee of the promissory note is entitled to the benefits of 
 such mortgage, whether an assignment of the same is made 
 or not 1 unless there be some special provision to the con- 
 
 1; Whiting 0. Paul, 13 E. I. 40; 
 Walker 0. Lee, 14 S. C. 142; Heath 
 0. Silverthorne, 39 Wis. 146. 
 
 1 Carpenter v. Longan, 16 Wall. 
 271; Sawyer 0. Prickett, 19 Ib. 146; . 
 Ober v. Gallagher, 93 U. S. 199 ; New 
 Orleans etc. Co., v. Montgomery, 95 
 Ib. 16 ; National Bank v. Matthews, 
 08 Ib. 621; Swift v. Smith, 102 Ib. 
 413 ; National Bank v. Whitney, 103 
 Ib. 99, 101 ; Ellett v. Butt, 1 Woods, 
 220 ; Beals . Neddo, 1 McCrary, 206; 
 Winsted v. Bingham, 14 Fed. Rep. 1; 
 Hayden v. Snow, 9 Biss. 511 ; Dick- 
 inson v. Worthington, 10 Fed. Rep. 
 860 ; in re Allen, 12 Ib. 433 ; Beach 
 v. Mosgrove, (McCrary, J.) 16 Ib.307; 
 Foster 0. Fox, 4 W. & S. 92; Cath- 
 cart's App. 13 Pa. St. 416 ; McCall v. 
 Lenox, 9 S. & R. 304; Rickert v. 
 Madeira, 1 Rawle, 328 ; Brice's App. 
 95 Pa. St. 105; Cullum v. Irwin, 4 
 Ala. 452; Johnson v. Hart, 3 Johns. 
 Cas. 322; Jackson v. Willard, 4 
 Johns. 43 ; Jackson v. Blodgett, 5 
 Cow, 202; Pattison v. Hull, 9 Ib. 
 754; National Bank v. Bigler, 83 N. 
 Y. 171; Howard v. Entreken, 24 
 Kan. 428; Lewis v. Kirk, 28 Kan. 
 497 ; Burhaus v. Hutcheson, 25 Kan. 
 631; Kurtz v. Sponable, 6 Kan. 395; 
 Swenson v. Plow Co. 14 Ib. 388; 
 Wellborn 0, Williams, 9 Ga. 86; 
 Roberts v. Mansfield, 32 Ib. 228; 
 
 Moss v. Kessler, 60 Ib. 47 ; Whitte- 
 more v. Gibbs. 24 N. H. 484 ; Gra- 
 ham 0. Newman, 31 Ala. 497 ; Van- 
 dercook v. Baker, 48 Iowa, 199; 
 Crow v. Vance, 4 Ib. 434; Martin- 
 dale v. Burch, 57 Ib. 292; Sangster 
 v. Love, 11 Ib. 580 ; Ord v. McKee, 
 5 Cal. 616: Gay v. Ide,6 Ib. 101; Me 
 Millan v. Richards, 9 Ib. 409; 
 Hoffley v. Maier, 13 Ib. 14 ; Johnson 
 v. Sherman, 15 Ib. 293; Lord . Mor- 
 ris, 18 Ib. 484; McCarthy v. White, 
 21 Ib. 501 ; Willis v. Farley, 24 Ib. 
 490; Hurt v. Wilson, 38 Ib, 263; 
 Stewart v. Preston, 1 Fla. 10; John- 
 son 0. Carpenter, 7 Minn. 176 ; 
 Humphrey v. Buisson, 19 Ib. 221 ; 
 Hosetter0. Allexander, 22 Minn. 559; 
 Ruhling 0. Hackett, 1 Nev. 360 ; Sar- 
 gent v. Howe, 21 111. 148; Mepps v. 
 Sharpe, 32 Ib. 13; Edgerton v. 
 Young, 51 Ib. 415; Keohane v. Smith, 
 
 97 Ib. 156, 159; Hosmer v. Campbell, 
 
 98 Ib 572, 578; Miller 0. Larned, 103 
 Ib. 563 ; Foster v. Strong, 5 Bradw. 
 227; Anderson v. Baunigarten, 27 
 Mo. 80; Mitchell v. Laden, 30 Ib. 
 526; Green 0. Chappell, 38 Ib. 213; 
 Potter 0. Stevens, 40 Ib. 229 ; McQuie 
 0. Peay, 58 Ib. 56 ; Linville 0. Sav- 
 age, 58 Ib. 248 ; Kansas City Savings 
 Ass'n v. Martin. 61 Ib. 435; Christian 
 0. Newbury, Ib. 446; Logan v. Smith, 
 62 Mo. 455 ; Bell v. Simpson, 75 Ib.
 
 184 
 
 NEGOTIABLE NOTES AND MORTGAGES. 
 
 trary. 1 The rule applies to a bond or other obligation given 
 as collateral security for the payment of a promissory note.' 
 It is immaterial whether the existence of the mortgage 
 security is known to the indorsee of the note at the time of 
 the transfer 8 so long as the same has not been separately 
 extinguished. 4 Where part only of the evidences of indebt- 
 edness are assigned, only a pro rata portion of the security 
 follows.* The rule applies in favor of notes given in re- 
 
 490 ; Croft . Bunster. 9 Wis. 503 ; 
 Kelley v. Whitney, 41 Ib. 110; 
 Woodruff v. King, 47 Ib. 261 ; Cros- 
 by v. Brownson N 2 Day, 425 ; Pond 
 v. Clarke, 14 Conn. 334 ; Southerin 
 v. Mendum, 5 N. H. 420: Page v. 
 Pierce, 26 N. H. 317, in which cases 
 such equitable assignment was en- 
 forced in legal actions; Blunt 0. Nor- 
 ris. 123 Mass. 55 ; Morris v. Bacon, 
 Ib. 58; Bryant v. Damon, 6 Gray, 
 564 ; Cleveland v. Martin, 2 Head, 
 131 ; McCallura v. Jobe, 9 Baxt. 168; 
 Paine v. French, 4 Ohio, 318 ; Swartz 
 v. Leist, 13 Ohio St. 419; Duncan v. 
 Louisville, 13 Bush, 385; Schmidts. 
 Frey, 5 La. Ann. 435 ; Pierce v. 
 Faunce, 47 Me. 513; Gabbert v. 
 Schwartz, 69 Ind. 450; Wright 
 v. Eaves, 10 Rich. 585 ; Cleveland v. 
 Cohrs, 10 S. C. 224; Walker v. Lee, 
 14 Ib. 142; Perkins v. Sterne, 23 
 Tex. 561; Pratt v. Bank, 10 Vt. 293; 
 Keyes v. Wood, 21 Ib. 331 ; Dodge 
 . Bank, 2 MacAr. 420 ; Tingle v. 
 Fisher, 20 W. Va. 497; Martin v. 
 Moulin, 2 Burr. 979; Duffleld v. 
 Elwes, 1 Bl. N. S. 497; Walker 
 v. Jones, L. R. 1 Pr. C. 50. In Car- 
 penter v, Longan, supra, it is said: 
 "The transfer of the note carries 
 with it the security without any 
 formal assignment or delivery, or 
 even mention of the latter. If not 
 assignable at law, it is clearly so in 
 
 equity." In Boyd v. Parker, 43 Md. 
 182, where a mortgage was made to 
 secure the indorser of a note, ita 
 benefits enured to every bona fide 
 holder thereof. In France the mort- 
 gage security follows the instrument 
 (Tunguier, 75), and the Belgian 
 code, 26, enacts the same in ex- 
 press terms. 
 
 1 Johnson v. Hart, 3 Johns. Cas. 
 322 ; Ellett v. Butt, 1 Woods, 220. 
 
 * Batesville Inst. v. Kauffman, 18 
 Wall. 151 ; Hutchinson v. Crane, 100 
 111. 269, 274; Wright v. Troutman, 
 81 Ib. 374. 
 
 Chad well v. Wheless, 6 Lea, 322; 
 Keyes v. Wood, 21 Vt. 331. 
 
 4 Logan v. Smith, 62 Mo. 425. 
 
 8 Phelan v. Obey, 6 Cal. 478 ; Grat- 
 tan . Wiggins, 23 Ib. 16 ; Grapen- 
 gether v. Fejervary, 9 Iowa, 163 ; 
 Gregory t>. Savage, 32 Conn. 250; 
 Walker v. Schreiber, 47 Iowa, 529; 
 Sample v. Rowe, 24 Ind. 208 ; Ayres 
 v. Hayes, 60 Ind. 452 ; Duncan v. 
 Louisville, 13 Bush, 378 ; Stockton 
 v. Johnson, 6 B. Monr. 408 ; Noyes 
 v. White, 9 Kan. 640 ; Brown v. Del- 
 any, 22 Minn. 249 ; Foley v. Rose, 
 123 Mass. 557 ; Bryant v. Damon, 6 
 Gray, 564; Bank v. Tarleton. 23 
 Miss. 173 ; Henderson v. Herrod, 10 
 S. & M. 631 ; Terry v. Woods, 6 Ib. 
 139; Stewart v. Crosby, 50 Me. 130; 
 Anderson v. Baumgartcn, 27 Mo. 80:
 
 INDORSEE'S TITLE TO NOTE. 185 
 
 newal or substitution of other notes, secured by mortgage, 1 
 subject to proof that such notes were given in full payment 
 of the notes secured by mortgage, in which event the 
 security ceases.* While the indorsement and delivery of 
 a negotiable promissory note, the payment of which is se- 
 cured by a mortgage or deed of trust, carries with it the 
 mortgage security, for the benefit of the indorsee for 
 value, an assignment of the mortgage security alone, with- 
 out the personal evidences of debt, conveys no right or 
 title to the assignee, and is a nullity. The mortgage itself, 
 without the debt to sustain it, has no reason for existence; 
 when the debt is paid, it loses its vitality as a valid instru- 
 ment. The only effect of the assignment of a mortgage 
 by a mortgagee, where given to secure the payment of ne- 
 gotiable collateral notes which have passed into possession 
 of third persons, indorsees for value, is to create a quasi or 
 secondary trusteeship on the part of the assignee in favor 
 of the indorsees of the paper, the payment of which is se- 
 
 Mayer . Campbell, 9 Ib. 279 ; Stev- Ib. 543 ; Lippold . Held, 57 Ib. 213; 
 
 enson v. Black, 1 N. J. Eq. 338 ; Rig- Burdett v. Clay, 8 B. Monr. 287 ; Me 
 
 ney v. Lovejoy, 13 N. H. 247 ; Page Namara v. Condon, 2 Mac Ar. 364 ; 
 
 t>. Pierce, 26 N. H. 217 ; Pattison v. Seymour*. Darrow, 31 Vt. 122; 
 
 Hull, 9 Cow. 747; Jackson v. Blod- Howard Bank v. Loomis, 51 Ib. 
 
 gett, 5 Ib. 202; Green v. Hart, 1 349; Bailey . Merrick, 50 Me. 171; 
 
 Johns. 580; Prescott v. Hull, 17 Ib. Verner v. Johns, 15 S, C. 613; Bos- 
 
 284; Beresford v. Ward, 1 Disney, wellfl. Goodwin, 31 Conn. 79; Lever 
 
 169; Swartz v. Leist, 13 Ohio St. 419; v. Bessenger, 9 Baxt. 393 ; Rogers v. 
 
 Lynch v. Hancock. 14 S.C. 66; Lang- Traders' Ins. Co., 6 Paige, 583; 
 
 don v. Keith, 9 Yt. 299 ; Keyes v. Tripp v. Vincent, 3 Barb. Ch. 614 ; 
 
 Wood, 21 Vt. 331 ; Rolston v. Brock- Stanton v. Thompson, 49 N. H. 272 ; 
 
 way, 23 Wis. 407; Batesville Inst. Taft z.Boyd, 13 Allen, 84; Melledge 
 
 v. Kauffman, 18 Wall. 151 ; Martin v. v. Boston Iron Co., 5 Cush. 158; Cur- 
 
 Moulin, 2 Burr, 979. And a release tis v. Hubbard, 9 Met. 322 ; Parham 
 
 of part of the debt will discharge the Mach. Co. v. Brock, 113 Mass. 194 ; 
 
 mortgage security pro tanto. Hawke Dodge v. Emerson, 131 Ib 467; Wash- 
 
 v. Snydacker, 86 111. 197. ington Co. v. Slaughter, 54 Ib. 265; 
 
 1 Jone? v. Guaranty etc. Co., 101 State v. Lake, 17 Ib. 219. 
 
 U. S. 622; Kuhns v. McGeach, 38 * Weston v. Wiley, 78 Ind. 54; Al- 
 
 Ohio St. 468; Christian v. Newberry, ford v. Baker, 53 Ib. 279: Lover t>. 
 
 61 Mo. 446 ; McDonald v. Hulse, 16 Bessenger, 9 Baxter, 393.
 
 186 NEGOTIABLE NOTES AND MORTGAGES. 
 
 cured thereby. And this trusteeship is, upon occasion, 
 enforced by courts of equitable jurisdiction. The assignee of 
 a mortgage security, without more, obtains no title or interest 
 therein. 1 
 
 145. THE MORTGAGEE AS TRUSTEE FOR THE IN- 
 DORSEE. The mortgagee, or his assigns, continuing vested 
 with the legal estate in the land, pledged for the paj'ment 
 of negotiable promissory notes of the mortgagor, is a trus- 
 tee for any bona fide indorsee of such notes, for value, and 
 is bound to act in good faith in his relations to him ; and 
 the indorsee has the right to control the security. 2 Or- 
 dinarily, a mortgagee is, as between himself and the mort- 
 gagor, not a trustee ; 8 but a trust is raised upon the 
 negotiation for value of the negotiable notes secured 
 thereby in favor of the indorsee, where there is no actual 
 assignment of the mortgage security. 
 
 146. CASES WHERE SECURITY DOES NOT FOLLOW 
 DEBT. The rule that the assignment of a debt will carry 
 
 1 Carpenter v. Longan, 16 Wall. 9 Iowa, 297 ; Hill . Edwards, 11 
 271, 274; Wanzer . Gary, 76 N. Y. Minn. 29; Picket v. Jones, 63 Mo. 
 526; Peters . Jamestown Bridge, 5 195; Watson v. Hawkins, 60 Ib. 
 Cal. 334; Huntington v. Smith, 4 550; Delano v. Bennett, 90 111. 533. 
 Conn. 235 ; Quniebang Bank v. Phelan v. Olney, 6 Cal. 478; Cut- 
 French, 17 Ib. 134; Jackson t>. Blod- ler v. Haven, 8 Pick. 490; Young v. 
 gett, 5 Cow. 205 ; Same v. Willard, Miller, 6 Gray, 152; Johnson v. 
 4 Johns. 43; Jackson v. Bronson, 19 Brown. 31 N. H. 405; Brown . 
 Ib. 325; Merritt t>. Bartkolick, 36 N. Blydenburgh, 7 N. Y. 141; Water- 
 Y. 44; Johnson v. Cornett, 29 Ind. man. Hunt, 2 R. I. 298; Dudley v. 
 59; Dearborn . Taylor, 18 N. H. Cadwell, 19 Conn. 228; Parsons . 
 553; Hobson v. Roles, 20 Ib. 41; Wells, 17 Mass. 425; Sangcr v. Ban- 
 Hayes u. Lewis, 17 Wis. 212; Cleve- croft, 12 Ib. 367; Swartz v. Leist, 13 
 land v. Cohrs, 10 8.C. 224; Perkins v. Ohio St. 419: Johnson v. Carpenter, 
 Sterne, 23 Tex. 561; Hamilton v, 7 Minn. 176, 184; Sturtcvant v. 
 Lubukee, 51 111. 415; Graf ton Bank Jaques, 1 Allen, 523; Torrey v. 
 c. Foster, 11 Gray, 265; Burdett v. Dearth, 53 Vt. 331; Blumenthal v. 
 Clay, 8 B. Mon. 287; Perkins . Jassey, 29 Minn. 177; Lucas . Harris, 
 Stern. 28 Tex. 563; Bayley v. Gould, 20 111. 165. 
 
 Walker's Ch. 478; Martin v. McRcy- Warner v. Jacob, L. R. 20 Ch. D. 
 
 nolds, 6 Mich. 73 ; Rankin t>. Major, 220.
 
 INDORSEE'S TITLE TO NOTE. 187 
 
 the security given for its payment does not apply in cases in 
 favor of indorsees of bills of exchange where a deed of trust 
 having been given as collateral security for their accep- 
 tance, upon the bankruptcy of the acceptor, the drawer 
 withdrew his security ; nor in favor of holders of bills of 
 exchange, where part of the land covered by a deed of trust 
 had been released by the acceptor, and conveyed to a bona 
 fide pledgee, as security, for a valuable consideration. 1 
 Nor is the mortgage security preserved in favor of a drawee 
 of bills of exchange, where the mortgage having been made 
 to secure the payment of certain bills which were dis- 
 honored, the drawee accepted and paid other bills of like 
 amount, taking an assignment of the mortgage.* Nor in 
 favor of a third party, where a mortgage given as indemnity 
 to a surety upon a note made by a corporation for an advance, 
 and the note was subsequently taken up by a third person 
 giving his own note for the amount. 3 
 
 147 THE INDORSEE SUBJECT TO RECORD AND SHOULD 
 RECORD ASSIGNMENT. The duty of the indorsee of a 
 note and mortgage is to inquire of the mortgagor if there 
 be any reason why the note and mortgage should not be 
 paid. 4 The indorsee is subject to any prior encumbrances 
 appearing on record, in the direct line of the title of his 
 mortgage security, although without notice thereof. 6 But 
 he is not required to search the records before taking the 
 same as security to learn if the grantor or mortgagor, or 
 grantee or mortgagee, have made any further conveyances 
 since the making and recording of the mortgage security. 
 The pledgee is chargeable, as said, with notice of convey- 
 
 1 St. Louis Building Assn. v. Clark, B Buchanan v. International Bank, 
 
 36 Mo. 601. 78 111.500; U. 8. Mortgage Co. v. 
 
 8 Wilkinson v. Simpson, 2 Moore Gross, 93 Ib. 497; Hosmer v. Camp- 
 
 Pr. Co. 275. bell, 98 Ib. 572; Miller . Lamed, 
 
 Corbett v. Woodward, 5 Sawy. 103 Ib. 562, 577; Connecticut v. 
 
 403, 410. Bradish, 14 Mass. 296. 
 
 4 Silverman v. Bullock, 98 111. 17; 
 Oldsfl.Cummings, 31 Ib. 188.
 
 188 
 
 NEGOTIABLE NOTES AND MORTGAGES. 
 
 ances and encumbrances only in the direct line of the title 
 he receives as collateral security. 1 
 
 As between the parties, no record of any assignment of 
 the mortgage security, given for the payment of promissory 
 notes, is necessary ; but as against third parties, even where 
 not required by direct statutory provisions, such assignment 
 should be placed on record, thus charging all parties dealing 
 with the property, or negotiable securities, with notice of 
 the rights of the indorsee and assignee. The recording of 
 assignments of mortgages is required to protect assignees 
 from future dealings with the property by the mortgagee 
 and mortgagor, and third parties. 8 Nor will the record of an 
 assignment of a promissory note and mortgage impart any 
 validity to such assignment where there was no delivery of 
 the securities and the same were not in the possession of 
 the pretended assignor. The absence of possession and de- 
 livery is sufficient to put an assignee upon inquiry, ant 7 
 
 Ogle c. Turpin. 102 111. 148. A 
 mortgagee indorsed the notes, se- 
 cured by mortgage, to a bona ride per- 
 son advancing value.before maturity, 
 and delivered them with the mort- 
 gage. Subsequently, obtaining a 
 deed of his equity from the mort- 
 gagor, he fraudulently entered a re- 
 lease of the first mortgage upon rec- 
 ord, and having recorded his deed, 
 conveyed the premises by deed of 
 trust as security for a further loan 
 made by parties without notice of 
 the outstanding notes and mortgages, 
 of which no assignment hiid been re- 
 corded. The second mortgagee was 
 protected against the lien of the first 
 notes, there being no presumption 
 that the payee of such notes had 
 transfered the same before purchas- 
 ing the equity of redemption, and 
 that reliance might be placed upon 
 the record showing the release and 
 title in the vendor. 
 
 'Williams v. Jackson, 107 U. S 
 Rep. 478; Flower v. El wood, 66 III 
 444; Ogle 9. Turpin, 102 111. 148; 
 Howard v. Ross, 5 Bradw. 461; 
 Smith v. Keohane, 97 Ib. 156; James 
 v. Johnson, 6 Johns. Ch. 417; Van- 
 derkemp v. Shelton, 11 Paige, 28 ; 
 James v. Morey, 2 Cowen, 246 ; 
 Campbell v. Vader, 1 Abb. 295; 
 Johnson v. Carpenter, 7 Minn. 183; 
 Gregory v. Savage, 32 Conn. 250 ; 
 Cornog t>. Fuller, 30 la. 212 ; Bank 
 v. Anderson, 14 Ib. 544; Lewis v. 
 Kirk. 28 Kan. 497; Burton v. Baxter, 
 
 7 Blackf. 297; Hutchins V. State 
 Bank, 12 Met. 424; Welsh v. Priest, 
 
 8 Allen, 165 ; Young t>. Miller, 6 
 Gray, 152; Mitchell v. Burnham. 44 
 Mo. 286 ; Bailey v. Myrick, 50 Ib. 
 179; Warren v. Homestead, 33 Ib. 
 256; Fosdick v. Barr,3Ohio St. 371; 
 Schwartz . Leist, 13 Ib. 419; Fisher 
 t>. Knox, 13 Pa. St. 622 ; Henderson 
 t>. Pilgrim, 22 Tex. 464.
 
 INDORSEE'S TITLE TO NOTE. 189 
 
 upon default, although advancing value, his claim is subject 
 to prior equities of other assignees with possession, but who 
 had not placed their assignment on record. 1 
 
 148. THE INDOKSEE SUBJECT TO EQUITIES UNDER 
 FRAUDULENT MORTGAGES. In the absence of judicial decis- 
 ions following the rule as stated in Carpenter v. Longan, 9 
 the assignee of a non-negotiable chose in action as a mort- 
 gage or deed of trust of real estate, although receiving the 
 negotiable evidences of the debt by indorsement, as a holder 
 for value, in good faith, is subject to claims for recoupment 
 or equitable set-off, where the note and mortgage or deed 
 of trust were procured by the false and fraudulent misrepre- 
 sentations of the mortgagee. 1 The like rule was applied 
 where an indorsee of a negotiable promissory note, shown 
 to be a forgery, sought to enforce the mortgage security, 
 the privileges of innocent holders of commercial paper not 
 applying in favor of an assignee of a mortgage, nor entitling 
 him although remediless on the forged note, to enforce 
 such mortgage security, his title under the same being sub- 
 ject to all defenses arising from the frauds or deceits prac- 
 ticed in its execution. 4 A deed of trust to secure the pay- 
 ment of negotiable promissory notes being fraudulent and 
 void, bona fide indorsees of the notes for value are not 
 allowed to enforce the mortgage security as against judg- 
 ment creditors whose rights accrued prior to the indorse- 
 ment of the notes. 5 Although the mortgagor is estopped to 
 set up equities arising in the original transaction, where 
 the mortgage security is assigned with his consent.' A 
 mortgage to secure the payment of a negotiable promissory 
 note, given for the price of liquors sold in violation of 
 
 1 O'Mulcahy . Holley, 23 Minn. Potter v. McDonald, 43 Mo. 
 
 81. 93. 
 
 * 16 Wall. 271. 'Matthews . Walwyn, 4 Ves. 
 Melendy v. Keen, 89 111. 395,404. Junr. 118; Melendy v. Keen, 89 111. 
 
 * Tabor v. Foy, 56 la. 539; Pope 395, 404. 
 t>. Jacobus, 10 Ib. 262.
 
 190 NEGOTIABLE NOTES AND MORTGAGES. 
 
 law, although such note and mortgage were void as 
 between the parties' the note- is enforced in the hands of 
 a bona fide indorsee for value, 9 and also the mortgage, 
 when assigned as security for its payment. 8 
 
 149. MISTAKE IN MORTGAGE SECURITY, NO DEFENSE 
 AGAINST BONA FIDE INDORSEE. It is no defense against 
 an indorsee before maturity of negotiable promissory notes, 
 secured by mortgage or deed of trust, that a mistake has 
 been made in the drafting of the mortgage deed, where 
 such indorsee or a subsequent purchaser of the property 
 has received the same in good faith for a valuable consid- 
 eration, without knowledge of defects. 4 And such bona 
 fide indorsee of notes so secured, for value, holding without 
 notice of a prior equitable claim or right, may convey a 
 perfect title to a third person having notice of such equities, 
 since the mortgage security, once discharged of latent equi- 
 ties, it is immaterial whether subsequent parties receiving 
 the same for value are chargeable or not with notice of such 
 prior equities. 6 The rule of equitable estoppel is applied 
 as against an owner of land, allowing the title thereto to 
 be placed in the name of a third person, who for a long 
 series of years is permitted to appear as its absolute legal 
 and equitable owner. Having obtained loans from one who 
 was without knowledge of the outstanding equity of the 
 owner, and who advanced his money on the credit of the 
 title of the borrower, an estoppel arose against the owner to 
 dispute the validity of the title he has himself conferred, to 
 the loss and hurt of an innocent pledgee for value, in the 
 usual course of business.* 
 
 1 Brigham t>. Potter, 14 Gray, 522; v. Wood, 69 111. 829; Pierce v. 
 
 Denny . Dana, 2 Cush. 160. Fuunce, 47 Me. 507; Langdou v. 
 
 9 Cazet v. Field, 9 Gray, 329. Keith, 9 Vt. 299; see Drury v. Hay- 
 
 Taylor n. Page, 6 Allen, 86. den, 111 U. 8. 212, rev. s. c. 9 Biss. 
 
 4 Carpenter v. Longan, 16 Wall. 511. 
 
 271; New Orleans Canal Co. t>. 5 Pierce v. Faunce, supra. 
 
 Montgomery, 95 U. S. 16; Sickmon Suiter v. Baker, 54 Cal. 140
 
 INDORSEE'S TITLE TO NOTE. 191 
 
 150. THE RECOVERY BY THE INDORSEE OF MORTGAGE 
 NOTES. The recovery by the indorsee for value of notes, 
 seeking in equity the enforcement of the mortgage given to 
 secure their payment, where received in good faith, before 
 maturity, and in the due course of business, is the full 
 amount of such notes. Anything less would be in violation 
 not only of the promises contained in the negotiable person- 
 al evidences of indebtedness, but of the terms of the mort- 
 gage security itself, in which is usually recited the making 
 and delivery and form of the notes as being the considera- 
 tion for the execution of the mortgage deed. Payments 
 made by the mortgagor and maker to the mortgagee and 
 payee, before or after the negotiation for value of such 
 notes, secured by mortgage, are without effect as to the 
 amount of recovery of a bona tide indorsee, before maturity 
 of such collateral securities, for value advanced, without 
 notice of such payments. The indorsee is entitled to recov- 
 er the full amount of the notes from the mortgagor and 
 maker, although the latter shall have paid portions of the 
 debt before. The indorsee having the legal title to the ne- 
 gotiable evidences of debt, and a remedy at law, a court of 
 equity will not interpose and take it from him. Rather, it 
 will follow the law and allow the indorsee the benefit of the 
 security for his bona fide advance. 1 Where, however, the 
 promissory note, secured by mortgage, is not received so as 
 to make the pledgee a party thereto, under proper indorse- 
 ment, where required, the indorsee although advancing 
 value takes only an equitable title to the negotiable paper, 
 and his recovery is subject to any valid defenses the maker 
 and mortgagor may have against the payee and mortgagee ; 
 nor is the pledgee's right increased where, after knowledge 
 of such defenses, an indorsement of the note is obtained.* 
 An attempt to transfer such negotiable paper and mortgage 
 
 1 Carpenter v. Longan, 16 Wall. * Osgood V. Artt, 11 Biss. (15 C. 
 
 271; Croft v. Bunster, 9 Wis. 503; L. N. 415); Lancaster Nat. Bank v. 
 
 Heath v. Silverthorne etc. Co., 39 Ib. Taylor, 100 Mass. 24; Whistler v. 
 
 146. Powell, Mortg. 908. Foster, 14 C. B. 246.
 
 192 NEGOTIABLE NOTES AND MORTGAGES. 
 
 security by an assignment and transfer thereof in a separate 
 instrument executed for an independent purpose, is not an 
 indorsement sufficient even to bring the assignee within the 
 rule which admits the maker of a note to set up any valid 
 defenses available as between himself and the payee, where 
 it is held unindorsed by a third person, much less to entitle . 
 him to the privileges of a holder for value of negotiable 
 paper under proper indorsement. Such assignee, in cases 
 of fraud, want or failure of consideration, or knowledge of 
 misappropriation, or other equity, can have no recovery 
 either at law on the note or in equity on the mortgage se- 
 curity. 1 
 
 151. THE INDORSEE OP MORTGAGE NOTES, AS AFFECTED 
 BY PAYMENTS TO MORTGAGEE. Where a negotiable promis- 
 sory note, the payment of which is secured by mortgage or 
 deed of trust, is indorsed for value, before maturity, with- 
 out notice, actual or constructive, of payments having been 
 made thereon, the indorsee is entitled to have the mortgage 
 security enforced for the whole amount of the note." The 
 like rule prevails, as between the maker of a negotiable 
 promissory note, secured by mortgage executed by him, the 
 payee and mortgagee, and the innocent indorsee of the note, 
 before maturity, for value, as to any payments made by the 
 maker and mortgagor to the payee and mortgagee, after the 
 indorsement and deliver}*, although without notice thereof. 1 
 An indorsee for value of negotiable paper, secured by mort- 
 gage, is protected as against a subsequent encumbrancer, 
 whose advances were made for the express purpose of pay- 
 ing off the notes secured by the first mortgage, but which 
 
 1 Osgood v. Artt, supra; Meleudy * Burhans v. Hutcheson, 25 Kau. 
 
 t>. Keen, 89 111. 895. 405 ; Peck . 625; Reeves e. Scully, Walker's Oh. 
 
 Bligh, 37 Ib. 117; Haskell v. Brown, 248; Button v. Ives, 5 Mich. 515; 
 
 65 Ib. 25; Franklin t>. Twogood, 18 Jones v. Smith, 22 Ib. 360 ; Bank v. 
 
 Iowa, 515. Anderson, 14 Iowa, 544; McClure v. 
 
 1 Goodfellow t>. Stillwell. 78 Mo. Burris, 16 Ib. 591 ; Roberts v. Hal- 
 
 17; Logan v. Smith, 62 Ib. 55. sted, 9 Pa. St. 32.
 
 INDORSEE'S TITLE TO NOTE. 193 
 
 were misappropriated by an agent. The second encumbran- 
 cer should have required the surrender and cancellation of 
 the long-time notes secured by the first mortgage, or in- 
 formed himself that they were in fact paid. 1 The pro- 
 duction by a tenant of notes secured by mortgage, in an ac- 
 tion by an assignee of the mortgage against a stranger, 
 creates no presumption of the discharge of the mortgage, 
 without further evidence, where it appears that the notes 
 were not paid to a lawful holder. 2 A credit indorsed upon 
 a note, secured by mortgage, being only a receipt, the in- 
 dorsee may show the true amount paid, and recover the 
 actual indebtedness. 3 
 
 The rule as to releases of mortgage securities was ap- 
 plied where notes amounting to $25,000, secured by mort- 
 gage, were negotiated, $5,000 of them to one innocent in- 
 dorsee for value, and the remaining notes to another 
 indorsee who advanced the full value thereof upon an 
 agreement that the mortgage should stand wholly for his 
 benefit. A satisfaction of the mortgage for the $5,000 note 
 was fraudulently executed by the mortgagee, without the 
 knowledge of the mortgagors, and placed on record. The 
 court held that nothing could defeat the rights of the inno- 
 cent indorsee for value of the $5,000 note, to the proceeds 
 of the mortgage security but such conduct on his part as to 
 raise an equitable estoppel. His failure to give notice to 
 the second purchaser, although aware of the terms of the 
 sale, was not sufficient to estop him. The second purchaser 
 was guilty of a want of care that must be regarded as equal- 
 ly, if not in a greater degree, as the cause of his loss, as he 
 could have easily ascertained the facts by a little inquiry 
 easily made. It appeared that no inquiry was ever 
 made about the ownership of the other note, although it 
 would have appeared that the mortgagee could not have 
 
 1 Keohane v. Smith, 95 111. 156. Richardson v. Hadsall, 106 111. 
 
 Crocker v. Thompson, 3 Met. 224 476. 
 13
 
 194 NEGOTIABLE NOTES AND MORTGAGES. 
 
 produced it, and that it had been negotiated to a holder 
 for value entitled to the benefit of the mortgage. 1 
 
 A release of record by a mortgagee, believing the notes 
 to be paid, will not affect the right of an innocent indorsee 
 of one or more of such notes, for value, to enforce the mort- 
 gage security.* Nor where, after an indorsement and de- 
 livery of negotiable bills or notes, secured by mortgage, 
 to an innocent holder for value, the mortgagee receives full 
 payment, executing a satisfaction on record, the mortgagor 
 believing him to be still the holder of the notes. 8 And a 
 purchaser, or subsequent mortgagee or trustee in a trust 
 deed, having notice at the time of execution of their leed, 
 that a prior mortgagee or trustee has released a mortgage or 
 trust deed without payment of the notes or their sun-under, 
 or authority from the holder thereof, is subject to the 
 equitable rights of the latter. 4 A mortgagee may by his 
 representations that his mortgage has been satisfied, estop 
 himself as against a creditor of the mortgagor, who, upon 
 the faith and credit of such representations has accepted the 
 mortgagor's notes in payment of the debt due, to assert that 
 his mortgage is superior to the notes thus taken, in its lien 
 upon the land.* 
 
 152. THE INDORSEE OF OUTSTANDING NOTES, WHEN 
 SUBJECT TO PAYMENTS. Notice is not charged from a fail- 
 ure to demand the production of negotiable promissory notes, 
 as against a lender of money upon other negotiable paper, 
 secured by deed of trust, where, before advancing the money, 
 the trustee under a prior deed of trust securing the payment 
 of negotiable notes, and the original holder of the notes, the 
 
 1 Smith v. Stevens, 49 Conn. 181 * Insurance Co. . Eldridge, 102 
 (10 Rep. 831). U. S. 545. 
 
 ' Martindale t>. Burch, 57 Iowa, Winsmith v. Winsmith, 15 S. C. 
 291; Dickinson t>. Worthington, 10 611. 
 Fed. Rep. 860. 
 
 3 Blurnenthal v. Jassey, 29 Minn. 
 117; Mead t>. Leavitt, 59 N. H. 476.
 
 INDORSEE'S TITLE TO NOTE. 195 
 
 payee, asserted under seal in a release of their deed of trust 
 that the first notes had been paid, and the records presented 
 a clear title. Nor is it to be presumed that such notes under 
 the first deed of trust were in the hands of a bona fide in- 
 dorsee for value. Nothing but proof of knowledge, fraud, 
 or gross neglect on the part of the holder of the second set 
 of notes, would defeat his title, and his claim to priority in 
 the distribution of the proceeds of the mortgage security. 1 
 The like rule was enforced where, after indorsement of the 
 negotiable evidences of debt, a mortgagee received payment 
 from the mortgagor, entered a release of record, and inno- 
 cent parties then advanced money, secured by a new deed 
 of trust, without notice of the fraud.* And also where the 
 mortgagee had indorsed the note and mortgage as collateral 
 security, and then released the mortgage upon record, the 
 land passing into the hands of a bona fide purchaser for 
 value ; 8 and in favor of an innocent purchaser for value of 
 the mortgaged premises where, through error, satisfaction 
 had been entered of the mortgage, although some of the 
 notes were held by indorsees for value, without notice. 4 
 
 Money was loaned, through an agent, upon notes and 
 mortgages, the notes being made payable to the agent, and 
 being indorsed by him, and with the mortgage security, for- 
 warded to the principal, the agent having authority to 
 receive payments and to execute releases. Some of the notes 
 and mortgages were negotiated by the principal to bona fide 
 indorsees for value. The principal and the indorsees ob- 
 tained their title subject to the defense of payment to and 
 release by the agent. Nor was it material that, at the time 
 of payment by the makers thereof, the agent was not in pos- 
 session of the notes and mortgages. 4 And an indorsee of a 
 negotiable note, where the deed of trust provides that pay- 
 ments maybe made on the note to the trustee, is chargeable 
 
 'Williams . Jackson 107 U. S. Ayers v. Hays, 60 Ind. 452; 
 
 Rep. 478. Gregory v. Savage, 32 Conn. 250. 
 
 * Bank v. Anderson, 14 Iowa, 544. 5 Cowles v. Bums, 28 Kan. 32. 
 1 Lewis . Kirk, 28 Kan. 497.
 
 193 NEGOTIABLE NOTES AND MORTGAGES. 
 
 with notice thereof, and, failing to revoke such authority, 
 is bound by any payments so made, in good faith. 1 
 
 153. THE REMEDY UPON THE NOTE, DISTINCT PROM 
 THE SECURITY. The liability of persons as fixed by the 
 order of their Uiiiues upon a negotiable promissory note is 
 not changed, nor is the negotiability thereof affected, by 
 the fact that it recites that its payment is further secured by 
 a mortgage or deed of trust. The note still expresses the 
 obligation of the maker to pay the sum of money mentioned 
 therein absolutely and at all events, at maturity, to the 
 payee or his indorsee, and lacks no essential element of 
 commercial paper. The recital that its payment is secured 
 by mortgage or deed of trust is not sufficient to charge 
 third persons with knowledge of the terms of the mortgage, 
 nor to put them upon inquiry. 9 As with other commer- 
 cial paper, mere suspicion that there may be a defect in the 
 title of the holder, or knowledge of circumstances which 
 might excite suspicion as to his title in the mind of a pru- 
 dent man, is not sufficient to defeat the title of an indorsee 
 or holder for value. Bad faith only can do this.* Nor is 
 
 1 Goodfellow v. Stillwell, 73 Mo. promissory note recited that it was 
 
 17. "secured by mortgage," and was 
 
 * Carpenter v. Longan, 16 "Wall, payable in five years. The Court 
 271; In re Babcock, 3 Story, 393; said that such a note was not strict- 
 Cranes. March, 4 Pick. 131; Hale ly "mercantile paper," in the ordin- 
 v. Hider, 5 Cush. 231 ; Ball v. Wy- ary meaning of the term ; and under 
 eth, 99 Mass. 338; Jackson v. Sack- the circumstances of the case, which 
 ett, 7 Wend. 94 ; Butler v. Slocmnb, arose from the grossly fraudulent 
 33 La. Ann. 170; Morris v. White, conduct of a person entrusted with 
 28 Ib. 855; Schmidt v. Frey, 5 Ib. the notes and mortgage, the pledgee 
 435 ; Burling v. Goodman, 1 Nev. receiving the same, although ad- 
 314; Blumenthal v. Jassey, 30 Minn. vancing value, was charged with 
 (14 Rep. 52); Henry 0. Eppinger, 34 equities of third persons not recog- 
 Mich. 29, 83; Kelly v. Whitney, 41 nised in the case of the indorsement 
 Wis. 110; Bange v. Flint, 25 Ib. 544; of ordinary commercial paper. 
 Croft v. Bunster, 9 Ib. 503; Clark v. Kelly v. Whitney, 41 Wis, 110; 
 Figes, 2 Stark. 207; Wright v. Simp- Cromwell v. County of Sac, 96 U. S. 
 eon, 6 Ves. 728. In Strong v. Jack- 51. 
 BOII, 123 Mass. 60, the negotiable
 
 INDORSEE'S TITLE TO NOTE. 197 
 
 an indorsement thereof by the payee and mortgagee " with- 
 out recourse " sufficient to charge an indorsee for value 
 with notice of any defenses of the maker and mortgagor 
 against the note, not to put him upon inquiry. 1 The mort- 
 gagee and payee, indorsing the mortgage note " without 
 recourse " to a bona fide indorsee for value, before maturity, 
 is liable upon his implied warranty that the amount is due 
 as appears by the note, after deducting credits indorsed 
 thereon. Should the mortgagee and payee, however have 
 received rents or profits which should have been applied to 
 the note so indorsed, but were applied to other notes and 
 judgments against the same debtor, the mortgagee con- 
 tinues liable to the indorsee, upon his implied warranty, 
 for the full sum appearing due, but has his counter remedy 
 to recover the amounts thus applied from his debtor. 8 
 
 The note itself, being the principal evidence of indebt- 
 edness, and having an independent vitality of its own, is 
 not affected as a binding personal obligation of the 
 maker, by a release of the mortgage security, or of any part 
 thereof. 1 Nor by a dismissal of a suit brought to foreclose 
 the mortgage security. The obligation upon the note re- 
 mains. 4 Nor where the mortgage given as collateral se- 
 curity for its payment, is void and fraudulent, 6 nor that 
 the mortgagor had no title to the land. 6 The indorsee of 
 a note secured by mortgage, is not required to release 
 his interest in such mortgage security before suing the 
 parties in an action upon the personal evidences of debt. 7 
 And if in foreclosure proceedings no personal decree for the 
 
 1 Bell v. Simpson, 75 Mo. 490 ; 4 Longworth v. Flagg, 10 Ohio, 
 
 Stevenson v. O'Neal, 71 111. 314; 300. 
 
 Kelley v. Whitney, supra; Blunt v. * Dorsell v. Mitchell, 105 U. S. 
 
 JSTorris, 123 Mass. 55. 430. 
 
 2 Plains Roth. 107111, 688 (15 C. Krupp 0. Krueggel, 12 Phila. 
 
 L. N. 293). 174. 
 
 Edgington v. Hefner, 81 HI. 341; ' Hale v. Rider, 5 Cush. 231. 
 Southerin . Mendum, 5 N. H. 420 ; 
 Sherwood ts. Dunbar, 6 Cal. 53.
 
 198 NEGOTIABLE NOTES AND MORTGAGES. 
 
 deficiency is given, the indorsee may bring his action upon 
 the note and recover the same. 1 
 
 154. CONCURRENT REMEDIES OP INDORSEE OF NOTE 
 AND MORTGAGE. The indorsee of a negotiable promissory 
 note, secured by mortgage or deed of trust, is entitled, upon 
 default, unless restricted by statutory enactment, to avail 
 himself, at one and the same time, of his remedy by action 
 at law upon the personal evidences of debt, and to enforce 
 in equity his mortgage security, although with but one 
 satisfaction of the debt.* Where the negotiable obliga- 
 tion of the debtor is secured by a deed of trust, a personal 
 suit upon the note may be prosecuted at the same 
 time, as the trustee exercises his power of sale un- 
 der the deed. 3 Nor does it affect the right of the 
 indorsee to enforce the mortgage or deed of trust se- 
 curity that the note has been merged into a judg- 
 ment. So long as the judgment remains unsatisfied, the 
 debt is unpaid, and the principal remaining, the mortgage 
 lien is not merged, but is transferred from the note to the 
 judgment. 4 The costs of such action at law upon the evi- 
 
 1 Palmer t>. Harris, 100 111. 276 ; Johnson v. Watson. 87 Ib. 540 ; Pal- 
 Allen t>. Allen, 34 N. J. Eq. 493 ; mer v. Harris, 100 Ib. 276 ; Kellogg's 
 Marston v. Marston, 45 Me. 412; case, L. R. 3 Ch. 776; Mason v. 
 Bradley v. Chester Valley Co. 36 Pa. Bogg, 2 M. & Cr. 448. 
 St. 150; Andrews v. Scotton, 2 'Connecticut M. L. Ins. Co. . 
 Bland's Ch. 665. Jones, 8 Fed. Rep. 303 ; Vansant v. 
 
 * Ober v. Gallagher, 93 U. S. 208; Allmon, 23 111. 30 ; Mester v. Hauser, 
 
 Oilman v. Illinois Telegraph Co., 91 94 111, 433 ; Johnston v. Houston, 47 
 
 TJ. S. 603, 616; Eubanks v. Lever- Mo. 230; Lichty v. McMartin, 11 
 
 idge, 4 Sawy. 274 ; Connecticut Ins. Kan. 565 ; Dunkley v. Van Buren, 3 
 
 Co. v. Jones, 8 Fed. Rep. 363; Chap- Johns. Ch. 330. 
 
 man v. Lee, 64 Ala. 483; Ipswich * Ober v. Gallagher, 93 U. S. 199 ; 
 
 Manuf. Co. v. Story, 5 Met. 312 ; Ely in re Kansas City etc. Co., 9 N. B. 
 
 t>. Ely, 6 Gray, 439 ; Longworth . R. 76 ; Palmer v. Harris, 100 111. 276; 
 
 Flagg, 10 Ohio, 300 ; Baker v. Leh- Erickson v. Rafferty, 79 Ib. 209; 
 
 man, "Wright, 522 ; Kansas City Morrison v. Morrison, 38 Iowa, 78; 
 
 Savings Ass'n . Mastin, 61 Mo. 485 ; Thornton . Pegg, 24 Mo. 249 ; Zuch- 
 
 Andrews 0. Scotton, 2 Bland Ch. ter . Boehm, 53 Ga. 71 ; Connecticut 
 
 665 ; Vansant v. Allmon, 23 111. 33 ; M. L. Ins. Co. . Jones, 8 Fed. Rep. 
 
 Edgington v. Hefner, 81 111. 341 ; 803.
 
 INDORSEE'S TITLE TO NOTE. 199 
 
 dences of debt are a part of the mortgage debt to be re- 
 covered in foreclosure proceedings. 1 The remedies of the 
 indorsee, at law and in equity, have been made in certain 
 states the subject of statutory regulation, the provisions of 
 which generally restrict the indorsee to one suit at a time, 
 or require primary resort against the land, and restrict 
 the recovery to an action on the note where the same has 
 been prosecuted to judgment, and prefer equitable juris- 
 diction for the enforcement of such mortgage securities.* 
 
 155. EQUITABLE AID TO THE MORTGAGOR AND 
 MAKER OF NEGOTIABLE NOTES. The mortgagor, who has 
 executed negotiable notes, is given the aid of a court of 
 equity to control the use of the mortgage security in the 
 hands of a bare trustee, where fraud and a total want of 
 consideration for either note or mortgage is shown. Any 
 defenses available as against the real owner in an action 
 upon the mortgage note are equally available in invoking 
 the preventive powers of a court of equity against the en- 
 forcement of the mortgage to secure such note and to pre- 
 vent a negotiation thereof. 3 Where a mortgagee, or his as- 
 signee, has separated the debt, represented by negotiable 
 securities, from the mortgage security, so as to defeat the 
 mortgagor's right to a reconveyance of the estate upon pav- 
 ment of the debt, a court of equity, at the instance of the 
 mortgagor and ranker of the notes, will restrain the collec- 
 tion of the personal evidences of debt remaining unpaid, 
 and settle the equities of all parties. 4 
 
 156. THE MORTGAGE SECURITY ENFORCED, ALTHOUGH 
 KEMEDY ON NOTE BARRED. The creditor, receiving a mort- 
 
 1 Pettibone 0. Stevens, 15 Conn. 19. Scofield v. Descher, 72 N. Y. 491; 
 
 Ould v. Stoddard, 54 Cal. 613; McKernan v. Robinson, 84 Tb. 105. 
 
 Christy v. Dyer, 14 Iowa, 443 ; Mor- * Belohradsky v. Kulm, 69 111. 547. 
 
 rison v. Morrison, 38 Iowa, 78 ; 4 Walker v. Jones, L. R. 1 Pr. C. 
 
 Brown v. Cascaden, 43 Ib. 103; 50 ; Lockhart v. Hardy, 9 Beav. 349 ; 
 
 Johnson v. Lewis, 13 Minn. 364; Palmer v. Hendrie, 27 Ib. 349; s c. 
 
 Suydam v. Bartle, 9 Paige Ch. 294; 28 Ib. 341 ; Thornton v. Court, 3 DC 
 
 Williamson v. Champlain, 8 Ib. 70; G. M. & G. 293.
 
 200 
 
 NEGOTIABLE NOTES AND MORTGAGES. 
 
 gage of real estate as collateral security for the payment of 
 a negotiable promissory note has a double remedy to recov- 
 er his debt, a suit in equity to subject the land to its pay- 
 ment, and an action at law upon the note, and a recovery 
 may be had on the one, although there may be some tech- 
 nical objection or difficulty as to recovery upon the other. 
 The statute of limitations affecting only the remedy on the 
 note, the debt itself which the mortgage is given to secure, 
 remains unsatisfied, and an enforcement of the security to 
 secure the payment of such debt is permitted upon equita- 
 ble rules. 1 The like rule is applied to deeds of trust given 
 to secure the payment of promissory notes. The security 
 is enforced notwithstanding the bar of the statute against 
 the note.* Nor will equity enjoin the sale of land under 
 such trust deed, where the remedy on the note is barred by 
 the statute, except upon the equitable terms of a payment 
 
 1 Union Bank . Stafford, 12 How. 
 340 ; Hughes v. Edwards, 9 Wheat. 
 489, 494; Buckner v. Street, 15 Fed. 
 Rep. 365 ; Eubanks v. Leveridge, 4 
 Sawy, 274 ; Chapman v. Lee, 64 Ala. 
 483 ; Hall v. Deukla, 28 Ark. 507 ; 
 Grant v. Burr, 54 Cal. 298; Belknap 
 . Gleason, 11 Conn. 160,166 ; Hough 
 .. Bailey, 32 Ib. 289 ; Joy v. Adams, 
 26 Me. 330 ; Thayer v. Mann, 19 Pick. 
 535; Ipswich Manuf. Co. v. Storey, 
 5 Met. 312 ; Eastman v. Foster, 8 Ib. 
 19; Craine v. Paine, 4 Cush. 483; 
 Lash v. McCormick, 17 Minn. 409 ; 
 Ognum r>. Reynolds, 11 Ib. 459 ; 
 "Wilkinson v. Flowers, 37 Miss. 579; 
 Benson v. Stewart, 30 Ib. 49 ; Nevitt 
 v. Bacon, 32 Ib. 212; Bush t>. Cooper, 
 26 Ib. 599 ; Trotter v. Erwin, 27 
 Ib. 77i ; Miller v. Trustees, 5 S. & 
 M. 651 ; Chouteau v. Burlando, 20 
 Mo. 482 ; Pratt v. Huggins, 29 Barb. 
 282 ; Heyer . Pruyn, 7 Paige, 465, 
 470; Waltermire v. Westover, 14 
 N. Y. 19 ; Borst t>. Borcy, 15 Ib. 505 ; 
 
 Cooks v. Culbertson, 9 Nev. 199; 
 State v. Watts, 45 N. J. L. (14 Rep. 
 467); Fisher v. Mossman, 11 Ohio St. 
 42; Smith v. Washington Co, 33 
 Gratt. 617 ; Hannah v. Wilson, 3 Ib. 
 342 ; Richmond v. Allen, 25 Vt. 324 ; 
 Hayes v. Frey, 54 Wis. 503, 519 ; 
 Wiswell v. Baxter, 20 Ib. 630; Spears 
 0. Hartley, 3 Esp. 81 ; Toplis v. Baker, 
 2 Cox. 123. Under the Iowa code an 
 action to foreclose or redeem a mort- 
 gage is barred at the same time as 
 an action at law on the debt. Smith 
 v. Foster, 44 Iowa, 442 ; Clinton v. 
 Cox, 37 Ib. 570 ; Brown v. Rockhold, 
 49 Ib. 282. Under the New Hamp- 
 shire statute, action may be brought 
 on the note so long as there is a right 
 of suit on the mortgage. Colby v. 
 Everett, 10 N. H. 429 ; Demeritt v. 
 Batchelder, 28 Ib. 533. 
 
 * Wood v. Augustine, 61 Mo. 46 ; 
 Grant v. Burr, 54 Cal 298 ; Wiswell 
 . Baxter, 20 Wis. 680 ; Bank of the 
 Metropolis v. Guttschlick, 14 Pet. 19.
 
 INDORSEE'S TITLE TO NOTE. 201 
 
 or tender of the debt. 1 And a power of sale given in a 
 mortgage continues as long as the debt remains in force and 
 unsatisfied. 9 Even where judgment on the note has been 
 entered, and the judgment itself is barred by the statute, 
 the creditor is allowed, the debt not being paid, to enforce 
 his remedy against the land. 8 
 
 This right of the holder of a negotiable promissory note, 
 to the enforcement of the mortgage security, is not affected 
 by any lapse of time short of the period sufficient to raise a 
 presumption of payment. 4 Such presumption arises gener- 
 ally where twenty years have elapsed since the maturity of 
 the debt. 5 Proof is received to show a payment on account 
 of or an acknowledgement of the debt, and to rebut such 
 presumption. 6 Where a note payable on the day of its date, 
 secured by a mortgage, which was not recorded for several 
 years, and until after the death of the mortgagor, upon an 
 action upon the mortgage security, the note being barred, 
 brought still later, a reasonable presumption arose that the 
 note had been paid, and a decree was refused without a pro- 
 duction of the note, as it might have passed into the hands 
 of a holder for value. 7 
 
 157. THE CONTRA RULE. In three or four states, 
 however, a different rule prevails as to the recovery of the 
 indorsee against the mortgage security where the note itself 
 is barred by the statute of limitations. The rule is founded 
 
 1 Grant v. Burr, 54 Cal. 298. Girardeau Co. v. Harbison, 53 Mo. 
 
 5 Emory v. Keighan, 94 111. 543. 90 ; Giles v. Baremore, 5 Johns. Ch. 
 
 3 Hendershot , Ping, 24 Iowa, 545 ; Whitney v. French, 25 Vt. 663 ; 
 
 134; Morrison v. Morrison, 38 Ib. 73; Hughes v. Edwards, 9 Wheat. 489; 
 
 Bank of the Metropolis v. Gutt- Fox v. Blossom, 17 Blatchf. 352; 
 schlich, 14 Pet. 19, 32. Hillary v. Wnllcr. 12 Ves 239. 
 
 4 Smith t>. Washington Co., 33 Pratt v. Huggins, 29 Barb. 279 ; 
 
 Gratt. 617. Hcycr v. Pruyn, 7 Paige, 465; Hayes 
 
 Blaisdell v. Smith, 3 Bradw. 150; v. Frcy, 54 Wis. 503, 519; Bank v. 
 
 Pollock v. Maison, 41 111. 517 ; Jar- Guttschlick, 14 Pet. 19, 32. 
 
 vis v. Woodruff, 22 Conn. 548; 7 Lucas v. Harris, 20 111. 167; Carr 
 Hough v. Bailey, 32 Ib. 289; Cool- v. Fielden, 18 Ib. 77, 81. 
 idge v. Larned, 8 Pick. 508 ; Cape .
 
 202 NEGOTIABLE NOTES AND MORTGAGES. 
 
 upon the theory that the mortgage security is so completely 
 au incident of the debt it is given to secure, that the debt 
 being barred, the mortgagee or the holder of the notes is 
 without remedy upon the mortgage. 1 That as the note is 
 the principal debt, that falling, the mortgage falls also ; the 
 lien created by the mortgage having expired by the death of 
 the note, equity offers no means of reviving and enforcing 
 it; or, in other words, where the action at law is barred by 
 the statute of limitations, no foreclosure can be had of a 
 mortgage given to secure its payment. The principal, hav- 
 ing ceased to exist, the incident having nothing to which it 
 may attach, ceases to exist also.* And the mortgagee can- 
 not dispossess the mortgagor by an action of trespass to try 
 title, or ejectment. 8 The removal, however, of the bar of 
 the statute by some act or payment of the mortgagor and 
 maker, revives the mortgage security, and the holder of the 
 note is allowed to enforce the same. 4 The entry of judg- 
 ment upon a note, secured by mortgage, enables the holder 
 of the judgment to enforce the mortgage security, as against 
 third parties, during the term the judgment continues a lien ; 
 and, as between the parties, the mortgagees or his represen- 
 tatives holding such judgment, the lein of the mortgage is 
 continued, and foreclosure decreed at any time within 
 twenty years.* 
 
 1 Cunningham t>. Ha-wkins, 24 Cal. 150; McLane v. Paschall, 47 Ib. 369; 
 
 409 ; Swenson v. Plough Co., 14 Blackwell e. Barnett, 52 Ib. 326. 
 
 Kans. 388; Chicago Lumber Co. c. 'March c. Myers, 85 111. 177; 
 
 Ashworth, 26 Ib. 212; Fort Scott v. Lynch v. Swayne, 83 Ib. 336; Lucas 
 
 Schulenberg, 22 Ib. 648; Powell c. . Harris, 20 Ib. 169; Powell v. Con- 
 
 Conaut, 33 Mich. 396; Lucas c/Har- aut, 33 Mich. 396; Andrews v. 
 
 ris, 20 111. 169; Pollock v. Mason, 41 Thayer, 30 Wis. 228. 
 
 Ib. 516 ; Lynch . Swayne, 83 Ib. Pollock v. Mason, 41 111. 516. 
 
 836; March v. Meyers, 85 Ib. 177 ; * Duty v. Graham, 12 Tex. 437; 
 
 Emory 0. Keighan, 94 Ib.543; Wood- Hubbard v. Mo. Valley R R Co., 
 
 ward v. Matthews, 15 Ind. 339; Tate 25 Kan. 172; Swenson v. Plough Co., 
 
 v. Fletcher, 77 Ib. 103; Duty v. Gra- 14 Kan. 388. 
 
 ham, 12 Tex. 437; Perkins v. Sterne, Priest v. Wheelock, 58 111. 114. 
 23 Ib. 561; Ross . Mitchell. 28 Ib.
 
 INDORSEE'S TITLE TO NOTE. 203 
 
 158. APPLICATION OF PROCEEDS OF SECURITIES TO 
 MORTGAGE NOTES UNDER PRIORITY RULE. Where several 
 notes payable at different times, made to the same payee, 
 and representing parts of the same debt, are secured by one 
 mortgage, in the absence of special provision, the indorsees 
 of such notes are entitled to payment from the proceeds of 
 the mortgaged property in the order of the maturity of such 
 notes. 1 The legal maxim prior in tempore, prior injure, is 
 applied in such cases, as the obligation to pay the note first 
 maturing may be enforced before default is made in later 
 payments. 8 Such notes have been regarded as so many suc- 
 cessive mortgages.* Where separate mortgages are given to 
 secure each note, all being given for the same indebtedness, 
 the like rule as to priority of the note first maturing is ap- 
 plied. 4 Priority in payment of the first note, when made the 
 subject of clear and distinct agreement by the parties is en- 
 forced, although the mortgage security, when sold, realizes 
 less than the whole sum of the indebtedness secured; and 
 notice of such a contract will bind indorsees of other notes 
 and third parties. 6 Priority may be given to the last or any 
 
 1 Wilson v. Hay ward, 6 Fla. 171; 153; Huffard . Gootberg, 54 Ib. 
 
 Roberts n. Mansfield, 32 Ga. 228; 271; Brown v. Delaney, 22 Minn. 
 
 Sergeant v. How, 21 111. 148; Van- 349; Norris v. Beatty, 6 W. Va. 483; 
 
 sant v. Allen, 23 Ib. 35 ; Herrington McClintic v. Wise, 25 Gratt. 448 ; 
 
 v. McCullum, 73 Ib. 476; Koester v. Belding o. Mauley, 21 Vt. 550 ; Wood 
 
 Burke, 81 Ib. 436 ; Humphreys v. v. Trask, 7 Wis. 566 ; Church v. 
 
 Morton, 100 Ib. 598; Harris v. Har- Smith, 39 Ib. 492 ; Pierce v. Shaw, 
 
 Ian, 14 Ind. 439; People's Bank v. 51 Ib. 316. 
 
 Finney, 63 Ib. 46 ); Doss v. Ditmars, s Winters v. Franklin Bank, 33 
 
 70 Ib. 451; Shaw v. Newsom, 78 Ib. Ohio St. 250; Wood v. Trask, 7 Wis. 
 
 335; Grapengether v. Fejervary, 9 556. 
 
 Iowa. 163; McDowell v. Lloyd, 22 Gerber v. Sharp, 72 Ind. 558 ; 
 
 Ib. 448; Walker v. Schreiber, 47 Ib. Murdock . Ford, 17 Ib. 52. 
 
 529; see Bailey v. Matvin, 53 Ib. 571; 4 Isett v. Lucas, 17 la. 503. 
 
 Richardson v. McKim, 20 Kan. 346; 5 Shutton v. Wiggins, 23 Cal. 16 ; 
 
 United States Bank f>. Covert, 13 Wilson v. Hayward, 6 Fla. 171 ; 
 
 Ohio, 240 ; Kyle v. Thompson, 11 Chew v. Buchanan, 30 Md. 367 ; 
 
 Ohio St. 616; Winters v. Franklin Foley v. Rose, 123 Mass. 557; Bry- 
 
 Bank, 33 Ib. 250; Mitchell v. Ladew, ant v. Damon, 6 Gray, 564; Langdon 
 
 36 Mo. 526; Ellis v. Lamme, 42 Ib. v. Keith, 9 Vt. 299; George v. Un-
 
 204 NEGOTIABLE NOTES AND MORTGAGES. 
 
 note. 1 Such agreement, however, cannot be proven by 
 parol testimony.* And the right itself, being purely equi- 
 table, in the absence of contract, may be lost by neglect, as 
 against an innocent purchaser misled to his wrong by mis- 
 representations, or the wilful silence of the holder of the 
 notes claiming such priority.* 
 
 159. APPLICATION OF PROCEEDS WHERE, UPON DE- 
 FAULT, ALL NOTES BECOME DUE, AND PRO RATA. The rule 
 of applying the proceeds of mortgaged property primarily 
 to notes first maturing, where such notes have passed into 
 the hands of different indorsees for value, is not approved 
 in cases where, under provisions of the mortgage, upon de- 
 fault of any one note all the notes become due and payable. 
 The happening of the contingency cancels and makes nuga- 
 tory the stipulations of the contract as to the times at which 
 the notes become due, and fixes the time of payment abso- 
 lutely upon default. 4 Where in such mortgage a provision 
 is contained for an election upon the part of the payee or 
 holder of such notes to declare the whole debt due, such 
 election must be made, and notice given to those inter- 
 ested. 4 
 
 The appropriation of the proceeds of the mortgage se- 
 curity to the payment of negotiable notes or bonds, where 
 more than one are given for a single debt, and secured by 
 the same mortgage is, in several cases, made by dividing 
 such proceeds among the holders of the several obligations 
 
 derwood, 40 Ib. 272; Moore v. Ware, Isett . Lucas, 17 la. 503; Hancock's 
 
 38 Me. 498; Ellis u. Lamme, 42 Mo. App. 34 Pa. St. 155. 
 
 153; Bank v. Tarlton, 23 Miss. 178; 'Anderson v. Baumgarten, 27 Mo. 
 
 Swartz v. Leist, 13 Ohio St. 419 ; 80; French v. Haskins, 9 Gray, 195. 
 
 Wooters v. Hollingsworth, 58 Tex. 4 United States Bank v. Covert, 13 
 
 371. Ohio, 240; Pierce v. Shaw, 51 Wis. 
 
 1 Ellis 0. Lamme, 42 Mo. 153 ; 316; Church v. Smith, 39 Ib. 492 ; 
 
 Brownlow v. Arnold, 60 Ib. 79 ; Marine Bank v. Bank, 9 Ib. 57. 
 
 Walker v. Dement, 42 111. 272. * Marine Bank v. International 
 
 1 Thompson v. Ketchum, 8 Johns. Bank, 9 Wis. 57. 
 
 189; Creery t>. Holly, 14 Wend. 80;. ...
 
 INDORSEE'S TITLE TO NOTE. 205 
 
 pro rata. 1 The rule is properly enforced where a single 
 mortgage is given to secure separate debts to various per- 
 sons, at different times. In such cases, the liens being con- 
 current, no priority is allowed.* The rule of priority has 
 also been held not to apply where a deed of trust was made 
 securing negotiable coupon bonds of a railroad company, 
 and the intention declared that there should be no sale of 
 the mortgaged property except for the whole. 8 
 
 160. THE EQUITY OF THE INDORSEE OF ASSIGNED 
 NOTE PREFERRED. An equity arises in favor of the in- 
 dorsee, where a person holding two or more promissory 
 notes, parts of the same debt, and secured by the same mort- 
 gage, indorses one or more thereof for value retaining the 
 others, that, in the event of the proceeds of the security fall- 
 ing short of paying all the notes, the indorsed notes shall 
 be first paid out of such proceeds, irrespective of the time 
 of the maturity of the notes. This equity is especially fa- 
 vored in certain states, and is regarded as paramount to all 
 others, and of controlling force. 4 And a note first indorsed 
 has priority of others indorsed subsequently.* But this 
 
 1 Phillips v. Mariner, 5 Biss. 29 ; Tenn. Ch. 565; Waterman v. Hunt, 
 
 Strntton v. Wiggins, 23 Cal. 16 ; 2 R. I. 298; Paris Bank v. Beard, 49 
 
 Russell v. Carr, 38 Ga. 459; Eastman Tex. 358; Delespine v. Campbell, 52 
 
 c. Foster, 8 Mete. 19; Goodloe v. Ib. 4; Belden v. Manley, 21 Vt. 551 ; 
 
 Clay, 6 B. Monr. 236; Ventrcss v. Smith . Day, 23 Ib. 662. 
 
 Creditors, 20 La. Anu. 359; English * Moffitt v. Roche, 76Ind. 75; Cain 
 
 v. Carney, 25 Mich. 178; Johnson t>. . Hanna, 63 Ib. 409. 
 
 Candage, 31 Me. 28; Moore v. Ware, * Humphreys v. Morton, 100 111. 
 
 88 Ib. 496 ; Chew a. Buchanan, 30 598. 
 
 Md. 367; Bank v. Tarleton, 23 Miss. 4 Cnllum v. Erwin, 4 Ala. 452 ; 
 
 173; Davidson . Alien, 36 Ib. 419; Nelson v. Dunn, 15 Ib. 501; Griggs- 
 
 Johnson v. Brown, 31 N. H. 405 ; by v. Hair, 25 Ib. 327 ; Roberts v. 
 
 Stevenson v. Black. 1 N. J. Eq. 338 ; Mansfield, 32 Ga. 228; Richardson v. 
 
 Donley v. Hays, 17 S. & R. 402; McKim, 20 Kan. 346; McClintic v. 
 
 Perry's App. 22 Pa. St. 43; Hancock's Wise, 25 Gratt. 448 ; Noyes v. White, 
 
 App. 34 Ib. 155; Ellis . Roscoe, 4 9 Kan. 640; Stevenson v. Black, 1 N. 
 
 Baxt. 418 ; Andrews v. Hopgood, 1 J. Eq. 338. 
 
 Lea, 693; Smith, v. Cunningham, 2 6 McClintic v. Wise, 25 Gratt. 448.
 
 206 NEGOTIABLE NOTES AND MORTGAGES. 
 
 equity of the indorsee of the transferred note is not favored 
 in Massachusetts. A mortgagee and payee indorsed one of 
 two notes, secured by mortgage, retaining the other, which 
 was for a larger amount. No resulting trust, in the absence 
 of a special agreement, was implied in favor of the indorsee 
 as against the mortgagee that the transferred note should 
 be first paid. The very reason of the negotiation (say the 
 court) may have been the belief of the mortgagee that the 
 property covered by the mortgage security was of value 
 sufficient only to secure the payment of the note retained. 1 
 
 1 Young t>. Miller, 6 Gray 152.
 
 INDORSEE'S TITLE TO MORTGAGE. 207 
 
 CHAPTER ' XVI. 
 
 THE INDORSEE'S TITLE TO THE MORTGAGE SECURITY. 
 
 161. The indorsee's title to the mortgage security. 
 
 162. The rule in the United States Supreme Court Carpenter v. Longan, 
 
 163. The New York view of notes and mortgages. 
 
 164. The rule in Massachusetts, New Hampshire and Maine. 
 
 165. The rule in Iowa and Wisconsin. 
 
 166. The rule in Missouri. 
 
 167. The rule in Kansas. 
 
 168. The rights of the indorsee under the rule. 
 
 169. The indorsee's title to the mortgage security, under limitations. 
 
 170. The rule in Illinois Oldsfl.Cummings. 
 
 171. The rule in Ohio. 
 
 172. The rule in Minnesota. 
 
 173. The rule in other states. 
 
 174. The restricted rule not applied to coupon bonds or accommodation 
 
 paper. 
 
 161. THE INDORSEE'S TITLE TO THE MORTGAGE 
 SECURITY. The right of the indorsee for value of negotia- 
 ble promissory notes to the enforcement of the mortgage or 
 deed of trust security as free from antecedent equities as the 
 note, approves itself to good judgment and natural justice. 
 The transfer of the note by indorsement where required 
 and deliveiy, before maturity, for value, in good faith and 
 without notice, vests in the indorsee an unimpeachable title, 
 its character as negotiable paper not being affected by the 
 fact of its payment being secured by a mortgage or deed 
 of trust. The indorsement of such note, and delivery, 
 carries with it the mortgage security. The union of the two 
 in a transaction of loan, whereby the borrower obtains mon- 
 ey upon his principal personal obligation, supplemented by 
 such mortgage given as security, creates the relation of
 
 208 NEGOTIABLE NOTES AND MORTGAGES. 
 
 principal and incident as to the two obligations. Both being 
 given for the same purpose, and together forming the con- 
 sideration of the loan, an indorsee for value of such note 
 and mortgage, in good faith, without notice, should not, 
 upon plain rules of justice ; be subjected in enforcing such 
 obligations to different rules of defense, admitting equities 
 in the case of the incident not allowed as against the princi- 
 pal obligation. The contract of the maker of the note is to 
 pay the sum named therein, upon a certain day, to a person 
 named or order, or bearer. The obligation of the mortgagor, 
 contained in the mortgage deed, is also to pay the note 
 upon like terms. Both engagements are the same, and the 
 Like enforcement as to each free from antecedent equities, 
 should be given the bona fide indorsee for value. The 
 rules of estoppel in pais are invoked against the maker 
 and mortgagor where it is sought to assert secret equities 
 against an innocent person who has advanced money in good 
 faith on the credit of the representations contained in the 
 two instruments, the negotiable note and the mortgage 
 security. The approved rule is, that the title of the indorsee 
 for value, in good faith, without notice of defenses, to the 
 mortgage security is as free from antecedent equities as his 
 title to the negotiable note, when received before maturity, 
 under like conditions, and he is entitled equally to enforce 
 the one as the other. This rule is followed by the Su- 
 preme Court of the United States, the federal courts, and in 
 several state courts. 1 
 
 1 Carpenter v. Longan, 16 Wall. cher, 44 Ib. 252 ; Updegraft v. Ed- 
 
 271; Sawyer . Pickett, 19 Wall. 147; wards, 45 Ib. 545; Clasey v. Sigg, 51 
 
 Kennicott v. Supervisors, 16 Ib. 452; Ib. 872; Webb v. Hasclton, 4 Neb. 
 
 Batesville Inst. v. Kauffman, 18 Ib. 818; Moses . Comslock, Ib. 520; 
 
 151; New Orleans etc. Co. t>. Mont- Gabbert v. Schwartz, 69 Ind. 450; 
 
 gomery, 95 U. 8.16; National Bank Morgan t>. Smith, etc. Co., 73 Ib. 
 
 r. Matthews, 98 Ib. 621; Swift v. 179; Murray v. Jones, 50 Ga. 109; 
 
 Smith, 102 Ib. 442; Bcals v. Neddo. Paige v. Chapman, 58 N. H. 334; 
 
 1 McCrary, 206; Hayden . Snow, 9 Button v. Ives, 5 Mich. 519; James 
 
 Bisscll, 511; Preston t>. Case, 43 t. Smith, 22 Ib. 360; Terry t>. TuttJe, 
 
 Iowa, 549; Farmers' Bank c. Flet- 24 Ib. 206; Howry v. Eppenger, 84
 
 INDORSEE'S TITLE TO MORTGAGE. 
 
 209 
 
 162. THE RULE IN THE UNITED STATES SUPREME 
 COURT CARPENTER v. LONG AN. The rights of the in- 
 dorsee of a negotiable promissory note secured by mortgage 
 or deed of trust, in respect to the enforcement of the mort- 
 gage security, came up for decision in the United States 
 Supreme Court for the first time in the case of Carpenter v. 
 Longan, 1 and the full court approved the rule that the 
 
 Mich. 29, 33; Kelner t>. Krolich, 36 
 Mich. 373; Judge v. Vogel. 38 Ib. 
 568; Hurt v. Wilson, 38 Cal. 263; 
 Malrury v. Rinz, 58 Ib. 11 ; Willis v. 
 Farley, 24 Ib. 290; Ord v. McKee, 5 
 Ib. 516; Duncan v. Louisville, 14 
 Bush. 385 ; Lewis v. Kirk, 28 Kan. 
 497; Burhans v. Hutcheson, 25 Kan. 
 625; McCrum v. Corby, 11 Ib. 464; 
 Logan a. Smith, 62 Mo. 455; Good- 
 fellow v. Stillwell, 73 Mo. 17; Potts 
 v. Blackwell, 4 Jones. 58 ; Crane t>. 
 March, 4 Pick. 131; Brown v. Tyler, 
 8 Gray, 135; Cazet v. Field. 9 Ib. 
 329; Taylor v. Page, 6 Allen, 86; 
 Lane v. Davis, 14 Ib. 225; Boyd v. 
 Parker, 43 Md. 182 ; McCracken v. 
 German Fire Ins. Co., 43 Ib. 471; 
 Morris t>. Bacon, 123 Mass. 58; 
 3Iontague v. Boston R. R. Co., 124 
 Ib. 242; Stevens v. Dedham Inst., 
 129 Ib. 547; Briggs v. Kice, 130 Ib. 
 50; Walker . Y,ee. 14 S. C. 142; 
 Croft v. Bunster, 9 Wis. 503; Cornell 
 . Hickens, 11 Ib. 353; Andrews v. 
 Hart, 17 Ib. 3C6; Bange v. Flint, 25 
 Ib. 544 ; Heath v. Silverthorne etc. 
 Co., 39 Ib. 146. A distinction is 
 drawn between cases where a mort- 
 gage secures payment of negotiable 
 instruments and where it secures 
 non-negotiable, the Court applying 
 it only in the former class. Kelly v. 
 Whitney, 41 Wis. 110. The same 
 distinction is stated in the leading 
 case, of Carpenter v. Longan, supra. 
 In McCrum v. Corby, 11 Kan. 464, 
 
 and Walker v. Lee, 14 8. C. 142, the 
 notes, although payable to order, 
 were pledged unindorsed. The 
 pledgees were held to take an equi- 
 table title only thereto, and to be 
 subject to equities. Otherwise, if 
 properly parties to the instrument. 
 The contra view was taken in Cor- 
 bett v. Woodward, 5 Sawy. 403, and 
 In re Kansas City etc. Co. 9 N. B. 
 R. 76, cases of assignment of prom- 
 issory notes secured by mortgage, 
 the latter arising under the bank- 
 rupt law ; and in U. S. c.rSturges, 1 
 Paine. 534: and Fales v. Mayberry, 
 2 Gall. 564, where the evidences of 
 debt were non-negotiable bonds. 
 
 1 16 Wall, 271. The facts were: 
 Mahala Longan and Jesse B. Longan 
 executed their negotiable promissory 
 note to Jacob B. Carpenter, or order, 
 for the sum of $980, payable six 
 months after date, at a bank in 
 Denver, with interest. At the same 
 time Mahala Longan executed to 
 Carpenter a mortgage upon certain 
 real estate, conditioned for the pay- 
 ment of the note at its maturity. Two 
 months before the maturity of the 
 note it was indorsed for a valuable 
 consideration to B. Platte Carpenter, 
 the plaintiff. The note not being 
 paid at maturity, suit was brought 
 to foreclose the mortgage. The de- 
 fendant set up that she had delivered 
 wheat and flour to the original 
 holder of the note at the time of the
 
 210 NEGOTIABLE NOTES AND MORTGAGES. 
 
 indorsee takes the mortgage as he takes the note, free from 
 antecedent equities. The opinion of the court was delivered 
 by Mr. Justice Swayne. " The question is," say the Court, 
 '* whether an assignee, under the circumstances of the case, 
 takes the mortgage as he takes the note, free from the 
 objections to which it was liable in the hands of the mort- 
 gagee. We hold the affirmative. The contract, as regards 
 the note, was that the maker should pay it at maturity to 
 any bona fide indorsee, without reference to any defenses to 
 which it might have been liable in the hands of the payee. 
 The mortgage was conditioned to secure the fulfilment of 
 that contract. To let in such a defense against su<-h a 
 holder would be a clear departure from the agreement of the 
 mortgagor and mortgagee, to which the assignee subsequent- 
 ly, in good faith, became a party. If the mortgagor desired 
 to reserve such an advantage, he should have given a non- 
 negotiable instrument. 'If one of two innocent persons must 
 suffer by a deceit, it is more consonant to reason that he 
 who puts trust and confidence in the deceiver should be 
 a loser rather than a stranger.' (Hern v. Nichols, 1 Salk. 
 289)." The court further say : "All the authorities agree 
 that the debt is the principal thing, and the mortgage an 
 accessory. Equity puts the principal and accessory upon a 
 footing of equality, and gives to the assignee of the evidence 
 of the debt the same rights in regard to both. There is no 
 analogy between this case and one where a chose in action, 
 standing alone, is sought to be enforced. The fallacy which 
 lies in overlooking this distinction has misled many able 
 minds, and is the source of all the confusion that exists. 
 The mortgage can have no separate existence. When the 
 note is paid the mortgage expires. It can not survive for a 
 
 execution of the mortgage, the pro- was sold, and that both goods and 
 
 ceeds to be applied in payment of money were lost by reason of the 
 
 the note, but that he had converted insolvency of such mortgagee. No 
 
 the same to his own use ; and it was knowledge or notice of this transac- 
 
 shown that the flour and wheat were tion was chargeable as against the 
 
 stored in a warehouse ; that some indorsee of the note.
 
 INDORSEE'S TITLE TO MORTGAGE. 211 
 
 moment the debt which the note represents. This depend- 
 ent and incidental relation is the controlling consideration, 
 and takes the case out of the rule applied to choses in action, 
 where no such relation of dependence exists. Accessorium 
 non ducit, sequitur principale" 
 
 The rule announced has been applied in later cases by 
 the United States Supreme Court, where the indorsement of 
 the note and mortgage was for the purpose of collateral 
 security for other obligations of the pledgor, 1 and in cases of 
 deeds of trust.* 
 
 163. THE NEW YORK VIEW OF NOTES AND MORT- 
 GAGES. In an early New York case involving the use 
 of indorsed negotiable notes, secured by mortgage, as 
 collateral, Chancellor Kent, speaking of the relation be- 
 tween the note and mortgage, said, " Wherever the note 
 goes, the land will go along with it. The estate in the 
 land is the same thing as the money due on the note. By 
 the transfer of note, the mortgage went with it, and the 
 same interest passed in the one as in the other/'* But 
 promissory notes are rarely used in New York in connection 
 with mortgage security, non-negotiable bonds being used 
 in place thereof. In this connection, in the Trustees of 
 Union College v. Wheeler, 4 (Dwight, C. J.) said, " Refer- 
 ence is made to a class of cases holding in substance that 
 when a mortgage is given to secure a negotiable note, which 
 is itself transferred before maturity, it is taken by the 
 assignee free from all equities; and it is argued that these 
 authorities tend to show that the mortgage partakes of the 
 nature of the debt in such a sense that only the direct 
 equities between the debtor and the creditor can be set up 
 as against the assignee. These cases have not become the 
 
 1 Sawyer v. Prickett, 19 Wall. 147 ; * New Orleans etc. Co. v. Montgom- 
 
 Kennicott v. Supervisors, 16 Wall. cry, 95 U. S. 16. 
 452 ; Natipnal Bank v. Matthews, 98 8 Johnson v. Hart, 3 Johns. Cas. 
 
 Ib. 621 ; ' Swift 9. Smith, 102 Ib. 322, 330. 
 442. * 61 N. Y. 88.
 
 212 NEGOTIABLE NOTES AND MORTGAGES. 
 
 established law in this state. If sound they must be made 
 to rest on rules of law attending the transfer of negotiable 
 paper, and cannot be held by indirection to overthrow a 
 rule concerning the ordinary bond and mortgage which has 
 become fixed in our jurisprudence." 
 
 164. THE BULB IN MASSACHUSETTS, NEW HAMP- 
 SHIRE AND MAINE. In Massachusetts, the rule is recog- 
 nised that the indorsee of a negotiable promissory note, se- 
 cured by mortgage or deed of trust, takes the security as 
 he takes the note. 1 In Taylor v. Page, 8 where the considera- 
 tion of the note and mortgage was illegal, an indorsee of the 
 note, for value, before maturity, without notice, was 
 allowed to recover on the mortgage security, no principle 
 or authority making the mortgage less valid than the note 
 in the hands of an innocent indorsee for value. The rule 
 has been enforced in later cases, the transfers being as col- 
 lateral security. 8 In a recent case in New Hampshire, 4 
 upon a writ of entry upon a mortgage, by the indorsee of 
 the note and assignee of the mortgage, who received the 
 same for value, before due, as collateral security, in good 
 faith, and without notice of defenses, the mortgagor was 
 not permitted to set up any defense of want of considera- 
 tion, or that the note and mortgage were obtained from him 
 by fraudulent representations. The mortgage was enforced 
 equally as freed from equities as the note, as "defenses (say the 
 court) which cannot be made against the note because it has 
 travelled away from them, cannot be made against the mort- 
 gage which has kept company with the note." In Maine, a 
 mortgagee is pro tan to apurchaser,and abona fide mortgagee is 
 
 1 Crane v. March, 4 Pick, 181. v. Page, 6 Allen 36 ; Lane v. Davis, 
 
 * 6 Allen, 86. 14 Ib. 235. Sub-pledgees were pro- 
 
 1 Morris . Bacon, 123 Mass. 68 tected in Draper v. Saxton, 118 Mass. 
 
 Strong v. Jackson. 123 Ib. 60; Blunt 427; Briggs v. Rice, 130 Ib. 50. 
 
 v. Norris, 123 Mass. 55; Montague 4 Paige v. Chapman, 58 N. H. 333; 
 
 v. Boston R. R. Co., 124 Mass. 242; Tucker v. Bank, Ib. 83; criticising 
 
 Stevens v. Dedham Inst. 129 Ib, 547; Jenness v. Bean, 10 N. H. 266; 
 
 Brown v. Tyler, 8 Gray, 185 ; Taylor Williams v. Little, 11 Ib. 66.
 
 INDORSEE'S TITLE TO MORTGAGE. 213 
 
 equally entitled to protection as a bona fide grantee ; the 
 assignee of a mortgage is on the same footing with the bona 
 fide mortgagee. He relies upon the record, and is pro- 
 tected against unknown and latent equities. 1 
 
 165. THE RULE IN IOWA AND WISCONSIN. The 
 question was first decided in Iowa in the case of Preston v. 
 Case.* A negotiable promissory note, payable to the order 
 of the cashier of a bank, and secured by a mortgage, was 
 executed and delivered as collateral security for proposed 
 future advances of money as they might be required. In 
 fact, no advances were ever made. The cashier of the bank, 
 some time after the delivery thereof, indorsed the note in 
 blank, and forwarded it, with the mortgage, and other like 
 securities to the Chicago correspondent of the bank as col- 
 lateral security for a present loan. The pledgee, as a holder 
 for value in good faith of the note, was allowed to enforce 
 the mortgage security as free of equities arising from want 
 of consideration as if the action had been on the note itself, 
 the right of enforcement of the mortgage security following 
 the transfer of the negotiable collateral note. The rule of 
 Carpenter v. Longan, supra, has been followed in later 
 cases. 3 
 
 In Wisconsin, the rule was extended to include an in- 
 dorsee for value of negotiable paper, secured by mortgage, in 
 
 1 Pierce v. Faunce, 47 Me. 507. if the debt bad been represented by 
 
 1 42 Iowa, 549. In Judge v. Vogel, a negotiable promissory note which 
 
 38 Mich. 568, a mortgage was given had passed into the hands of an in- 
 
 for a certain sum, but really to nocent indorsee for value, before 
 
 secure future advances of which, maturity, without notice, he would 
 
 however, none were made. An in- have taken the mortgage as the note, 
 
 nocent person, advancing money in free of pre-existing equities. Ladue 
 
 good faith upon the belief and credit v. Detroit R. R. Co., 15 Mich. 380. 
 of the statements as to the debt con- * Farmers' Bank v. Fletcher, 44 
 
 tained in the mortgage, took no Iowa, 252; Updegraft . Edwards, 
 
 greater title to the security than the 45 Ib. 545; Clasey v. Sigg, 51 Ib. 
 
 mortgagee, and was not allowed the 372; Vandercook v. Baker, 48 Ib. 
 
 aid of equity to enforce the same. 199; Martindale v. Burch, 57 Ib. 291. 
 The court recognize, however, that
 
 214 NEGOTIABLE NOTES AND MORTGAGES. 
 
 a case where a corporation holding the promissory note and 
 mortgage of A, executed to C, its negotiable bond for a sum 
 equal to the note, attaching thereto the note and mortgage, 
 and reciting in the bond that the note and mortgage 
 were transferred to C. as collateral security, and that both 
 should be transferable in connection with the bond, and not 
 otherwise. This was regarded as a sufficient indorsement 
 within the law merchant to pass both the note and the 
 mortgage security to the indorsee free from equities. 1 
 
 166. THE RULE IN MISSOURI. Missouri adopted the 
 views stated as to the rights of the indorsee of the note to the 
 enforcement of the mortgage security in Logan v. Smith,* 
 holding (where a negotiable promissory note secured by 
 mortgage had been pledged as collateral security for a pres- 
 ent loan so as to make the pledgee a party to the instrument) 
 that an indorsee for value of a negotiable note, who receives 
 it discharged of equities to which it was subject in the hands 
 of the payee, acquires the same right in a mortgage given to 
 secure it, which the payee would have had, if no equities 
 had ever existed against the note. The rule has been 
 enforced in a later case, in which an indorsee for value of a 
 negotiable promissory note, secured by deed of trust, before 
 maturity, and without knowledge of payments made upon 
 it, was allowed to enforce the security to the full amount of 
 the note. 3 A bank, under the form of discounting the note of 
 a third party, took up certain notes secured by a deed of trust, 
 in order to prevent a foreclosure, retaining the notes and 
 mortgage as collateral security. As against the maker, the 
 transaction amounted to a purchase, and not a payment there- 
 of, and the bank, default having taken place in the securities, 
 was allowed to enforce the mortgage security. 4 
 
 1 Crosby v. Roub, 16 Wis. 625. Swope t>. Leffingwell, 72 Mo. 
 
 1 62 Mo. 455. 348; reversing s. c., 4 Mo. App. 525 ; 
 
 1 Goodfellow v. Smith, 73 Mo. 17. affirmed in 105 U. S. 17.
 
 INDORSEE'S TITLE TO MORTGAGE. 215 
 
 167. THE RULE IN KANSAS. The Supreme Court of 
 Kansas (Valentine, J.), recently, in the case of Lewis v. 
 Kirk 1 announced the rule upon this subject prevailing in 
 that state, as follows : " Where a real estate mortgage is 
 executed to secure the payment of a negotiable promissory 
 note, such mortgage will so far partake of the negotiable 
 character of a note, that whenever the note is transferred 
 by indorsement before due so as to free it from all equities 
 existing in favor of the maker of the note, or prior in- 
 dorsers, the mortgage will also be freed from such equities. 
 Until the mortgage is recorded such transfers will not prevent 
 a third person, who has no notice of the mortgage or trans- 
 fer from purchasing the mortgaged property, and thereby 
 obtaining a full and absolute title to the property free and 
 and clear from the mortgage lien. But when the mortgage 
 is recorded, its negotiable character is then extended even 
 to bona fide purchasers of the property, and it retains such 
 character, contemporaneously with the existence of the 
 note to which it is an incident, until the note is satisfied, 
 or until the mortgage is released of record by the mortgagee 
 or his attorney, assignee, or personal representative ; and 
 that, when the mortgage is so released, it then loses its 
 negotiable character to the extent that any third person 
 who may then purchase the property in good faith will ob- 
 tain the full, complete, and absolute title thereto, freed from 
 all equities, liens, interests, trusts, or incumbrances existing 
 in favor of any holder of the note and mortgage, whether 
 the note is satisfied or not." In an earlier case, the record 
 of an assignment of a mortgage by a bona fide indorsee for 
 value of negotiable paper, transferred before maturity, and 
 secured by a mortgage, was not required, nor notice to the 
 mortgagor of such assignment, in order to protect the in- 
 dorsee against payments made, after the assignment and 
 without his knowledge or Consent, by the mortgagor to the 
 mortgagee. 8 
 
 1 Lewis v. Kirk, 28 Kan. 497. * Burhans v. Hutclaeson, 25 Kan. 
 
 625.
 
 216 NEGOTIABLE NOTES AND MORTGAGES. 
 
 168. RIGHTS OF THE INDORSEE FOR VALUE UNDER 
 THE RULE. The title of the indorsee for value, in good 
 faith, before maturity, of a negotiable promissory note, 
 secured by mortgage, to the enforcement of the security, is 
 not defeated by the fraud of the mortgagee, in procuring a 
 release of the mortgage. 1 Nor, where several negotiable 
 notes are secured thereby, some of which had been trans- 
 ferred, will the release of record of the mortgage by the 
 mortgagee, supposing the notes had all been paid, dis- 
 charge the mortgage as to such of said notes as were out- 
 standing and unpaid in the hands of bona fide indorsees for 
 value, before maturity.* The title of the indorsee of the 
 note and his right to the enforcement of the mortgage se- 
 curity, equally as free of equities as the note, was supported 
 where a wife claimed that she was forced to execute the 
 note and mortgage under threats of personal violence. 
 Such a defense presents no superior equities to those of the 
 bona fide indorsee of the paper secured thereby.* Nor can 
 a wife question the validity of an assignment of a mort- 
 gage, given to secure the payment of a negotiable promis- 
 soiy note, held by an indorsee for value, upon the ground 
 that the premises covered by the mortgage were her 
 homestead. 4 An assignee of a mortgage executed to one 
 with notice that it was without consideration, and that no 
 note was ever delivered, is subject to equities between the 
 original parties. 5 Nor does the rule of Carpenter v. Longan 
 affect statutory provisions relative to priority of different 
 mortgages ; the indorsee for value of a note and mortgage 
 is subject thereto as well as the original parties.' 
 
 169. THE INDORSEE'S TITLE TO THE MORTGAGE SE- 
 CURITY, UNDER LIMITATIONS. The right of the indorsee of 
 
 1 Vandercock v. Baker, 48 Iowa, * Malrury v. Rinz, 58 Cal. 11. 
 199. 5 Burbank v. Warwick, 52 Iowa, 
 
 * Martindale v. Burch, 57 Iowa, 493. 
 
 291. Yerger v. Barz, 56 Iowa, 77. 
 
 Beals v. Neddo, 1 McCrary, 200.
 
 INDORSEE'S TITLE TO MORTGAGE. 217 
 
 a negotiable promissory note to the enforcement of a mort- 
 gage of land given as security for its payment, is subject in 
 certain states to limitations, which affect materially the 
 availability of such securities, either for sale or use as col- 
 laterals. The liability of the maker or indorser upon his 
 own personal obligation, when in the hands of an indorsee 
 for value, before maturity, and without notice, is not 
 questioned. The mortgage, however, being treated as in 
 the nature of an independent contract, enforceable only in 
 equity, the indorsee of the note, receiving the mortgage by 
 assignment, or as an incident following the note without 
 more, is subject generally to antecedent equities arising out 
 of the original transaction, and as between the original 
 parties, and in some cases to the secret equities of third 
 persons and cestuis que trust. Although the condition of 
 the mortgage is to pay the note, the indorsee for value 
 seeking to enforce the same in a court of equity, is subject 
 to all equities and defenses available to the mortgagor if 
 sued by the mortgagee. If judgment were taken on the 
 principal note by the indorsee, such judgment would be a 
 lien on the mortgagor's estate (including that covered by 
 the mortgage) for the whole amount thereof, and a court 
 of equity would not interfere to restrain the enforcement of 
 such judgment lien for the full face of the note. The in- 
 dorsee may pursue his remedies, both at law and in equity 
 at the same time, with the anomalous result that while his 
 recovery at law will be as stated for the amount of the note, 
 the decree in equity upon the mortgage security may be 
 fora different amount, as his recovery is subject to defenses 
 not permitted in the action at law. This inconsistency 
 cannot occur under the rule of Carpenter v. Longan. 
 
 170. THE RULE IN ILLINOIS OLDSV. CUMMINGS. 
 The rule was established in Illinois in the leading case of 
 Oldsw. Cummings 1 in which an indorsee for value of nego- 
 
 1 31 111. 188.
 
 218 NEGOTIABLE NOTES AND MORTGAGES. 
 
 liable promissory notes, receiving the same before maturit}', 
 without notice of defenses, sought to enforce the mortgage 
 security in equity by foreclosure and sale. Usury was sefc 
 up as a defense, and also that the indorsement of the note 
 and mortgage was only colorable, and for the purpose of 
 cutting off defenses. In delivering the opinion of the 
 court, Chief Justice Caton presented the argument in favor 
 of the restricted rule. " Mortgages," he said, " are not com- 
 mercial paper. It is not convenient to pass them, from 
 hand to hand performing the real office of money in com- 
 mercial transactions, as notes, bills and the like. * * * 
 The note itself, though secured by a mortgage, is still com- 
 mercial paper, and when the remedy is sought upon that, 
 all the rights incident to commercial paper will be enforced 
 in the courts of law. But when this remedy is sought 
 through the medium of a mortgage ; when that is the foun- 
 dation of the suit, and the note is merely used as an inci- 
 dent, to ascertain the amount due on the mortgage, then the 
 courts of equity, to which resort is had, m ust pause, and 
 look deeper into the transaction, and see if there be any 
 equitable reason why it should not be enforced. He who 
 holds a note, and also a mortgage, holds in facts two instru- 
 ments for the security of the debt ; first, the note, with its 
 personal security, which is commercial paper, and as such, 
 may be enforced in courts of law, with all the rights inci- 
 dent to such paper, and the other, the mortgage, with se- 
 curity on land, which may be enforced in the courts of 
 equity, and is subject to the equities existing between the 
 parties. * * * The assignee is required to inquire of 
 the mortgagor if there is any reason why the mortgage 
 should not be paid, but lie should not be required to inquire 
 of the whole world, to see if some one has not a latent equi- 
 ty which might be interfered with by his purchase of the 
 mortgage, as for instance, a cestui que trust." The rule 
 has been followed in later cases, 1 but is not applied as against 
 
 1 Walker e. Dement. 47 111. 273; man v. Frisbie, 63 Ib. 482; White . 
 Edgertont). Young, 43111. 464; Klee- Sutherland, 64 Ib. 181; Haskell t>.
 
 INDORSEE'S TITLE TO MORTGAGE. 219 
 
 an indorsee for value of a negotiable promissory note, se- 
 cured by mortgage, where the claim of set-off is in respect 
 of a debt arising out of a collateral matter. 1 And where 
 notes and mortgages are executed, and delivery is made 
 thereof to the payee of the notes so that he may sell them 
 upon the market to raise money for certain purposes, the 
 mortgagee is estopped as against an indorsee for value, 
 without notice, seeking to foreclose the mortgage security, 
 to question its validity, although the agent misappropriated 
 the money received. 4 The rule that a holder for value of 
 negotiable notes and mortgage is not subject to secret equi- 
 ties of cestuis que trust of which he has no notice, is ap- 
 plied where the real owner of land has enabled his agent 
 to sell and convey his land to a third person, who gave his 
 notes, payable to the agent, and secured by a mortgage, 
 and the notes passed by indorsement to an indorsee for 
 value without notice, although the sale of the land was a 
 fraud on the real owner. 8 
 
 171. THE RULE IN OHIO. In Ohio, the indorsee of a 
 negotiable promissory note, secured by mortgage, upon en- 
 forcing in equity the mortgage security is subject not only 
 to the equities of the original parties, but also to the equi- 
 table rights and title of third persons. In the leading case 
 in that state, 4 the court declined to affirm, either that a 
 mortgage, when made to secure a negotiable note, becomes, 
 contrary to its general nature and qualities, a negotiable 
 instrument ; or, that the transfer of such a note, without 
 
 Brown, 65 Ib. 29; Thompson v. bell, 98 Ib. 573 ; Mclntire v. Yates, 
 
 Shoemaker, 68 Ib 259 ; Belohrad- 104 Ib. 491 ; Grassley v. Reinbach, 4 
 
 sky v. Kuhn, 69 Ib. 547 ; Petillon v. Bradw. 344 ; Foster v. Strong 5 Ib. 
 
 Noble. 73 Ib. 567 ; Buchanan v. In- 227. 
 
 ternational Bank, 78 Ib. 500; Inter- ' Colehour v. State Savings Inst., 
 
 national Bank v. Bowen, 80 111. 541; 90 111. 152. 
 
 Darst v. Gale, 83 Ib. 137 ; Melendy Mclntire Yates. 104 111. 491 ; 
 
 v. Keen, 89 Ib. 395 ; Bryant v. Vix, Melendy v. Keen, 89 111. 395, 403. 
 
 83 Ib. 14; Colehour v. State Savings * Silverman v. Bullock, 98 111. 11. 
 
 Inst., 90 Ib. 152 ; Hosmer v. Camp- Bailey v. Smith, 14 Ohio St. 396.
 
 220 NEGOTIABLE NOTES AND MORTGAGES. 
 
 the aid of any statute, or of any judicial decisions, except 
 those of very recent date, has an effect upon the note itself, 
 and draws after it, and within, one of the most important 
 incidents of negotiability, a collateral contract having rela- 
 tion to the same debt. Mortgages being (the court say) 
 " mere choses in action ; and whether standing alone, or 
 taken to secure negotiable or non-negotiable paper, they are 
 only available for what is honestly due from the mortgagor 
 to the mortgagee. If they are assigned, either expressly or 
 by implication, the assignee takes only the interest which 
 his assignor had in the instrument acquires but an equity, 
 and, upon the long-established doctrine of courts of equity, 
 is bound to submit to the assertion of the prior equitable 
 rights of third persons." The indorsee, suing upon the 
 note, may recover judgment for the full amount thereof. 1 
 And where a note, payable on demand, was secured by 
 mortgage, the mortgage became due under the same condi- 
 tions as the note.* 
 
 172. THE RULE IN MINNESOTA. In Minnesota, the 
 rule is established that by the transfer of a negotiable prom- 
 issory note, secured by mortgage, the indorsee of the note 
 is entitled to enforce the mortgage security only as subject 
 to equities existing between the original parties. 8 A mort- 
 gage being a chose in action, as between the mortgagor and 
 the mortgagee, or any subsequent assignee from the latter, 
 is taken subject to the state of accounts between the mort- 
 gagor and mortgagee at the time of the assignment, and to 
 all payments made by the mortgagor to the mortgagee at 
 any time before actual notice thereof. 4 And where an as- 
 signment of a note and mortgage is made by a separate in- 
 strument, the person receiving the same being chargeable 
 \vith notice that they are not in possession of the assignor, 
 
 1 Heller v. Meis, 2 Sup. Ct. R 289. 176; Hostetter v. Alexander, 22 Ib. 
 
 'Union Central Life Ins. Co. v. 559; Blumentbal v. Jassey, 30 Minn. 
 
 Curtis, 33 Ohio St. 348. (14 Rep. 52.) 
 
 1 Johnson . Carpenter, 7 Minn. 4 Johnson . Carpenter, supra.
 
 INDORSEE'S TITLE TO MORTGAGE. 221 
 
 but making no inquiry, the presumption in favor of pur- 
 chasers in good faith, within the meaning of the registry 
 laws, is not invoked for his protection, and his assignment, 
 although recorded, is subject to an unrecorded assignment 
 of the same note and mortgage, accompanied by delivery 
 and possession. 1 
 
 173. THE RULE IN OTHER STATES. Under the Louis- 
 iana code and the decisions of the courts of that state, the 
 negotiability of the note secured by mortgage, so far as the 
 personal liability of the parties thereto are concerned, to the 
 full amount thereof, is conceded and enforced. 2 A different 
 rule is applied to the mortgage security. A mortgage is not 
 negotiable in the sense of the commercial law, 3 whether 
 transferred by separate assignment, or following as accessory 
 to the transfer of the negotiable note the payment of which 
 is secured by it. 4 The transferree of a mortgage receives 
 no greater right or title than the transferror has at the time 
 the transfer is made. 6 The mortgage security vests in the 
 indorsee of the note subject to all equities and defenses 
 existing between the original mortgagor and mortgagee. 8 If 
 
 ~ o o o o o 
 
 the mortgage has been extinguished, or has for any cause 
 ceased to be an existing obligation, and can no longer be 
 enforced by the mortgagee, the indorsee of the note cannot 
 enforce it. 1 
 
 The indorsee of negotiable notes, secured by mortgage, 
 although paying less therefor than their face, is entitled in 
 South Carolina to the full benefits of his purchase and may 
 recover the face value thereof. But, in resorting to the col- 
 lection of his debt from the mortgage security, if the assigu- 
 
 1 O'Mulcahy t>.Holley, 28 Minn. 31. Sprig v. Bossier, 5 N. S. 56 ; Gua- 
 
 8 Schmidt v. Frey. 5 La. Ann. 435; ton v. Matthews, 5 La. Ann. 495; 
 
 Garner v. Gay, 26 Ib. 376 ; Morris . Bouligny v. Fortier, 17 Ib. 121; Mor- 
 
 White, 28 Ib. 855 ; Butler fl.Slocomb, ris v. White, 28 Ib. 855 
 
 33 Ib. 170. Butler v. Slocomb, 33 La. Ann. 
 
 8 Boligny v. Foster, 17 La. Ann. 170 ; Bouligny v. Fortier, supra. 
 
 121. 7 Bowman v. McElroy, 14 La. Ann. 
 
 4 Schmidt v. Frey, supra. 587; Doll v. Rosetti, 20 Ib. 264.
 
 222 NEGOTIABLE NOTES AND MORTGAGES. 
 
 ment is made without the consent of the mortgagor, such 
 indorsee stands only in the place of the original creditor, and 
 is subject in all respects to the like equities and settlement 
 of accounts as the mortgagee would be, the mortgagor not 
 being bound by the amount appearing on the face of the 
 mortgage. 1 
 
 In Vermont, a suit to foreclose a mortgage was brought 
 by an indorsee for value, before maturity, of the negotiable 
 notes secured thereb}', without notice of equities. A de- 
 fense was introduced that a part of the consideration of the 
 notes was illegal. The indorsee, by his purchase of the 
 notes and mortgage, having acquired all the rights, legal and 
 equitable, of the mortgagee was allowed to maintain an 
 action to foreclose the security for so much of the debt as 
 was legally and fairly contracted.* The rights of pledgees 
 of notes properly indorsed and secured by mortgages have 
 been sustained. 1 
 
 . 174. THE RESTRICTED RULE NOT APPLIED TO COUPON 
 BONDS OR ACCOMMODATION PAPER. Important exceptions 
 are made in Illinois to the rule declared in Olds v. Cum- 
 mings. 4 Such rule was not applied in a case involving the 
 rights of persons holding long time coupon bonds issued by 
 a railroad company, and payable to " holder ; " the payment 
 of which was secured by a deed of trust in like terms. 
 Such bonds, intended to be thrown upon the market to be 
 circulated as commercial paper, and used also as securities 
 for permanent investment, are not within the reason of the 
 rule.* Nor is the rule applied in transactions founded upon 
 accommodation paper. In Miller v. Lamed* the court 
 
 1 Wright v. Eaves, 10 Rich. Eq.583. The bonds were payable to "the 
 
 * Shaw v. Carpenter, 54 Vt. 155. holders," and the deed of trust was 
 8 George v. Woodward, 40 Vt. 672. declared to be "for the benefit, pro- 
 4 81 111. 188. tection and security of the persons 
 
 * P. & S. R. B. Co. v. Thomp- or corporations who shall hold the 
 so, 103 111. 205, overruling C. D. & bonds about to be issued." 
 
 V. Ry Co. . Loewenthal, 93 111. 433. Miller v. Larned, 103 111. 562.
 
 INDORSEE'S TITLE TO MORTGAGE. 223 
 
 (Scott, J.) discussing this question, say : " The principle 
 underlying the decision in Olds v. Cummings, and other 
 analogous cases in this court, is, that the original mortgagor 
 has equities that are older and superior to any possessed by 
 the assignee of the notes secured, and on the doctrine the 
 oldest equity must prevail, the mortgagor has been let in to 
 make the same defense to the mortgage in the hands of an 
 equitable assignee as he could against the assignor. But 
 what application can this doctrine have to an assignee or 
 holder of accommodation paper ? It would be most un- 
 reasonable to affirm the grantor in a mortgage to secure ac- 
 commodation paper, has any equities superior to those of the 
 assignee of the note, who thereby becomes the equitable 
 assignee of the mortgage. Any application of the doctrine 
 of Olds v. Cummings to the maker of a mortgage to secure 
 accommodation paper, would be to make a most equitable 
 and reasonable doctrine the means of enabling a party to 
 perpetrate a great wrong on another. A court of equity 
 will not lend its aid for any such purpose."
 
 224 NEGOTIABLE NOTES AND MORTGAGES. 
 
 CHAPTER XVII. 
 
 NOTES AND MORTGAGES AS COLLATERAL SECURITY. 
 
 175. The title of the pledgee of notes and mortgages. 
 
 176. The pledgee, when subject to equities. 
 
 177. The rights of the pledgee in cases of misappropriation. 
 
 178. The pledgee, -when chargeable with notice. 
 
 179. The pledger's re-transfer of notes and mortgages. 
 
 180. The pledge of notes and mortgages to National Banks. 
 
 181. The recovery of pledgees and sub-pledgees of notes and mortgages. 
 
 182. The pledgee's sale and collection of notes and mortgages. 
 
 183. The pledgee's foreclosure and sale of mortgaged lands. 
 
 175. THE TITLE OP THE PLEDGEE OF NOTES AND 
 MORTGAGES. The use by the holder of negotiable promis- 
 sory notes of a third person, properly indorsed, together 
 with an assignment of the mortgage given to secure the pay- 
 ment of the same, as collateral security for his own principal 
 obligation, vests in the pledgee the legal title to the collat- 
 eral securities, and enables him, upon default, to render the 
 same available for the purpose of securing payment of his 
 own advances. By such transactions the pledgee gains an 
 additional security as compared with the indorsement and 
 delivery of ordinary negotiable promissory notes as collateral 
 security. The note secured by mortgage has all the char- 
 acteristics and privileges of commercial paper ; and the 
 pledgee thereof receives the further collateral security of the 
 property covered by the mortgage given to secure its pay- 
 ment. 1 As to the negotiable note, the pledgee occupies the 
 
 1 Swift 0. Smith, 102 U. 8. 442; Wright . Ross, 36 Cal. 414; Wor- 
 National Bank . Matthews, 98 Ib. cester Nat. Bank v. Cheeney, 87 111. 
 621;Sawyer. Prickett, 19Wall.l47; 602; Lowentkal v. McCormick, 101
 
 THE PLEDGE THEREOF. 
 
 225 
 
 pr s'tion of a holder for value, in the usual course of business.' 
 Nor is it material that the note is indorsed " without 
 recourse," by the pledger.* The assignment of the mort- 
 gage, conveying the legal title to such collateral security, is 
 itself an equitable mortgage under which the pledgee is 
 vested with title, as in no other way can the security be 
 made available to him. 8 Such absolute legal transfer may, 
 however, be shown to have been intended as collateral secur- 
 ity only. 4 In Louisiana, the title of notes secured by mort- 
 gage passes by indorsement for the purpose of collection 
 only.* 
 
 176. TBE PLEDGEE, WHEN SUBJECT TO EQUITIES. 
 Where such negotiable promissory notes, secured by mort- 
 
 Ib. 143; Miller v. Larned, 103 Ib.562; 
 International Bank v. Jenkins, 104 
 Ib. 143 ; Zimpleman v. Veeder, 98 
 Ib. 613; Tooker v. Newman. 75 111. 
 215; Lewis . Kirk, 28 Kan. 497; 
 Clasey v. Sigg, 51 la. 572; Preston. 
 Case, 42 Ib. 549; McCrum v. Corby, 
 11 Kan. 464 ; Rice v. Dillinsrham, 73 
 Me. 59 ; Brown v. Tyler, 8 Gray, 135 ; 
 Fletcher v. Dickinson, 7 Allen, 23; 
 Montague v. Boston etc. Ry Co., 124 
 Mass. 242; Briggs v. Rice, 130 Ib. 50; 
 Morns . Bacon, 123 Mass. 58; Blunt 
 v. Norris, Ib. 55 ; Folcy v. Rose, Ib. 
 557; Strong v. Jackson, Ib. 60; 
 Stevens v. Dedham Inst.. 129 Ib 547; 
 Smith v. Burgess, 133 Ib. 511; Me 
 Bracken v. German Ins. Co., 43 Md. 
 471 ; Potts . Blackwell, 4 Jones (N. 
 C. Eq.) 58; Richardson . Mann, 30 
 La. Ann. 1060; Morris v. White, 28 
 Ib. 855; Logan v. Smith, 62 Mo. 455; 
 Bell v. Simpson, 75 Mo. 485 ; Gibson 
 v. Martin, 1 Nev. 256; Whiting. 
 Paul, 13 R. I. 40; Walkers. Lee, 14 
 S. C. 142 ; George t>. Woodward, 40 
 Vt. 672 ; Wells v. Wells, 53 Ib. 1. 
 15 
 
 1 Michigan Bank v. Eld red, 9 
 Wall. 544, 533; Chicopee Bank v. 
 Chapin, 8 Met. 40; Stoddard v. Kim- 
 ball, 6 Cush. 469; Blanchnrcl v. 
 Stevens, 3 Ib. 162; Palmer v. Yatcs, 
 3 Sandf. Ch. 137; Morris v. Baeon, 
 123 Mass. 58; Atkinson v. Brooks, 
 26 Vt. 569. 
 
 3 Blunt v. Norris, 123 Mass. 5.>. 
 
 9 Rice v. Dillingham, 73 Me. 59; 
 Slee v. Manhattan Co., 1 Paige, 48; 
 Pond v. Eddy, 113 Mass. 149; Cults 
 v. York Mauuf. Co.. 18 Me. 191; 
 Henry v. Davis, 7 Johns. Ch. 40; 
 Clark . Henry, 2 Cow. 324; Carr v. 
 Carr, 52 N. Y. 251 ; Clapp v. Shep- 
 ard, 2 Met. 127; Fulton v. Fulton, 
 48 Barb. 581; Wright v. Ross, 36 
 Cal. 414. 
 
 * Pond v. Eddy, 113 Mass. 149 ; 
 Rice v. Dillingham, and Henry v. 
 Davis, supra ; Mclntire v. Yates, 
 104 111. 491. 
 
 5 Richardson v. Mann, 20 La. Ann. 
 1060; Commercial Bank v. Martin,! 
 Ib. 344.
 
 226 NEGOTIABLE NOTES AND MORTGAGES. 
 
 gage, are received unindorsed (indorsement being necessary 
 to convey the title), so that the pledgee is not a party to 
 the instrument, an action against the parties thereto must 
 be brought in the name of the assignor. The pledgee there- 
 fore holds both the notes and mortgage subject to equities 
 .arising from the fraudulent conduct of the pledger. Having 
 only an equitable title thereto, he is subject to equities. 1 
 One of several notes secured by mortgage was entrusted by 
 the owner to a third person to collect, and indorsed so as to 
 pass the title for this purpose. The note was fraudulently 
 transferred after maturity for a valuable consideration, to 
 another person. The holder of the note so receiving it, from 
 one not an owner, and after maturity, took it encumbered 
 with all antecedent equities.* A promissory note, hav- 
 ing several years to run, showed upon its face that it was 
 secured by mortgage, serable, such note is not an instru- 
 ment entitled to the privileges of commercial paper. A 
 pledge of such a note under circumstances clearly calculated 
 to excite suspicion, the pledge being in fact an act of gross 
 fraud on the part of the person entrusted with the securities, 
 is not supported. 8 The title of a pledgee of a negotiable 
 promissory note and mortgage security is supported, although 
 the note and mortgage be given for an illegal consideration, 
 rendering them void as between the parties, where such 
 note is indorsed before maturity, for value, and without 
 notice of such invalidity. 4 Where the holder, however, 
 although advancing value, is chargeable with notice of the 
 invalid character of the consideration for such securities, no 
 right or title thereto can be acquired.* 
 
 1 McCrnm v. Corby, 11 Kan. 464; the mortgage in Shaw. Carpenter, 
 
 Blunt c. Norris, 123 Mass. 55; Smith 54 Vt. 155. 
 
 . Burgess, 133 Mass. 511. 6 Pierce v. Kibbee, 51 Vt. 559; 
 
 1 Foley v. Smith, 6 Wall. 493. Butler v. Slocum, 83 La. Ann. 170. 
 
 3 Strong v. Jackson, 123 Mass. 60. A note, secured by mortgage, -was 
 
 4 Taylor . Page, 6 Allen, 86. The pledged as collateral security for 
 recovery was restricted to the other notes, which were usurious, 
 amount of the valid debt secured by The pledgee was allowed to en-
 
 THE PLEDGE THEREOF. 227 
 
 177. THE BIGHTS OF THE PLEDGEE, IN CASES OF MIS- 
 APPROPRIATION. Where the owner of negotiable promis- 
 sory notes, secured by mortgage or deed of trust, has 
 placed the same in possession of another, so that the latter 
 has, by indorsement where required and assignment, the 
 legal title and apparent absolute ownership of such securi- 
 ties, an innocent pledgee, receiving such notes before 
 maturity, and an assignment of the mortgage, express or 
 implied, upon a valuable advance, made on the faith and 
 credit of such apparent title and ownership, without notice 
 of equities, is protected, although such use of the securities 
 be a misappropriation thereof and a fraud upon the real 
 owner. 1 The like rule is applied for the benefit of an in- 
 nocent pledgee, who has advanced value, in the usual 
 course of business, upon a negotiable note, secured by 
 mortgage, where the act of misappropriation is made by an 
 agent, who has been entrusted with such note indorsed in 
 blank, and enabled to appear as the apparent owner thereof. 
 Such pledgee is entitled to enforce the mortgage given to 
 secure such note to the full amount, notwithstanding the 
 fraud of the agent.* An indorsement " without recourse," 
 
 force the mortgage security, and to tion. Even by agreement the mort- 
 apply the proceeds in discharge of gage could not be made a security 
 the mortgage debt, but not in pay- for a note which it was not intended 
 ment of the notes tainted with usury. to secure. The utmost risk the 
 Tooke v. Newman, 75 111. 215. pledgee took was that B might dis- 
 1 Morris v. Beacon, 123 Mass. 58. charge the mortgage, but the note 
 A made a note to the order of B, would still remain a valid security; 
 and secured by mortgage, duly or B might pass the legal title to an- 
 recorded. B indorsed the note to other, who in law would become the 
 C, as collateral security for a loan to trustee of the pledgee of the note. 
 a larger amount, stating that the * Swift v. Smith, 102 U. S. 442. 
 note carried the mortgage with it. The rights of the holder of nego- 
 Subsequently B fraudulently substi- tiable promissory notes, secured by 
 tuted another note for the one trust deed, indorsed in blank by the 
 secured by the mortgage, and in- owner, and handed to an agent for 
 dorsed it and the mortgage to D for a certain purpose, were sustained, 
 value. Both pledgees acted in good although the agent misappropriated 
 faith. No right of the first pledgee the same by pledging them as col- 
 was lost by the fraudulent substitu- lateral security for his own note,
 
 228 NEGOTIABLE NOTES AND MORTGAGES. 
 
 before maturity, by a pledger of a note made by a third 
 person, and secured by mortgage, although such note was 
 obtained from the maker by artifice, vests the title to the 
 note and the mortgage security in a pledgee for value, in 
 good faith, and without notice by the record of any pre- 
 vious assignment of the mortgage or other equity. The 
 title of the pledgee, under such circumstances, is that of a 
 purchaser for a valuable consideration, and is preferred as 
 against the owner, and a prior pledgee who had received 
 unindorsed the note originally issued with the mortgage, 
 but with no assignment of the mortgage, or record thereof, 
 although upon a bona fide advance. 1 The lien of a pledgee, 
 holding the legal title to the note and mortgage, is not de- 
 feated as against third persons chargeable with notice, by 
 the fraud or mistake of the mortgagee in entering satisfac- 
 tion of the mortgage upon the record. 1 
 
 178. THE PLEDGEE, WHEN CHARGEABLE WITH NO- 
 TICE. The pledgee of negotiable paper, secured by a mort- 
 gage or deed of trust, is chargeable with notice of 
 misappropriation, or want of authority, under the same 
 presumptions governing in other cases of pledge of or- 
 dinary commercial instruments. Where such securities 
 show upon their face the existence of a trust, pledgees are 
 bound to take notice thereof, and to make inquiry, at their 
 peril. 8 A, as trustee, held a note made to himself per- 
 sonally, and a mortgage securing the payment of the same, 
 the mortgage stating that the consideration was paid by A 
 " as trustee for " B, and referred to A as " trustee as afore- 
 given for a loan of money. Default 523; Shaw v. Spencer, 100 Mass. 382; 
 occurring upon the personal note of Fisher t>. Brown, 104 Ib. 261 ; Moni- 
 the pledger, the pledgee, as a pur- tor Ins. Co. v. Buffum, 115 Ib. 345; 
 chaser for value, without notice, Duncan v. Jaudon, 15 Wall. 175. 
 was allowed to enforce the trust General obscurity in a writing will 
 deed. not entitle anybody to buy it with- 
 
 '.Blunt t>. Norris, 123 Mass. 55. out taking pains to ascertain what 
 
 1 Gibson t?. Martin, 1 Nev. 256. the hieroglyphics mean. Smith . 
 
 Sturtevant v. Jaques, 14 Allen, Burgess, 133 Mass. 511.
 
 THE PLEDGE THEREOF. 229 
 
 said." After recording the mortgage, A struck out the 
 words " as trustee," and then borrowed money for his own 
 use of C, transferring the note and mortgage as collateral 
 security. The advance was made in good faith, but the 
 pledgee failed to read the mortgage, and made no examina- 
 tion of the record. C being chargeable with notice of the 
 contents thereof, the pledgee was not regarded as a bona 
 fide holder for value of the securities, and was ordered to 
 return them to the successor in trust. The Supreme Judi- 
 cial Court of Massachusetts (Allen, J.) 1 say : " The note 
 and mortgage had reference to one transaction, and if L 
 held one of them as trustee, there was reason to suppose he 
 did the other also. The mortgage was a constituent part of 
 the security. It was not only a link in the title which he 
 was taking, but it was itself produced and delivered to him 
 as representing the title. The truth appears to be that the 
 defendant (the pledgee) accepted the mortgage without 
 taking pains to read it. If he had read it he would have 
 discovered all that was necessary for his protection. The 
 law holds him to the legal duty of reading it, and of in- 
 forming himself of all it contained. He must be con- 
 clusively presumed to have performed this duty, and can 
 not be heard to say that he did not. His legal position is 
 the same as if he had actually read it." Nor did the omis- 
 sion of the word " trustee " from the note excuse the 
 pledgee from examining the title to the mortgage security. 
 
 179. THE PLEDGOR'S RE-TRANSFER OF NOTES AND 
 MORTGAGES. The pledger of negotiable notes, secured by 
 mortgage, may, with the consent of the pledgee, re-transfer 
 such collateral securities to another pledgee, or for a new 
 loan, and the title thereto thus obtained will be enforced. 
 Certain notes of a third person, payable at different times, 
 and secured by a mortgage, were held as collateral security 
 for indebtedness. The pledgor may, with the consent of 
 
 1 Smith v. Burgess, 133 Mass. 511.
 
 230 NEGOTIABLE NOTES AND MORTGAGES. 
 
 the pledgee, transfer to another of his creditors a portion of 
 the notes to hold as collateral security, and rray agree that 
 the mortgage securing the payment of the notes shall stand 
 as a prior security for the notes so re-assigned, at the same 
 time giving to the first pledgee new securities of equal 
 value. A contest arose as between the two pledgees upon 
 the question of priority in the distribution of the proceeds 
 upon foreclosure and sale under the mortgage; the pledger's 
 agreement in favor of the second creditor was supported, 
 he having remained the general owner of the securities, and 
 having furnished other collateral securities to the first 
 pledgee. 1 A bank loaned money on negotiable notes, se- 
 cured by deed of trust. The loan was paid, but the bank 
 retaining the securities, a further specific pledge thereof 
 was made as collateral security for another loan. The 
 rights of the pledgee under the second loan were supported 
 as against a bona fide purchaser for value of the property 
 covered by the mortgage from the real owner thereof, who 
 had obtained a deed of the equity of redemption of the 
 apparent purchaser from the person in whom the title stood 
 of record, and who gave the notes and trust deed for the 
 purchase price, such notes and mortgage having been trans- 
 ferred for value to a pledgee without notice. 1 
 
 180. THE PLEDGE OF NOTES AND MORTGAGES TO 
 
 NATIONAL BANKS. A national bank, holding a negotiable 
 promissory note secured by mortgage or deed of trust, as 
 collateral security for the payment of loans is entitled, upon 
 default, to the enforcement of the mortgage security, 
 although it be insisted as a defense, that the taking of such 
 real estate security by a national bank is an act under sec- 
 tions 513G and 5137 of the United States Revised Statutes, 
 ultra vires the bank. 8 In the leading case upon this subject, 4 
 
 1 George v. Woodward, 40 Vt. 672. Ib. 99'; National Bank t>. Matthews, 
 
 Miller v. Lamed, 103 111. 562. 98 Ib. 821. 
 
 1 Swope v. Lefflngwell, 105 U. S. * National Bank t>. Matthews, 98 
 
 8; National Bank t>. Whitney, 103 U. 8. 621. As the deed of trust was
 
 THE PLEDGE THEREOF. 231 
 
 a negotiable promissory note, secured by a deed of trust, 
 with the usual powers of sale upon default, was indorsed 
 with the mortgage security, to a national bank as collateral 
 security for a loan. Upon default, the bank requested the 
 trustee to sell the property. A bill in equity was filed in a 
 circuit court in the State of Missouri to enjoin the sale, and 
 an injunction was granted and sustained against such sale. 
 But upon a writ of error issued from the United States 
 Supreme Court, the right of the pledgee to enforce the col- 
 lection of the collateral note by a sale of the lands covered 
 by the trust deed, was fully supported. Courts of equity 
 have always refused, under like circumstances, to use the dis- 
 cretionary powers vested in their chancellors to relieve bor- 
 rowers from national and other banks or corporations from 
 the re-payment of bona fide loans, upon a defense of ultra 
 vires as against the lender. The equity of the lender of 
 money in good faith, is preferred to that of persons and cor- 
 porations who have had the benefit thereof and still retain 
 the same, or the property acquired therewith, and yet seek 
 to avoid repayment upon a legal technicality, which was 
 never intended to shelter fraud. 1 The rule is applied, in the 
 
 not made to the bank, the United Leffingwell, 72 Ib. 348; affirmed, 
 
 States Sup erne Court held that it 105 U. S. 3. 
 
 did not come within the letter of the ' Orm v. National Bank, 16 Kan. 
 statute in any event, and that, if it 341 ; Macon R. R. Co. v. Georgia R. 
 had done so, the court would not R. Co., 63 Ga. 103; First Nat. Bank 
 have afforded the relief sought. "A v. Hair, 36 Iowa, 443; Argenti >. 
 court of equity," say the court, San Francisco Co., 16 Cal. 255 ; Em- 
 " is always reluctant in the last de- pire Ins. Co.*. Stewart, 46 Mich.482; 
 gree to make a decree which will Warner v. DeWitt Nat. Bank, 4 
 effect a forfeiture. The bank parted Bradw. 312 ; Bradley v. Ballard, 55 
 with its money in good faith. Its 111. 413; Nuerbach v. LeSueur 
 garments are unspotted under these Mill Co., 28 Minn. 291; Thorn- 
 circumstances. The defense of ultra ton v. National Exch. Bank, 71 
 vires, if it can be made, does not Mo. 221 ; Swope v. Leffingwell, 
 address itself favorably to the mind 72 Ib. 348 ; Pancoast v. Trav. 
 of the chancellor." The Supreme Ins. Co., 79 Ind. 172 ; Lebanon Bank 
 Court of Missouri followed the rule v. Hallenbeck, 29 Minn. 322; Hall v. 
 in later cases. Thorntons. National Mutual Ins. Co., 32 N. H. 297; Me 
 Exch. Bank, 71 Mo. 221 ; Swope . Clure v. Railroad Co., 13 Gray, 124 ;
 
 232 NEGOTIABLE NOTES AND MORTGAGES. 
 
 absence of restrictive statutory enactments, in favor of bank- 
 ing and loaning corporations, advancing money bona fide in 
 states or countries other than those in which they are or- 
 ganized as corporate bodies. 1 
 
 181. THE RECOVERY BY PLEDGEES AND SUB-PLED- 
 GEES OP NOTES AND MORTGAGES. The pledgee for value 
 advanced in good faith, without notice, holding negotiable 
 promissory notes, secured by mortgage, before maturity, as 
 collateral security, is entitled to enforce the mortgage se- 
 curity in a court of equity, and to recover the full face of 
 the notes secured, holding any surplus above the amount of 
 the loan or debt for the benefit of those beneficially entitled 
 thereto. 9 The like rule is enforced in favor of a sub- 
 pledgee of notes and mortgages, receiving the same, with 
 the evidence of the principal debt, for which they were 
 pledged, upon an advance in good faith to the pledgee 
 thereof, and without notice of equities. As against a sub- 
 sequent purchaser for value of the property chargeable 
 with notice, the sub-pledgee is allowed to collect the full 
 amount of the note secured by the mortgage. 8 In states 
 where the restricted rule prevails, subjecting indorsees of 
 
 Mott 0. United States Trust Co., 19 Lefflngwell, 105 Ib. 3; Blackburn 
 
 Barb. 568 : Silver Lake Bank v. Building Society t>. Cunliff, L. R 22 
 
 North, 4 Johns. Ch. 470 ; Carey v. Ch. D. 61 ; in re Cork & Y. Ry. L.R. 
 
 Railroad Co., 29 Barb. 85 ; Bissell v. 4 Ch. 748. 
 
 Railroad Co., 22 N. Y. 258; Baird . > Christian Union v. Yount, 101 
 
 Bank of Washington, 11 S. & R. U. S. 350; Cowell v. Springs Co, 
 
 411; Woods v. National Bank, 83 100 Ib. 55; Farmers Loan etc. Co. 
 
 Pa. St. 57; Winton t>. Little, 94 Ib. v. McKinney. 6 McLean, 7; Natonn 
 
 64; Stone t>. Brown. 54 Tex. 330 ; Water Power Co. v. Clarkin, 14 Cftl. 
 
 Howard Nat. Bank v. Loomis, 51 582 ; Stevens v. Pratt, 101 111. 206, 
 
 Vt. 849; Central Trust Co. v. Na- 214; Commercial Ins Co. v. Scam- 
 
 tional Bank, 11 Biss. (15 C. L. N. mon, 102 Ib. 46. 
 
 268); Zabriskie v. Railroad Co., 23 * McCrum e. Corby, 11 Kan. 464; 
 
 How. 881; Railroad Co. v. Howard, Gibson v. Martin, 1 Nev. 526; Hurst 
 
 7 Wall. 413; Fleckner v. Bank of U. v. Coley, 15 Fed. Rep. 645. 
 
 8., 8 How. 338, 353; National Bank Miller v. Larned, 103 111. 562. 
 t>. Whitney. 103 U. S. 99 ; Swope v.
 
 THE PLEDGT2 THEKEOF. 233 
 
 negotiable paper, seeking to enforce payment by foreclosure 
 and sale of the property in equity, to defenses not available 
 against the note, a sub-pledgee who advances money to 
 take up securities held in pledge for a loan is restricted in 
 his recovery, as against the mortgagor and maker, his repre- 
 sentatives, and bona fide purchasers for value, to the amount 
 of the actual advance by the pledgee upon receiving such 
 note and mortgage as collateral. 1 
 
 Where a negotiable note and mortgage are sub-pledged 
 before maturity by a pledgee, with full title, for a greater 
 sum than the amount of the original loan to the pledger, a 
 sub-pledgee advancing a valuable consideration thereon, in 
 good faith, and without notice of equities, is a purchaser for 
 value of such note and mortgage, to the extent of his ad- 
 vances, and may enforce the same for the face thereof, 
 holding any surplus for the persons entitled thereto. The 
 pledgor having, by reason of his misplaced confidence in 
 entrusting the legal title and apparent absolute ownership 
 of such negotiable securities and mortgage to a third person, 
 enabled him to deceive an innocent sub-pledgee advancing 
 money on the credit of such title and ownership, is estopped 
 to set up any defenses existing between himself and the 
 pledgee as against such sub-pledgee, and is only entitled to 
 recover his securities upon payment of the full amount 
 advanced. 8 
 
 Upon sub-pledges of mortgage securities made for less 
 than the amount of the original advances, where the whole 
 interest of the pledgee is assigned for the greater security of 
 the sub-pledgee, and the peisons bound upon the securities 
 become insolvent, the sub-pledgees are allowed to prove for 
 the whole amount secured by the first pledge, although not 
 receiving more than what is due them for the principal, inter- 
 est, and costs.* The rule as to recovery of the sub-pledgee 
 applies where the amount advanced by the sub-pledgee is 
 
 1 Loewenthal v. McCormick, 101 9 Briggs v. Rice, 130 Mass. 50. 
 111. 143. 8 In re Burrell, L. R. 7 Eq. 379.
 
 234 NEGOTIABLE NOTES AND MORTGAGES. 
 
 less than the sum loaned the pledger thereon by the pled- 
 gee. The actual recovery is limited to the amount of the 
 advances, where the owner of the securities seeks to redeem 
 the same. 1 
 
 182. THE PLEDGEE'S SALE AND COLLECTION OF 
 NOTES AND MORTGAGES. Powers of sale given in contracts of 
 pledge of negotiable promissory notes and mortgages, with r 
 out advertisement or notice to the pledger, and at public or 
 private vendue, while valid, if carried out in good faith, are 
 yet closely scrutinized, and should any element of fraud 
 enter into them, no rights can be acquired thereby. Such 
 negotiable instruments, although secured by mortgage, 
 come within the general rules governing the realization of 
 negotiable collateral securities. The pledgee theieof is not 
 permitted lo sell them at either public or private sale, ex- 
 cept with the consent of tie pledger, either given by con- 
 tract of pledge, or agreed to subsequently. A sale by a 
 pledgee of a note and mortgage to the mortgagor, made on 
 a pre-arranged plan, under a power of sale, public or pri- 
 vate, without advertisement or notice to the pledger, for 
 the exact amount of the loan theieon, being about one-half 
 its face value, is not a payment of the note. The pledger 
 may have his suit in equity to foreclose and sell the land, 
 the maker and mortgagor being credited with the actual 
 amount paid at the sale as a payment on the note, and this 
 although the note is produced marked "paid" at the hear- 
 ing. 2 The purchase by a pledgee of notes and mortgages 
 of lands at a foreclosure sale at less than the face of the 
 notes and immediately thereafter reselling them for a sum 
 greater than the notes, renders the pledgee liable, not for 
 the excess, but for a sum sufficient to pay the collateral 
 notes. 8 Where a pledgee of notes and mortgages has re- 
 turned the same to the pledger for the purpose of making 
 
 1 Draper v. Snxton, 118 Mass. 427. * Richardson v. Mann, 30 La. Ann. 
 Zimplcman v. Veeder, 98 111. 013. 1060.
 
 THE PLEDGE THEREOF. 235 
 
 collection thereof for account of the pledgee, the latter may 
 bring trover (or a statutory substitute therefor) against the 
 pledgor, upon his failure, after demand, to return or account 
 for the collaterals. The measure of damages in such a 
 case, is the interest of the pledgee in the collaterals, being 
 the amount of the debt where they are of greater value, or 
 their full value, where less. 1 
 
 183. THE PLEDGEE'S FORECLOSURE AND SALE OF 
 THE MORTGAGED LAND. The holder of a negotiable prom- 
 issory note, secured by mortgage, as collateral security for 
 a debt, is entitled, upon default, to proceed with the fore- 
 closure of the property included in the mortgage security, 
 and to entry, and possession thereof, under appropriate pro- 
 ceedings." Such proceedings, however, do not change the 
 relations of the parties to the contract of pledge, the land 
 being simply substituted as collateral security in place of 
 the notes and mortgage, and remaining subject to redemp- 
 tion. 3 Nor, as between the pledgor and pledgee, is such 
 foreclosure, entry and possession a payment of the debt for 
 which the notes and mortgages are held as collateral se- 
 curity. 4 
 
 1 Hurst v. Colcy, 15 Fed. Rep. 645. both the principal note and in 
 8 Brown v. Tyler, 8 Gray, 135. the conditions of the mortgage, 
 8 Brown 0. Tyler, supra; Montague in 1847, the pledgee commenced 
 v. Boston R R. Co , 124 Mass. 242; an action upon the mortgage, 
 Henry v. Davis, 7 Johns. Ch. 40; obtaining a conditional judgment 
 Slee v. Manhattan Co., 1 Paige, 52, for the amount of the principal 
 79; Clapp v. Sheppard, 2 Met. 127; debt It then took possession of 
 Rice v. Dillingham, 73 Me. 59 ; the land under execution, which 
 Hoyt v. Martense. 16 N. Y. 231; was retained until 1852. when the 
 Dalton v. Smith. 86 N. Y. 176. land was conveyed for $5,500, and 
 4 Stevens v. Dedham Savings Inst. several successive conveyances were 
 129 Mass. 547. A note for $7,320, made. The pledgor had never set- 
 executed by H. dated in 1845, pay- tied with the pledgee, nor received 
 able in five years, secured by mort- his own note, nor the collateral 
 gage, was indorsed and the mort- mortgage note. A bill in equity to 
 gage assigned to the bank as collate- redeem was brought in 1870, but 
 ral security for a note of $3,500, dismissed because of laches, 
 payable in one year. Upon default in
 
 236 NEGOTIABLE NOTES AND MORTGAGES. 
 
 After such foreclosure, entry, and possession, the pledgee 
 is under no obligation to take the land as in payment of his 
 debt. He should proceed with convenient speed to reduce 
 such property to cash, by a fair and proper public sale. 1 
 In this, he acts as trustee for the pledger, and is required 
 to pay over to him any balance remaining after the payment 
 of the debt for which the notes and mortgage were held as 
 security; or, if the debt and other proper charges, be paid, 
 to release and quitclaim the land to the pledger.* As 
 against the mortgagor, the pledgee will have an absolute 
 title, but not as against the pledger ; although where pos- 
 session of the land for over twenty years has been held by 
 the pledgee or his successive assignees, a claim to redeem 
 by the pledger is not favored in equity.* It is only from 
 the time of the realization in money, after foreclosure of the 
 mortgage securities held in pledge, that the statute of limit- 
 ations begins te run against the pledger, where, the debt 
 being paid, a surplus remains in the hands of the pledgee. 4 
 
 1 Brown v. Tyler, supra. * Ib. ; Ayres v. Waite, 10 Cush. 
 
 * Stevens fl.Dedham, supra; Dalton 72. 
 
 . Smith 86 N. Y. 176; Montague t>. * Brown v. Tyler, 8 Gray, 135. 
 Boston B. R. Co., 124 Mass. 242.
 
 THE TITLE OF THE ASSIGNEE. 237 
 
 CHAPTER XVIII. 
 
 THE ASSIGNMENT OF BONDS AND MORTGAGES. 
 
 184 The assignee's title to the mortgage security. 
 
 185. The equities to which the assignee is subject the New York rule. 
 
 186. The rule in New Jersey, Pennsylvania and Virginia. 
 
 187. The assignment of bonds and mortgages under estoppel. 
 
 188. Limitations of the application of estoppel in pais. 
 
 189. Estoppel in pais, by mortgagor's certificate of "no defense." 
 
 190. The bond and mortgage, under indorsement, quasi-negotiable. 
 
 191. Assignment of void, invalid, and fraudulent securities. 
 
 192. Payments to mortgagee, after assignment. 
 
 193. Release by mortgagee, after assignment. 
 
 184. THE ASSIGNEE'S TITLE TO THE MORTGAGE 
 SECURITY. In three or four states, notably New York, 
 Pennsylvania and New Jersey, where loans are sought upon 
 the security of real estate as well as upon the individual 
 liability of the borrower, the personal evidences of indebt- 
 edness, for which the mortgage is given as collateral security, 
 are bonds, non-negotiable in character. Such obligations are 
 subject to onerous equities in the hands of any assignee, how- 
 ever remote. The equities include those existing between 
 the original parties, and attending the original transac- 
 tion, and the equitable rights of third persons, cestuis que 
 trust, and others. The bona fide assignee for value of 
 such collaterals is limited in his recovery thereon to the 
 actual amount validly due as between the original parties, 
 subject to set-offs, and the equities stated ; and the mort- 
 gage, as an incident to the debt, and equally non-negotiable, 
 and subject to the like equities, cannot be enforced by such 
 assignee for any larger sum. Such limited recovery upon
 
 238 BONDS AND MORTGAGES. 
 
 enforcing the mortgage security, when given with a non- 
 negotiable bond, is consonant with the approved rule under 
 which the indorsee for value, before due, in good faith, of 
 negotiable promissory notes, secured by mortgage, recovers 
 the face value of the notes, free from antecedent equities, 
 when enforcing the mortgage incident. Under this view, 
 bonds and mortgages constituting a poor security for the 
 loan of money, the use has become general of indorsement 
 of certificates by mortgagors and obligors that they have 
 no defenses, equities, or set offs. Where such certificates 
 are indorsed or attached, the assignee of a bond and mort- 
 gage, without notice of equities, and for value advanced on 
 the faith and credit of the representations so made, may 
 invoke the rules of estoppel in pais, or equitable estoppel, 
 as against the mortgagor and obligor, notwithstanding the 
 original transaction, as between the parties, was without 
 consideration, or a gross fraud. Under the rules stated, a 
 sub-assignee, with knowledge, may take a valid title from a 
 bona fide assignee for value, without notice of equities. 
 The representations contained in such certificates are of as 
 binding effect as if made upon the favored instruments of 
 commerce, and pass upon assignment to successive holders 
 for value, as where negotiable paper is indorsed in blank. 
 Bonds and mortgages, thus freed from antecedent equities, 
 become available collateral securities. 1 
 
 185. THE EQUITIES TO WHICH THE ASSIGNEE is SUB- 
 JECT THE NEW YORK RULE. In an early case, in New 
 York, 1 Chancellor Kent, considering the equities to which 
 
 1 Kamena . Huelbig, 23 N. J. Eq. App. 78 Pa. St. 153 ; Penn. R. R. 
 
 78 ; Woodruff c. Morristown Inst., Go's App. 86 Ib. 80; Robert v. Hay, 
 
 84 Ib. 174; Shafere. Reilly, 50 N. Y. 91 Ib. 242 ; Mifflin County Bank's 
 61; Andrews . 'Etna Life Ins. Co,, App. 98 Ib. 150; Etheridgec. Parker, 
 
 85 Ib. 334; Wegh t>. Boylan, Ib. 894; 76 Va. 247 (14 Rep. 186); Ho well v. 
 Riggs v. Pursell, 87 Ib. 608 ; Me Hall, 5 Lea, 405. 
 
 Murtrie t>. Twitchell, 11 Pbila. 357 ; Beebe e. Bank of New York, 1 
 Holtz c. Belden, 12 Ib. 498; Asbton's Johns. 552, where the majority of
 
 THE TITLE OF THE ASSIGNEE. 239 
 
 the assignee of a non-negotiable bond, seeking to enforce 
 the mortgage security, was subject, restricted the same to 
 those existing as between the mortgagor and mortgagee 
 only. A similar opinion was stated by Justice Sutherland, 
 in a later case 1 and in Corning v. Murray.* Even in these 
 early cases, a majority of the court held the more extended 
 view, and the question was finally settled in Bush v. Lath- 
 rop,* where the rule was established that the assignee of a 
 bond and mortgage takes only such title as his assignor had 
 and no other, and is subject as well to all the equities of 
 third persons as to those of the original mortgagor and 
 mortgagee. In that case the pledgee of a bond and mort- 
 gage, holding the same under an assignment of the absolute 
 title thereto as collateral security for a smaller sum than 
 the face of the bond, made a sub-pledge thereof to a third 
 person who advanced its full value in good faith, without 
 notice. The fact that an assignee has no notice of such 
 equities at the time he makes his advance, is immaterial. 4 
 The rule announced was modified in later cases, 8 but in the 
 leading case of the Trustees of Union College v. Wheeler ' 
 the Court of Appeals of New York declared that Bush v. 
 Lathrop, supra, had been overruled only as to the point 
 that an assignor of a chose in action is estopped to set up 
 any equities affecting the title between himself and his as- 
 signee is an action brought by a second assignee, and not 
 as qualifying the rule as to the rights of an assignee in en- 
 forcing the mortgage, or as to equities growing out of the 
 chose in action itself. The rule is declared well settled 
 that the assignee of a bond and mortgage takes the security 
 subject to equities attending the original transaction, that 
 
 the court overruled the learned * Bank for Savings t>. Frank, 45 N. 
 
 chancellor. Clute v. Robinson, 2 Ib. Y. Supr. Ct. 404. 
 
 612; Livingston . Dean, 2 Johns. 6 Dillaye v. Commercial Bank, 51 
 
 Ch. 479. N. Y. 345 ; Moore v. Metropolitan 
 
 1 James v. Morcy, 2 Cow. 298. Bank, 55 Ib. 41. 
 
 3 Barb. 652. 61 N. Y. 88. 
 
 22 N. Y. 535.
 
 24:0 BONDS AND MORTGAGES. 
 
 he takes no greater rights than his assignor, and that the 
 true test is, to inquire, what can the mortgagee do by way 
 of enforcement of it as against the property mortgaged. 
 What he can do, the assignee can do, and no more. The 
 rule that the assignee of a bond and mortgage takes the 
 security, subject to equities attending the original transac- 
 tion in favor of the mortgagor and of prior equitable claims 
 of third persons, is followed in several decisions, and is the 
 rule in New York state. 1 
 
 186. THE RULE IN NEW JERSEY, PENNSYLVANIA AND 
 VIRGINIA. The established rule in New Jersey is that the 
 assignee of a mortgage given to secure a bond (and it would 
 seem* a promissory note) receives it subject to all defenses 
 which the mortgagor may have against it, but free from 
 any secret equities existing in favor of third persons, cestuLs 
 que trust, and others, of which the assignee has no notice. 1 
 In cases where such assignee has notice of equities of third 
 persons, he is subject thereto. 4 The assignee takes the 
 security subject to all the equities of the mortgagor, 
 whether open or secret ;* and to protect himself from loss, 
 such assignee should learn from the mortgagor, before 
 taking an assignment of the bond and mortgage, whether 
 there be any defenses, set-offs or objections thereto.* 
 A sub-assignee from an assignee, with constructive notice 
 
 1 Ingraham 9. Disborough, 47 N. Farland v. Gilchrist, 25 Ib. 487; 
 
 Y. 421 ; bchaefer v. Reilly, 50 Ib. 61 ; Starr . Hasbrouck, 26 Ib. 414 ; Bush 
 
 Greene v. Warwick, 64 Ib. 220; v. Cushmau, 27 Ib. 181; Putnam . 
 
 Crane v. Turner, 67 Ib. 487; Bank Clark, 29 Ib. 415; Vredenburgh v. 
 
 for Savings t>. Frank, 45 N. Y. Supr. Burnett, 31 Ib. 231 ; 8. c. 34 Ib. 252; 
 
 Ct. 404; Viele v, Judson, 82 Ib. 381 ; Woodruff v. Morristown Inst. 34 Ib. 
 
 Davis v. Leopold, 87 N. Y. 620. 174. 
 
 ' Woodruff v. Morristown Inst. 34 * Losey t>. Simpson, supra; D;in- 
 
 N. J. Eq. 174. bury . Robinson, 14 N. J. Eq 213. 
 
 1 Shannon v. Marsclis, 1 N. J. Eq. Conover v. Van Mater, 18 N. J. 
 
 413; Losey . Simpson, 11 Ib. 254; Eq. 484; Atwatcr v. Underbill, 22 
 
 Woodruff v. Depue, 14 Ib. 175; At- Ib. 606. 
 
 water v. Underbill, 22 Ih. 17, 599; Jones v. Esler, 18 N. J. Eq. 61 ; 
 
 Kamena v. Huelbig, 23 Ib. 78 ; Me Losey v. Simpson, supra.
 
 THE TITLE OF THE ASSIGNEE. 241 
 
 of prior equities, stands in no better position than 
 his assignee. 1 
 
 In Pennsylvania, an assignee for value of a non-nego- 
 tiable bond and mortgage is subject to all equities, 
 open and secret, of the mortgagor, but not subject to equi- 
 ties of third persons of which he had no notice, express or 
 implied;* or subject to the same equities and rules that gov- 
 ern other non-negotiable instruments or claims. 3 The as- 
 signee is not subject to equities existing between the mort- 
 gagor and a prior assignee of the same mortgage. 4 The 
 obligor and mortgagor, who has not estopped himself by 
 affirmative acts or representations or neglects, upon the 
 faith of which an assignee has advanced his money, is en- 
 titled to insist, as against any assignee of the securities, upon 
 any defense or equity which could have been insisted upon 
 as against the obligee and mortgagee. 5 
 
 In Virginia, it was held in an early case, 6 that an assignee 
 of a non-negotiable chose in action, like a bond secured by 
 mortgage, receives it subject to all the equities of the 
 debtor against the assignor existing at the date of 
 the assignment, or which arise after the date of the assign- 
 ment, and before the debtor has notice of it, and this 
 notwithstanding the assignment be for value received, and 
 without notice of equities. The rule applies only where the 
 debtor has an equity for relief, or a ground of defense based 
 on honest transactions between himself and his assignor, 
 and is not intended as a cover for fraud. It was not 
 applied in a case where a married woman, with power to 
 
 1 Rose v. KirabalT, 16 N. J. Eq. 185. App., 3 Grant, 281; McCandless v. 
 
 9 Davis v. Barr, 9 S. & R. 140 ; Engle, 51 Pa. St. 309. 
 
 Mott v. Clark, 9 Pa. St. 399; Taylors 8 Hortsman v. Gerker, 49 Pa. St. 
 
 Gitt, 10 Ib. 428; Prior v. Wood, 31 382. 
 
 Ib. 399; Michener v. Cavendor. 38 4 Reineman . Robb, 98 Pa. St. 
 
 Ib. 337; McConnell v. Wenrich, 474; Blair v. Matliiott, supra; Dow- 
 
 16 Ib. 365; Twitchell v. McMurtrie, ney v. Thorp, 63 Ib 322. 
 
 77 Ib. 383; Mifflin County Nat. * Asbton's App. 73 Pa. St. 153; 
 
 Bank's App., 98 Ib. 150; Blair v. Ilutclunson v. Gill, 91 Ib. 253. 
 
 Mathiott, 46 Ib. 262 ; Wetkerell's Norton v. Rose, 2 Wash. 233. 
 16
 
 242 BONDS AND MORTGAGES. 
 
 convey her real estate, executed a bond secured by a deed 
 of trust, and the securities passed by assignment to a bona 
 fide purchaser for value, without notice of the fraud. The 
 equities of the assignee were preferred as against a third 
 person, who had actively participated in the fraud, and was 
 seeking to defeat his title. 1 
 
 187. THE ASSIGNMENT OP BONDS AND MORTGAGES 
 UNDER ESTOPPEL. The rules of equitable estoppel are in- 
 voked for the benefit of the assignee for value without 
 notice, of bonds and mortgages, to relieve him from the 
 onerous defenses and equities to which he is usually sub- 
 ject in enforcing his mortgage security, although advancing 
 a valuable consideration, in good faith, and without notice. 
 The rules of estoppel are applied where one person either 
 by words or conduct, induces another to believe that he 
 may safely take a certain security, and he relying upon 
 such representation, acquires such security, the former is 
 never permitted in a court of equity to overthrow the title 
 so acquired. 9 A mortgagor is estopped where by con- 
 cealing his equities or misleading an assignee, justice 
 would be defeated by allowing him to set up a defense 
 founded on an equity available as against the mortgagee. 1 
 
 The rules of equitable estoppel are also applied where 
 an owner of a bond and mortgage entrusts the same to an 
 agent, so that he lias the full legal and equitable title and 
 the apparent absolute ownership thereof, by whom they 
 are assigned, without notice, to an innocent person who 
 advances his money upon the faith and credit of such title 
 and apparent ownership. 4 The rules are also applied in 
 
 1 Etheridirc v. Parker, 76 Va. 247 Woodruff v. Morristown Inst, 34 
 
 (14 Rep. 18fi). N. J. Eq. 174. 
 
 * Morns' Canal etc. Co. v. Lewis, 4 Knraena v. Huelbig, 23 N. J. Eq. 
 
 12 N. J. Eq. 832; Brinkcrhoff v. 78. 
 Brinkerhoff, 23 Ib. 477; Woodruff 
 t. Morristown Inst., 84 Ib. 174.
 
 THE TITLE OP THE ASSIGNEE. 243 
 
 favor of persons advancing value in good faith, as against 
 cestuis que trust in cases where a trustee holds bonds and 
 mortgages with an apparently absolute power of disposi- 
 tion. 1 It was also enforced in Moore v. Metropolitan Bank 1 
 in which a bona fide purchaser for value of a non-negotiable 
 chose in action from one upon whom the owner had by 
 assignment, conferred the apparent ownership, making 
 such purchase on the faith thereof, obtained a valid title as 
 against the real owner and the world. 2 
 
 188. EQUITABLE LIMITATIONS UPON THE APPLICATION 
 OF ESTOPPEL. In order that the equitable rules of estoppel 
 in pais may be applied, it is necessary that the mortgagor 
 shall have done an act or made an admission, the natural 
 effect of which is to influence the conduct of the assignee, 
 and which has induced him to change his position or condi- 
 tion, so that if the mortgagor is afterwards permitted to deny 
 the truth of his conduct or his words, the assignee will 
 suffer injury. 8 And where a trustee has made a colorable 
 assignment of bonds and mortgages, for his own benefit, to 
 an assignee for value, chargeable with notice of the misap- 
 propriation, no rights, as against the cestuis que trust, can be 
 acquired by such assignee, by reason of his mal fides* A 
 person who is seeking to protect himself, as against clear 
 proof of fraud and misappropriation in the original transac- 
 tion between the mortgagor and mortgagee, by invoking the 
 rules of equitable estoppel is himself bound to the exer- 
 cise of good faith in his subsequent connection with the 
 collaterals, and must show that his advance of value was 
 made promptly upon his faith and belief in the truth of the 
 representations made and as a proximate result thereof, and 
 
 1 Danbury v. Robinson, 14 N. J. 3 Mutual Life Ins. Co. ? . Norris, 
 
 Eq. 213; First National Bank v. Cor- 31 N. J. Eq. 585 ; Woodruff v. Nor- 
 
 ry, 22 Hun, 339 ; Dillaye v. Cora- ristown Inst., 34 Ib. 174. 
 
 mercial Bank, 51 N. Y. 345. 4 Dcy . Dcy, 26 N. J. Eq. 182. 
 
 55 N. Y. 81.
 
 244 BONDS AND MORTGAGES. 
 
 that lie will, as an innocent person, be prejudiced if they 
 are allowed to be disputed. 1 
 
 189. ESTOPPEL IN PAIS, BY MORTGAGOR'S CERTIFI- 
 CATE OF " No DEFENSE." The rules of estoppel in pais or 
 equitable estoppel, as applied in favor of assignees for value 
 of bonds and mortgages, are most frequently invoked in 
 cases where the mortgagor and obligor, upon the execution 
 of the bond and mortgage, has indorsed a certificate there- 
 on to the effect that he has " no defenses, equities, or set- 
 offs of any kind " against such mortgage, or that the same 
 is a valid security, and that he has received full payment, 
 or other like terms. In such cases, the assignee who has 
 advanced value on the faith of such certificate, in good 
 faith, without notice, is entitled to enforce the security, 
 although there be fraud or want of consideration as between 
 the mortgagor and mortgagee. 9 Where a mortgagor has 
 signed a certificate that he has " no defense" to such 
 security, the fact that an assignment of such bond and mort- 
 gage is an actual misappropriation by an agent entrusted 
 therewith, with full title, is no defense as against an assig- 
 nee for value, without notice. 8 Even where the money 
 thus obtained has never been accounted for, the mortgage 
 security is not affected by such misappropriation, the pur- 
 chaser being under no obligation to look to the application 
 of such proceeds, nor responsible for their misappropria- 
 tion/ 
 
 Such certificate of " no defense " defeats the equities of 
 third parties arising out of a collateral agreement, the assig- 
 
 1 Andrews . Etna Life Ins. Co., Robertson v. Hay, 91 Pa. St. 242; 
 
 85 N. Y. 334. Hutchinson t>. Gill, Ib. 253. 
 
 * McMurtriee. Twitchell, 11 Phila. 4 Gray's Admr. v. Bank of Ken- 
 
 851 ; Ashton's App. 73 Pa. St. 158; tucky, 29 Pa. St. 365 ; Pa. R R. Co 'a 
 
 Diercks . Kennedy, 16 N. J. Eq. App. 86 Ib, 60 ; Robertson v. Hay. 
 
 210 ; Bush v. Cushman, 27 Ib. 131 ; supra ; Hutchinson . Gill, su- 
 
 Woodruff v. Morristown Inst. 34 Ib. pra. 
 174. See Raley v. "Williams, 73 Mo. 
 810.
 
 THE TITLE OP THE ASSIGNEE. 245 
 
 nee having no notice thereof. 1 Nor will a mortgagor be 
 permitted to set up usury in the loan, where he has given 
 such certificate, as against an assignee for value, without 
 notice. 9 Nor will the want of a formal acknowledgment 
 by a wife of a mortgagor securing the payment of a bond, in 
 which her husband joined, affect the application of the 
 rules of equitable estoppel arising from such certificates of 
 44 no defense." 1 But, as delivery and assignment of a bond 
 and mortgage for which no value is paid, as between the 
 parties, is essential, a bona fide assignee thereof for value, 
 receiving it at a time subsequent to its execution, is not en- 
 titled to priority, in the proceeds of the mortgaged proper- 
 ty, as against an intervening lienor, in good faith, who has 
 complied with all statutory requirements as to notice, 
 although the mortgage was executed and recorded prior to 
 the attaching of his lien. Nor is it material, as against the 
 equity of such third person, that at the tim-e of the assign- 
 ment, the mortgagor made an affidavit falsely reciting that 
 the mortgagee had advanced the whole sum without abate- 
 ment, and that there were no off-sets, defenses, or counter- 
 claims, and although, as against the mortgagor, an estoppel 
 to show the truth arose. 4 
 
 190. THE BOND AND MORTGAGE, UNDER INDORSE- 
 MENT, QUASI-NEGOTIABLE. T T nder the application of the 
 rules of estoppel in pais or equitable estoppel, arising upon 
 the indorsement of certificates of no defense or equities, and 
 like declarations, or acknowledgments of the receipt of 
 the whole sum named, and by other affirmative acts or neg- 
 lects of the mortgagor, a bona fide sub-assignee for value 
 without notice, acquires a good title as against the owner, 
 or third persons, or creditors, although such bond and mort- 
 gage were fraudulently obtained by his assignor. Upon the 
 
 1 Riggs v. Pursell, 87 N. Y. 608. * Holtz v. Belden, 12 Phila. 498 ; 
 
 * Wegh v. Boylan, 85 N. Y. 394, Howeli v. Hall, 5 Lea, 405. 
 401. * Schaf er v. Rcilly, 50 N. Y. 61.
 
 246 BONDS AND MORTGAGES. 
 
 same rule of estoppel in pais, a bona fide grantee for value 
 without notice of a prior unrecorded deed, acquires a valid 
 title, although his grantor is chargeable with full notice 
 of fraud. 1 The rules of equitable estoppel are also applied 
 for the benefit of sub-assignees for value of bonds and mort- 
 gages, upon which such certificates of payment and of no 
 defense have been indorsed, in cases where they have ac- 
 quired the same under assignment from a bona fide holder 
 for value, without notice, although chargeable with no- 
 tice of fraud or breach of trust in the original transaction. 
 Such representations indorsed upon bonds and mortgages 
 partake, under the operation of the rules of estoppel in pais, 
 of the nature of blank indorsements of negotiable instru- 
 ments. They pass from hand to hand, and any subsequent 
 assignee thereof, although having notice of equities, may 
 claim protection under a bona fide holder for value, without 
 notice, in the line of assignments. Such rules of estoppel 
 in pais are supported upon the ground that where bonds and 
 mortgages are issued indorsed as stated, for the purpose of 
 obtaining money thereon for the use of the mortgagor, it is 
 a presumption therefrom that the intention of the mort- 
 gagor was that the securities should be available as collat- 
 eral or otherwise, and that the market should not be closed 
 upon the first assignee, except upon his consent to indorse 
 a new certificate., If the rule were otherwise, a bona fide 
 assignee for value, without notice, of a bond and mortgage, 
 so indorsed, would lose one of the chief advantages neces- 
 sarily belonging to that favored position. 4 
 
 191. ASSIGNMENT OF VOID, INVALID AND FRAUDU- 
 LENT SECURITIES. Where the mortgage security itself is 
 absolutely void, it is not enforced as security for any pur- 
 pose of reimbursement or indemnity. 8 Where a conveyance, 
 
 1 Wegh v. Boylan, 85 N. Y. 394 ; * Boyd v. Dunlap, 1 Johns. Ch. 
 
 Sclmfer v. Reilly, 50 N. Y. 01. 478; Union Nat. Bank . Warner, 
 
 9 Ashton's App. 73 Pa. St. 153; 12 Hun, 300; Savage v. Murphy, 34 
 
 McConnell v. Wenrich, 10 Pa. St. N. Y. 508; Shand . Handlcy, 71 Ib. 
 
 365 ; Mott t>. Clark, 9 Ib. 405. 319.
 
 THE TITLE OF THE ASSIGNEE. 247 
 
 made by a husband through a third party to his wife, is 
 fraudulent as to the creditors of the husband, and the wife 
 is a party to the fraud, no protection for any sum paid or 
 liability incurred will be given her. 1 Otherwise, where 
 an assignee for value is without notice of the fraud. In such 
 case, the assignee is protected to the amount of his advan- 
 ces.* In cases of fraud, the assignee for value, without 
 notice, is not allowed to enforce the personal obligation of 
 the bond, although his claim under the mortgage security is 
 good as against the land. As assignee of a non-negotiable 
 bond, he stands in the same position as l|is assignor, and in 
 the absence of fraud, gross negligence, or misconduct on the 
 part of the obligor or maker, is subject to all the equities 
 against such bond in the hands of the original obligee or 
 payee. 3 Nor will a bond and mortgage, while invalid in the 
 hands of the mortgagee, become a valid security" in the hands 
 of an assignee for value, chargeable with notice. 4 Nor, when 
 a valid bond and mortgage is assigned to secure the per- 
 foimance of an agreement void for illegality, will equity aid 
 the assignee in the enforcement of the mortgage security.* 
 
 192. PAYMENTS TO MORTGAGEE, AFTER ASSIGNMENT. 
 Payments upon a bond secured by mortgage by the mort- 
 gagor to the mortgagee, made after an assignment thereof 
 by the latter, when made in good faith, without notice, 
 actual or constructive, of the assignment, are valid. The 
 sums thus paid in good faith are credited on the bond and 
 
 1 Davis v. Leopold, 87 N. Y. 620. assignee, and partly for cash, which 
 
 * Van Wyck v. Baker, 16 Hun, he applied to his private use. 
 
 168; Davis n. Leopold, 87 N. Y. * Johnson v. Bush, 3 Barb. Ch. 
 
 620. 207; Dcwitt v. Brisbane, 16 N. Y. 
 
 8 Feltz v. Walker, 49 Conn. 93. 508; Talmage . Pell, 7 Ib. 328; 
 
 4 Pendleton v. Fay. 2 Paige's Ch. Leavitt v. Palmer, 3 Ib. 1; Schroep- 
 
 201, where an insolvent trustee as- pelfl. Corning, 5 Denio, 236; s. c. 6 
 
 signed a mortgage purporting on its N. Y- 107; Adams v. Rowan, 8 S. & 
 
 face to be given to him as trustee, M. 621. 
 partly in payment of his debt to the
 
 248 BONDS AND MORTGAGES. 
 
 mortgage, as against any assignee thereof. 1 Nor is a pay- 
 ment made before maturity evidence of bad faith ; nor the 
 non-production of the bond and mortgage and indorsement 
 of such payment thereon when made. No presumption that 
 the transaction is not bona fide arises where, upon payment 
 in full of the debt, the securities are not re-delivered and no 
 satisfaction of the mortgage executed, and no inquiries made 
 relative thereto. Mere failure to produce such non-negotia- 
 ble securities is not of itself sufficient to charge the mort- 
 gagor with the duty of investigation. 8 In order to protect 
 himself from bona fide payments by the mortgagor to the 
 mortgagee after assignment, an assignee of a bond and mort- 
 gage should notify the mortgagor himself. 8 Where a bond 
 and mortgage were assigned for value, but were not deliv- 
 ered at the time, being held as collateral security for a note 
 by a third party, who was subsequently paid by the mort- 
 gagor, an assignee, upon foreclosure, having taken such 
 mortgage with the same equities as his assignor, is subject 
 to a credit on the mortgage of the amount of the note paid. 4 
 In the leading case of Matthews v. Walwyn, a non-negotia- 
 
 1 Foster . Beals, 21 N. Y. 247; rests as to discharge his lien. If an 
 
 Trustees of Union College v. Whee- assignee sees fit to leave him this 
 
 ler, 61 Ib. 88, 111 ; Van Keuren v. apparent authority, he can not com- 
 
 Corkins, 66 Ib. 771 ; Jones v. John- plain of its exercise as to persons 
 
 son, 6 Johns. Ch. 427; Insurance Co. acting in good faith, but must be re- 
 
 t. Smith, 2 Barb. Ch. 82; Mitchell v. garded as represented by and iden- 
 
 Burnhan, 44 Me. 303 ; Bank v. An- tiffed with the mortgagee." 
 
 derson, 14 Iowa. 544 ; Johnson v. * Van Keuren v. Corkins, 66 N. Y. 
 
 Carpenter, 7 Minn. 176 ; Williams v. 77 ; Foster v. Beals, 21 Ib. 247. 
 
 Sorrell, 4 Ves. 389. In Trustees etc. Reed v. Marble, 10 Paige, 408; 
 
 . Wheeler, sunra, the court say: James v. Corey, 2 Cowen, 258; N.Y. 
 
 "Before the assignment the mort- Life Ins. Co. v. Smith, 2 Barb. Ch. 
 
 gagee had complete power to dis- 82; Meghan v. Mills, 9 Johns. 64; 
 
 charge the debt as well as the mort- Say v. Dascomb, 1 Hill, 552 ; Briggs 
 
 gage, either in part or absolutely. v. Dorr, 19 Johns. 95; Van Keuren 
 
 That power must be presumed to . Corkins, supra ; Heermaus v. 
 
 continue until notice to the contrary. Ellsworth, 64 N. Y. 159. 
 
 By means of it he may violate the * Kamena v. Ilu'jlbig. 23 N. J. Eq. 
 
 equities of third parties, and his con- 78. 
 duct may so react on his own into-
 
 THE TITLE OF THE ASSIGNEE. 249 
 
 ble bond and mortgage securing the same were fraudulently 
 assigned by the mortgagee, who thereafter received large 
 payments which should have been credited upon the mort- 
 gage debt. The assignee subsequently sought to foreclose. 
 The recovery upon the mortgage in equity was restricted 
 to what was really due upon the bond, following the rule in 
 law. 1 
 
 193. RELEASE BY MORTGAGEE, AFTER ASSIGNMENT. 
 The rule sustaining payments made by the mortgagor to the 
 mortgagee after assignment but before notice thereof, is 
 applied in cases where the mortgagee, after such assignment, 
 and before notice to the mortgagor, releases the whole or a 
 part of the land covered by such mortgage. An assignee 
 of such bond and mortgage is bound by such release as he 
 is by payments of the mortgagor made bona fide. The 
 rule, however, is restricted in its application to persons 
 executing the mortgage directly or indirectly through 
 trustees. 5 A bond and mortgage were assigned by an .ad- 
 ministrator of a deceased mortgagee, who subsequently by 
 mistake discharged the mortgage without receiving pay- 
 ment. The discharge was duly recorded, and the premises 
 were then sold to a bona fide purchaser for value, without 
 notice. The assignee of the securities brought suit to 
 foreclose. The effect of the recording of the release of 
 the mortgage being to cancel the record thereof, the subse- 
 quent purchaser for value in good faith, without notice, 
 was protected. 8 But the cancellation of a mortgage on 
 the record is only prima facie evidence of its discharge, and 
 
 1 4 Yes. 126. Referring to this better in equity than it is at law. So 
 
 case, the United States Supreme neither can it be worse. Upon this 
 
 Court, in Carpenter . Longan, 16 ground we place our judgment." 
 
 Wall. 271, say: "The principle is J Jones v. Smith, 22 Mich. 260 ; 
 
 distinctly recognized that the meas- Trustees of Union College v Wheeler, 
 
 ure of liability upon the instrument 61 N. Y. 88; Stocks v. Dobson, 4 
 
 secured is the measure of the liability De G. M. & G. 11. 
 
 chargeable upon the security. The * Ely v. Scofield, 35 Barb. 330 ; 
 
 condition of the assignee can not be Swartz v. Leist, 13 Ohio St. 419.
 
 250 BONDS AND MORTGAGES. 
 
 the fact that such cancellation was procured or made by 
 fraud or accident, or in mistake, is subject to proof by an 
 assignee or party interested. 1 Nor will such cancellation 
 affect the right to hold other collateral securities, so long as 
 the debt secured by such mortgage remains unpaid. 1 
 
 CHAPTER XIX. 
 
 BONDS AND MORTGAGES AS COLLATERAL SECURITY. 
 
 194. The use of bonds and mortgages as collateral security.,, 
 
 195. Tbe pledge of bonds and mortgages by delivery. 
 
 196. The equities to which the pledgee is not subject. 
 
 197. The pledgee's equities, as against fraudulent releases. 
 
 198. The pledgee's rights, in cases of fraud, misappropriation, etc. 
 
 199. localization of the securities by pledgee. 
 
 200. Pledger's rights upon payment of debt. 
 
 194. THE USE OF BONDS AND MORTGAGES AS COL- 
 LATERAL SECURITY. The use of bonds and mortgages, as 
 collateral security for other obligations, is general in the 
 states where this form of security is adopted. The pledgee, 
 receiving the same in good faith for a valuable considera- 
 
 o o 
 
 tion properly assigned, is vested with the legal title to the 
 bond and mortgage, and entitled to enforce the mortgage 
 security in equity with the same rights as a purchaser for 
 value, in good faith, and is also subject to the like equities. 
 Such a non-negotiable bond, as the evidence of a debt or 
 obligation, and the mortgage given as collateral security for 
 its payment, are the subject of pledge. 8 The mortgage se- 
 
 1 Trenton 'Banking Co. v. Wood- parties receiving subsequent as- 
 
 ruff, 2 N. Y. Eq. 125; Lilly v. Quick, signments of the collateral security. 
 
 Ib. 97; Miller v. Wack, 1 Ib. 214. Ibid. 
 
 * Hollis v. Insurance Co., 12Phila. * Campbell . Parker, 9 Bosvv.323. 
 821. Aud the same rule applies to
 
 THE PLEDGE THEREOF. 251 
 
 curity creating a specific lien on the land, the assignment 
 carries the legal estate to the pledgees, and is governed by 
 rules generally applicable to mortgages of a legal or equita- 
 ble interest in real property. 1 A bond and mortgage 
 transferred by an assignment absolute in terms, but in fact 
 as collateral security for a promissory note made by the 
 assignor, by the terms of which the assignor is given 
 authority to sell the collateral securities upon default in 
 payment of the note, is a pledge and not a mortgage or 
 sale of such collateral securities.* The pledgor remains the 
 general owner of the collateral where the title has not been 
 passed, the pledgee holding a special property therein as 
 security for the advances made. 8 
 
 195. THE PLEDGE or BONDS AND MORTGAGES BY DE- 
 LIVERY. A bond as a non-negotiable chose in action, to- 
 gether Avith the mortgage given to secure its i ayment, may 
 be assigned as collateral security by. a mere delivery 
 thereof. 4 Such collateral securities may be held by the 
 pledgee under a verbal agreement, as security for the pay- 
 ment of a claim of a third person as for his own. 5 The sat- 
 isfaction of the claim of one creditor by the pledgor is with- 
 out effect upon the right to retain possession of the collaterals 
 by the other, or his enforcement of the mortgage security, 
 upon default. 6 The benefit of such securities may follow by 
 implication to several creditors, as where certain bonds and 
 mortgages were assigned in trust as collateral security for 
 the payment of sterling bonds issued by a corporation, the 
 holders for value of the bonds, having acquired an imme- 
 
 1 Clark v. Henry, 2 Cow. 324; Wilson . Troup, 3 Cow. 231 ; Jack- 
 Carr v. Carr, 52 N. Y. 251; Slee v. son a. Willard, 4 Johns. 41 ;Runyaii0. 
 Manhattan Co , 1 Paige Ch. 48, 50; Mesereau, 11 II). 534; Prescott v. 
 Rice v. Dillingham, 73 Me. 59. Hull, 17 Ib. 292. 
 
 2 Campbell v. Parker, 9 Bosw. 322. 6 Champney v. Coope, 32 N. Y. 
 8 O'Dougkertyfl. Remington Paper 543; llarbeck . Vanderbilt, 20 Ib 
 
 Co ., 81 N. Y. 496. 395; Hubbell . Blakeslee, 71 Ib. 6<J. 
 
 4 Kamena v. Huelbig, 23 N. J. Eq. * Ibid.; Kellogg v. Ames, 41 N. Y. 
 78; Gal way t>. Fullcrton, 17Ib.389; 259.
 
 252 BONDS AND MORTGAGES. 
 
 diate beneficial interest in the collateral securities, became in 
 effect the assignees and purchasers for value of every bond 
 and mortgage embraced in the trust deed. 1 Where, however, 
 a bond and mortgage are executed for the purpose of rais- 
 ing money for the mortgagor, and there is no delivery to or 
 consideration paid therefor by the mortgagee, such securi- 
 ties have no vitality until assignment and delivery, and even 
 in the hands of an assignee for value without notice, the 
 transaction is not given a retroactive operation to the time 
 of the execution and record of such securities, so as to cut 
 out equities arising in the interval between such time and 
 the assignment in fact.* 
 
 196. THE EQUITIES TO WHICH THE PLEDGEE is NOT 
 SUBJECT. The pledgee for value of a non-negotiable bond, 
 secured by mortgage, without notice of antecedent 
 equities, is protected as against secret equities. Where 
 a bond and mortgage were executed by the wife of 
 one partner to the other partner for the purpose of raising 
 part of the capital of the partnership, and were assigned as 
 collateral security to an indorser of an accommodation note, 
 upon which the desired money was raised, the latter, having 
 subsequently paid the note, was entitled to foreclose the 
 mortgage security, free frcm the secret equity alleged be- 
 tween the parties thereto that the mortgage should be paid 
 from the profits of the business. 8 Nor will the fact that a 
 bond and mortgage, delivered for the temporary accommo- 
 dation of the mortgagee, by reason of false representations 
 as to his solvency and upon his agreement to use them as 
 collateral security only, were assigned absolutely to a bona 
 fide assignee, without notice of the secret agreement, be any 
 defense against such assignee in an action to foreclose. 4 
 
 In order to provide for the payment of three bills of ex- 
 
 1 Palmer v. Yates, 2 Sandf. 137. 4 Jacobson v. Dodd. 32 N. J. Eq. 
 
 Schaeffer . Reilly, 50 N. Y. 61. 403; Duncan v. Gilbert, 29 Ib. 521. 
 Ferdon t>. Miller, 34 N. J. Eq. 10.
 
 THE PLEDGE THEREOF. 253 
 
 change, the drawer executed a bond and mortgage, to be 
 sold for cash, and the proceeds applied in payment of the 
 bills. The mortgagee (the acceptor) without the consent 
 of the mortgagor or of the holders of the bills, pledged the 
 bond and mortgage as collateral security to a bank for the 
 payment of any and all sums of money which were then or 
 might be thereafter due by him, the bank having no notice 
 of the condition upon which the mortgage was executed. 
 The pledgee subsequently purchased the securities abso- 
 lutely, the mortgagee giving credit to the mortgagor upon 
 an account between them for the amount so realized. The 
 bills of exchange having been negotiated, the holders there- 
 of sought to restrain the bank from selling the land, but 
 claiming under the mortgage they were not allowed to re- 
 pudiate its form, nor could they avoid the legal conse- 
 quences resulting therefrom, and as the mortgage contained 
 no reference to the condition upon which they relied, they 
 were estopped to dispute the bank's title. A transfer of a 
 mortgage by one having an apparently unrestricted power 
 of disposition thereof to an innocent person advancing value, 
 conveys it free from any claims of secret cestuis que trust. 1 
 The rule is enforced relative to collateral agreements of 
 which a pledgee has no notice, where the bond and mort- 
 gage are delivered with a declaration of " no defense." 2 
 
 197. THE PLEDGEE'S EQUITIES, AS AGAINST FRAUDU- 
 LENT RELEASES. Where the holder of a bond and mort- 
 gage, having assigned the securities to a third person as 
 collateral for a valuable advance in good faith, subsequent- 
 ly received from the mortgagor a conveyance of his equity, 
 and executed a release of the mortgage securities, the land 
 was held still subject to the equitable claims of the bona 
 fide pledgee for value. 3 Such release of mortgage securi- 
 
 1 First National Bank v.'Corry, 22 Riggs v. Pursell, 89 N. Y. 608. 
 
 Ilun, 339; Dillaye v. Commercial * Browu v. Blydenburgh, 7 N. Y. 
 
 Bank, 51 N. B. 345; Greene v. War- 141. 
 wick, 64 Ib. 220.
 
 254 BONDS AND MORTGAGES. 
 
 ties, and execution of a conveyance by the mortgagor, with- 
 out the production of the bond and mortgage, is of itself 
 suspicious enough to put the mortgagor upon inquiry, and 
 if unexplained, to render him chargeable with knowledge 
 of the fraudulent character of the transaction. His liability 
 upon his personal obligation still remains valid and enforci- 
 ble. 1 The like rule applies as against a person advancing 
 money on a bond and mortgage, who fails to require the 
 production thereof. By his neglect he becomes chargeable 
 with notice of any defect in the title of his assignor.* 
 
 198. THE PLEDGEE'S EIGHTS, IN CASES OF FRAUD, 
 MISAPPROPRIATION, ETC. A bond and mortgage executed 
 and delivered, without consideration, to be used for a spe- 
 cific purpose, must be applied exclusively thereto. Any 
 other disposition of it is a fraudulent misappropriation, 
 against which the mortgagor is entitled to relief in equity.' 
 A bond and mortgage were executed as collateral security 
 for the performance of a contract, which was subsequently 
 canceled. The pledgee, in the meantime, fraudulently as- 
 signed the bond and mortgage. An action to foreclose the 
 mortgage was brought by the assignee, but he was not al- 
 lowed to enforce the security, the pledgees having no title 
 thereto, which was not defeasible by cancellation of the 
 contract, and could not convey any greater title. 4 Under 
 the restricted rule prevailing in certain states, the pledgee 
 or sub-pledgee of a bond and mortgage, receiving the same 
 as collateral security for an antecedent debt, without more, 
 is not a holder for value, in the usual course of business, 
 nor protected from equities arising subsequently to the giv- 
 ing of a certificate of " no defense " by the mortgagor.* 
 The pledgee of a bond and mortgagee, however, is not re- 
 
 1 Brown v. Blydenburg, 7 N. Y. 355; Phillips v. Thompson, 2 Johns. 
 
 141. Ch. 423. 
 
 8 Kellogg v. Smith, 26 N. Y. 4 Wanzcr v. Gary, 76 N. Y. 526. 
 20. Ashton's App., 73 Pa. St. 153; 
 
 1 Andrews . Torrey, 14 N. J. Eq. McConuell v. Wenrich, 16 Ib. 365.
 
 THE PLEDGE THEEEOF. 255 
 
 sponsible for any misappropriation of the money loaned 
 thereon, where the transaction of pledge lias been made 
 with an agent, entrusted with the documents of title and 
 apparent absolute ownership for the purpose of selling the 
 same in the market. 1 
 
 The sub-pledgee of bonds and mortgages, although 
 holding the same for value, in good faith, and with- 
 out notice, is subject to like equities as the pledgee, and in 
 cases of fraudulent pledge, not within the established rules 
 of estoppel in pais, can acquire no greater right to such 
 securities than were acquired under the original loan. The 
 leading case in New York upon the question of the 
 equities to which assignees for value of bonds and mortgages 
 are subject, arose out of a sub-pledge of such securities. 
 In Bush v. Lathrop 9 a non-negotiable bond for $1,400 was 
 given, secured by a mortgage conditioned to pay the bond. 
 The bond and mortgage were assigned as collateral security 
 for a negotiable note for less than one-fifth the face of 
 the bond, the assignment, which otherwise was absolute in 
 form, reciting the amount of the note as the consideration 
 thereof, but containing a covenant on the part of the mort- 
 gagor that the whole amount named in the bond, and in- 
 terest, was due. Shortly afterwards, the collateral securities 
 were fraudulently assigned by the pledgee for a considera- 
 tion of $1,475, with a covenant on his part that $1,400 and 
 interest was due thereon. Subsequently the assignees re- 
 assigned the securities to the defendant for a consideration 
 of $1,488, paid chiefly in money and the residue in notes, the 
 transaction being bona fide and without notice. The 
 property was valued at $2,000. The administrator of the 
 deceased mortgagor tendered to the last assignee the 
 amount of the principal note and interest for which the bond 
 and mortgage were pledged in the first instance, and upon 
 refusal to re-deliver the security, brought an action 
 
 1 Wcstervelt v. Scott, 11 N.J Eq.78. Bush v. Lathrop, 22 N. Y. 535.
 
 3 BONDS AND MORTGAGES. 
 
 therefor. The court below found for the sub-pledgee, but 
 the judgment was reversed at general term, and the Court 
 of Appeals affirmed the latter decision. 
 
 199. REALIZATION OF THE SECURITIES BY PLEDGEE. 
 The pledgee, in the exercise of powers granted by con- 
 tract to sell or collect collaterals, must act in good faith. 
 Where a contract of pledge provides that such securities 
 may be sold, the pledgor should make previous demand of 
 payment of the original debt. 1 A transfer thereof under 
 such power, to the obligor and mortgagor, or to a person in his 
 interest, for a sum sufficient only to pay the principal debt, 
 but grossly inadequate to the real value of the collateral 
 securities, the mortgagor or person in his interest buying 
 for the purpose of cancelling the same, amounts to a con- 
 version, and the pledgee may be sued for the damages 
 resulting from such wrongful sale.* It is the duty of the 
 pledgee, where a bond and mortgage are pledged as col- 
 lateral security to secure the payment of a promissory 
 note previously given to the plaintiff, such being the 
 express condition of the bond to produce the note for can- 
 cellation at the time judgment is entered on the bond, f cu- 
 lt may have passed into the hands of a holder for value, 
 without notice. 8 The pledgee, in enforcing the mortgage 
 security, is not subject to a defense of usury in the princi- 
 pal demand, a promissory note, for which the bond and 
 mortgage were assigned as collateral security. 4 And where 
 a mortgage was made to secure a loan, and other collateral 
 securities are given, the equity of a subsequent mortgagee 
 of part of the same property to require such securities to be 
 marshalled in his favor will not follow them into the hands 
 of an assignee for value, without notice.' 
 
 200. PLEDGOR'S RIGHTS UPON PAYMENT OP DEBT. 
 Where a mortgagor has paid to a pledgee the amount of 
 
 1 Campbell v. Parker, 9 Bosw. 322. Stevens v. Reeves, 33 N. J .Eq. 
 
 * Ibid. 427." 
 
 Matteson v. Matteson, 55 Wis.540. Reilly v. Mayer, 12 N. J. Eq. 55.
 
 THE PLEDGE THEREOF. 257 
 
 the note made by the mortgagee, to secure the payment of 
 which the bond and mortgage executed by such mortgagor 
 had been pledged, and received the same and the collaterals, 
 he is subrogated as against a subsequent assignee of the bond 
 and mortgage, chargeable with notice that the mortgagee, 
 at the time of the assignment, had not possession thereof, 
 to the rights of the payee of the note, and is allowed to set- 
 off, in a suit in equity to foreclose by the assignee, the full 
 amount of the note and interest, although he took up the 
 same for less than its face. The title of the assignee being 
 subject to the pledge, it was immaterial that he had no notice 
 thereof, by record or otherwise ; nor was the title of the 
 mortgagor subsequently redeeming the bond and mortgage, 
 so pledged, affected by payment of the indebtedness. 1 
 Where a pledgee, holding a bond and mortgage as collat- 
 eral security, brought suit to foreclose the security, claiming 
 only the amount of the debt and obtained a decree for a lien 
 on the land for the amount due find for a sale, and the pledgor 
 paid the amount due and then brought his own suit in equity 
 to foreclose, for the full amount of the bond, he was allowed 
 to recover, the former decree upon the special title of the 
 pledgee not operating as a bar to the suit by the pledger as 
 the general owner of the securities. 9 An equitable mort- 
 gage of title deeds was made to secure a loan of 3,000. 
 The pledgee sub-pledged the mortgage securities for a 
 loan to himself of XI, 200. The sub-pledgee failed to inform 
 the mortgagor, and subsequently, upon a promise of the 
 pledgee to substitute other equally valuable securities, sur- 
 rendered the mortgage securities to the pledgee. The mort- 
 gagor then paid his loan to the pledgee, and received the 
 deeds. The substituted securities proving worthless, the 
 sub-pledgee sought to enforce his claim as against the mort- 
 gagor. The want of notice and his surrender of the deeds 
 were sufficient to defeat his claim. 8 
 
 1 Kamena v. Huelbig, 23 N. J. Eq. Co. 81 N. Y. 496. 
 
 98. * In re Lord Southampton's Est., 
 
 * O'Dougherty ^.Remington Paper L. R. 16 Cli. D. 178. 
 17
 
 PART III. 
 THE PARTIES TO THE INSTRUMENT. 
 
 CHAPTER XX. 
 
 THE CONTRACT OF THE SURETY. 
 
 201. The parties to the instrument. 
 
 202. The contract of the surety. 
 
 203. The contract, as proved by parol, or by terms of the instrument. 
 
 204. The general liability of the surety. 
 
 205. The surety's liability on invalid loans, or forged or fraudulent paper. 
 
 206. The surety's liability ou official bonds. 
 
 207. The liability of married women and minors as sureties. 
 
 208. Obligations of sureties for married women and minors. 
 
 201. THE PARTIES TO THE INSTRUMENT. The rights 
 and liabilities of parties to negotiable instruments are gov- 
 erned by the order of their names on the paper, and by 
 their relations to each other, and the holder thereof. 
 Where the payment of such instruments is secured by the 
 deposit of collateral securities held by either, or one or 
 more of the parties thereto, as is frequently the case, the 
 rights accruing in relation to such collateral securities are 
 governed by equitable rules, which have been so uniformly 
 enforced as to become part of the commercial law of the 
 country. The principal relations of parties to the instru- 
 ments thus created are those of the holder thereof, the 
 maker, surety, indorser, and guarantor, and drawer, drawee 
 and acceptor, and payee of bills of exchange. The equita- 
 ble principle of subrogation to collateral securities is applied 
 
 258
 
 THE CONTRACT OF THE SURETY. 259 
 
 in these relations ; and also in the case of co-sureties, the 
 further equitable principle of contribution as to collateral 
 securities from the common principal, as founded upon prin- 
 ciples of natural justice. The holder of the bill or note, or 
 creditor, or the surety or indorser or acceptor, holding col- 
 lateral securities, are subject in respect thereto, to the lia- 
 bilities of pledgees. The same rules as to care and diligence 
 in the preservation and collection of collateral securities, 
 and the results of fraud and bad faith in connection there- 
 with, resulting in loss, follow as in the cases of pledge of 
 like collaterals. Both at law and in equity, the rights of 
 parties to the instrument to the benefit of collateral securi- 
 ties are preserved and enforced. 
 
 202. THE CONTRACT or SURETYSHIP. Thecontract 
 or undertaking of a surety is a contract to be answerable 
 for the payment of some debt, or the performance of some 
 act or duty, in case of the failure of another person, who is 
 himself primarily responsible for the payment of such debt, 
 or the performance of the act or duty. 1 Such contracts may 
 be arranged in three divisions : 1, those in which there is 
 an agreement to constitute, for a particular purpose, the re- 
 lation of principal and surety, to which agreement the 
 creditor thereby secured is a party 2 ; 2, those in which there 
 is a similar agreement between the principal and surety 
 only, to which the creditor is a stranger; but in which the 
 creditor, having notice of such relations between the parties, 
 will not be at liberty to do anything to the prejudice of the 
 rights of the surety, or to refuse (^when all his own just 
 claims are satisfied) to give effect to them 8 ; and 3, those in 
 which, without any such contract of suretyship, there is a 
 
 1 Addison on Cont. 555. Pearl v. Deacon, 24 Beav. 186; s. c. 
 
 Duncan , North and South 1 DeG. & J. 461. 
 Wales Bank, L. R 6 App., 1, 11, 12 * Davis v. Stainbank, 6 D. M. & 
 
 (Earl Cairns, Lord Chancellor); G. 694; ex parte Higgins. 2 Glyn & 
 
 Owenfl. Hanan, 3 Mac. & G. 378; J. 93; Liquidators v. Liquidators, L. 
 
 Newton v. Cliorlton, 10 Hare, 646; R 7 H. L. 348.
 
 260 THE PARTIES TO THE INSTRUMENT. 
 
 primary and a secondary liability of two persons for one and 
 the same debt, the debt being, as between the two, that of 
 one of those persons only, and not equally of both, so that 
 the other, if he should be compelled to pay it, would be 
 entitled to reimbursement from the person by whom (as be- 
 tween the two) it ought to have been paid. 1 
 
 203. THE CONTRACT, AS PROVED BY PAROL, OR BY 
 TERMS OF THE INSTRUMENT. The contract of suretyship be- 
 tween the principal and surety is an independent and col- 
 lateral undertaking from that of the principal debt, 
 although its terms may in part be inferred from the in- 
 strument upon which the surety is bound. Proof of the 
 fact of suretyship by parol evidence is permitted as not 
 coming within the objection that it tends to vary a written 
 instrument. Evidence of such fact is received, although 
 upon the face of the instrument the parties appear as joint 
 debtors. 9 Such proof is without effect, however, as to the 
 
 1 Tindal v. Brown, 1 Tcnn. R 170; Court of Appeals (Finch, J.) say: 
 
 s. c. 2 Ib. 186; ex parte Younge, 3 ''This is not a rule which in any 
 
 Y. & B. 40; Clark v. Devlin, 3 B. & manner assumes to alter or modify 
 
 P. 366. the original contract or the com- 
 
 Ward v. Stout, 32111. 309; Barry mon liability. That remains as 
 
 r>. Ransom, 12 N. Y. 462; Hubbard an unchanged fact, and may be 
 
 . Gurney, 64 Ib. 457; Calvo v. enforced as freely and perfectly 
 
 Davies, 78 Ib. 216; Palmer v. Purdy, as ever against all the debtors. 
 
 83 Ib. 144; Graves v. Johnson, 48 The change effected is that, as 
 
 Conn. 160; McKee v. Hamilton, 33 between themselves, one becomes 
 
 Ohio St. 7; Wharton v. Woodburn, a surety for the rest, because of 
 
 4 Dev. & B. 507. Contra: Yates v. a valid agreement by which they 
 
 Donaldson, 5 Md. 401 ; Walker v. become primarily liable for the 
 
 Bank of Montgomery, 12 S. & R. debt, and bound to pay in exon- 
 
 382; Lewis v. Hinchman, 2 Pa. St. eration of their associate; and 
 
 418. Duncan v. N. & S. W. Ry. Co., this fact being fairly and fully 
 
 L. R. 6 App. 1; Liquidators t>. same, brought to the knowledge of the 
 
 L. R. 7 H. L. 348; Davies v. Slain- creditor, he is bound to respect the 
 
 bank, 6 D. M. & G. 694; Dcering v. rights of the debtor who has become 
 
 Winchelsea, 2 B. & P. 270; ex parte a surety and acquired the right to 
 
 Hippins, 2 Glynn & J. 93; Sterling be protected as such. When, there- 
 
 v. Forrester, 3 Bligh, 575. In Palmer fore, by the agreement of the debtors 
 
 t>. Purdy, supra, the New York among themselves, it is sought to
 
 THE CONTRACT OF THE SURETY. 2G1 
 
 principal contract entered into, but operates, when knowl- 
 edge of it is chargeable to the creditor, to prevent him from 
 changing the contract in any essential particular, or from 
 making a different agreement with the principal debtor, 
 without the knowledge and consent of the surety, or from 
 releasing any collateral security held for the payment of 
 the debt. Such knowledge also imposes the duty 
 of enforcing the contract, as against the principal, 
 when matured, upon request of the surety.' Although 
 as to such principal contract, the mere knowledge 
 of the holders of a bill or note that the parties 
 thereto stand in the relation of principal and surety, is not 
 of itself sufficient to show that the creditor consented to 
 deal with them in such capacities, where the note is 
 executed and delivered by the sureties apparently as princi- 
 pals.* Parol evidence is admitted both in equity and at law 
 to establish the true relations of parties to such instruments. 8 
 The addition, by one of the makers of negotiable paper 
 of the word " surety," to his signature, charges the holder 
 thereof with notice of the relationship. 4 Such addition to a 
 signature raises the presumption that the bill or note is 
 given for value by the other makers, and that they are the 
 principal debtors.* 
 
 invest one or more of them 157); Reynolds v. Tapp, 5 Wend, 
 
 with new equitable rights out- 501. 
 
 side of the original contract by * Xemicewicz v. Gahn, 3 Paige, 
 
 notice to the creditor of tie later 614; Barry v. Rauson, 12 N. Y. 462; 
 
 arrangement, such notice must be Hubbard v. Gtirm-y, 64 Ib. 467; 
 
 be deiinite and distinct, and so given Davies v. Barrington, 30 N. H. 517; 
 
 as to fully apprize the creditor of the Graf ton Bank . Kent, 4 Ib. 221 ; 
 
 new agreement in fact made, and Mariners' Bank . Abbott, 28 Me. 
 
 the changed attitude of the debtor 280; Wilson v. Green, 25 Vt. 450; 
 
 claiming the rights of a surety." Branch Bank v. James, 9 Ala. 949; 
 
 'Hubbard v. Gurney, 64 N. Y. Hott v. Bodey, 18 Pa. St. 207; Core 
 
 469 ; Harris v. Brooks (Shaw, C. J.) v. Wilson, 40 Ind. 204. 
 
 21 Pick. 195 ; Goodman v. Litaker, 4 Hunt . Adams, 5 Mass. 358; 
 
 84 N. C. 8; Bank v. Hoge, 6 Ohio, Robinson v. Lyle, 10 Barb. 512; 
 
 17; Wythes v. Labouchere, 3 DeG. Rogers v. Tapp, supra. 
 
 & J. 593. 8 Farmers's Nat. Bank v. Stover, 
 
 2 Rogers v. Tapp, 57 Tex. (13 Rep. 60 Cal. 389.
 
 262 
 
 THE PARTIES TO THE INSTRUMENT. 
 
 204. THE GENERAL LIABILITY OF THE SURETY. The 
 measure of liability of a surety is fixed by the rerras of the 
 instrument which he has signed. His undertaking is not 
 to be enlarged or varied by judicial construction, but con- 
 strued most strictly and favorably for his interests. 1 In 
 case of doubt as to his liability, it is generally, if not uni- 
 versally resolved in his favor.* It is only to the extent, 
 and in the manner, and under the circumstances pointed out 
 in his obligation, that the surety is bound. Nor is it suffi- 
 cient that he may sustain no injury by a change in the 
 contract, or that it may even be for his benefit. The surety 
 has a right to stand upon the very terms of the contract ; 
 and if he does not assent to any variation of it, and a varia- 
 tion is made, it is fatal. 8 Where the contract of surety- 
 ship is for a certain sum only, the surety is only liable to 
 the limit agreed upon. In such cases, if the debt or de- 
 falcation amounts to a sum larger than that named in the 
 contract, the surety is only liable to the amount named in 
 his bond; if the debt or defalcation be less, then to the sura 
 only. 4 
 
 1 United States v. Boyd, 15 Pet. 
 187; Mix v. Singleton, 86 111. 194; 
 People v. Tomkins, 74 Ib. 482; My- 
 ers v. National Bank, 78 Ib. 257; 
 Cooper v. People, 85 Ib. 417; Philips 
 0. Singer Manuf. Co, 88 111. 205; 
 Winston v. State, 73 Ind. 175; Home 
 Savings Bank v. Traube, 75 Mo. 199; 
 Morgan v. Martien, 32 Ib. 438; Orrick 
 v. Vahey, 49 Ib. 431 ; St. Louis, v. 
 Sickles, 52 Ib. 122; New London 
 County Bank v. Mitchell, 15 Conn. 
 219; Ludlow v. Simond, 2 Games' 
 Cas. 1; Crist v. Burliugame, 62 
 Barb. 351; McClusky v. Cromwell, 
 11 N.Y. 593; Ward v. Slahl, 81 Ib. 
 406; Gates . McKee, 13 Ib. 232; 
 Rochester City Bank v. El wood, 
 21 Ib. 88; National Mechanics' 
 Banking Corporation v. Coukling, 
 
 90 N. Y. 116; Jennery v. Olmstead, 
 90 N. Y. 363; Paw Paw v. Eggles- 
 ton, 25 Mich. 36; Johnston v. Kim- 
 ball, 39 Ib. 137; Detroit Savings 
 Bank v. Ziegler, 49 Mich. 457 (14 
 Rep. 658); State v. Cutting, 2 Ohio St. 
 1; Liverpool Water Co. . Atkinson, 
 6 East, 597 ; Pearsall v. Suinmersett, 
 4 Taunt. 593; Pybus v. Gibbs, 6 El. 
 & Bl. 903 ; London Ass. Co. v. Bold, 
 6 Q. B.514; Hassell v. Long, 2 M. & 
 S. 370 ; Heppin v. Cooper, 2 B. & A. 
 431. 
 
 9 Dcdham Bank v. Chickering, 4 
 Pick. 314 ; Still v. Vance, 62 111. 52. 
 
 * Miller v. Stewart, 9 Wheat. 681, 
 703 (Story, Jus.) 
 
 * Ex parte Snowden, L. R. 17 Ch. 
 D. 44, 47.
 
 THE CONTRACT OF THE SURETY. 263 
 
 205. THE SURETY'S LIABILITY ox INVALID LOANS, OR 
 FORGED OR FRAUDULENT PAPER. Where a bona fide ad- 
 vance has been obtained upon a negotiable instrument, 
 signed by parties as principal and sureties, from a corpora- 
 tion without authority to loan money for the purpose desired, 
 it is no defense to a surety bound upon such obligation that 
 the act of loan was beyond the authority of the corporation, 
 where the money has actually been received. The equities, 
 as between the parties, are entirely with the corporation. 1 
 Where directors of a railroad company became sureties upon 
 contracts of the company which were ultra vires, so that no 
 recovery could be had as against the company, the liability of 
 the sureties thereon was enforced, their contract being inde- 
 pendent and collateral, in favor of innocent third parties 
 who had advanced money thereon, in good faith, without 
 notice. 2 A surety, although holding collateral security from 
 his principal, is not bound upon a note, which, under statu- 
 tory enactments, is void. 3 Where a surety executes a bond 
 in the belief that the names thereon are genuine, and 
 one turns out to be a forgery, if the payee or holder 
 lias accepted the instrument in good faith, for value, 
 without notice of the forgery, the surety is bound. 4 A 
 surety who signs a promissory note upon condition that 
 before delivery, an additional name should be procured, is 
 bound to a holder for value, before maturity, taking the 
 same without notice of the condition. 5 The liability of 
 a surety was enforced, where a promissory note, in the 
 
 1 In re Coltman, L. R. 19 Ck. D. Society v. Cordwell, Ib. 555 ; Stoner 
 
 64, 71 ; Jones v. National Building . Milliken, 85 111. 218, overruling 
 
 Ass., 94 Pa St. 215. Seeley v. People, 27 Ib. 173 ; City of 
 
 * Yorkshire Ry. Co. D. Maclure, L. Chicago v. Gage, 95 111. 593 ; Stern v. 
 R. 19 Ch. D. 478 ; German Mining People, 102 Ib. 540 ; State v. Baker, 
 Co.'s Case, 4 D. M. & G. 19; Cham- 64 Mo. 167. 
 
 bers . Manchester etc. Ry. Co., 5 B. * Clarke v. Bryce, 64 Geo. 486; 
 
 & S. 588, 612. Brown v. Kent County, 42 Mich. 501; 
 
 Nourse v. Pope, 13 All. 87. Washington Probate Court v. St. 
 4 Helms v. Wayne Agricultural Clair, 52 Vt. 24. 
 
 Society, 73 lad. 325; Wayne etc.
 
 264 THE PARTIES TO THE INSTRUMENT. 
 
 terms " I promise to pay to the order of myself," was signed 
 by two persons, and placed by one as accommodation paper 
 in the hands of the other, and was transferred by the holder, 
 for value, in violation of the agreement between the parties. 1 
 
 206. THE SURETY'S LIABILITY ON OFFICIAL BONDS. 
 The liability of sureties upon official bonds is strictly con- 
 strued, and does not extend beyond the letter of the con- 
 tract. Their obligation is regarded as strictissimi juris, and 
 nothing can be added thereto by way of presumption or 
 construction. The sureties in such cases are bound to a 
 certain extent only ; and any substantial change in the 
 office of the principal, without the sureties' consent, dis- 
 charges them from liability. The general language used in 
 a contract of suretyship, following a recital of the particular 
 office which the principal is to fill, is generally restricted by 
 the particular words of the recital. 9 The liability of sureties 
 was not enforced where a bond was given for a bookkeeper, 
 who was subsequently promoted to the position of teller, 
 and as such officer embezzled money coming into his hands 8 
 nor where an assistant clerk had been promoted to book- 
 keeper, 4 nor where the change was from actuary to book- 
 keeper and clerk,* nor where a clerk of a court was appointed 
 receiver of a trust fund, under an order of court, and mis- 
 appropriated the money received to his own use. 6 
 
 But the rule stated is not applied in cases where the 
 
 1 First Nat. Bank v. Fowler, 36 116 ; McCluskey v. Cromwell, 11 N. 
 
 Ohio St. 524. Y. 593 ; Weonston v. State, 73 Ind. 
 
 * Home Savings Bank v. Traube, 175. 
 
 75 Mo. 199; State v. Sandusky, 46 * National Meek. Banking Associ- 
 Ib. 381 ; State v. Cutting, 2 Ohio, 1 ; ation v. Conkling. 90 N. Y. 116. 
 Detroit Savings Bank . Zieglcr, 4 Manufacturers' Bank v. Dicker- 
 supra ; Paw Paw v. Eggleston, 25 son, 44 N. J. L. 449. 
 Mich. 36, 40; Detroit. Weber. 29 Jennery v. Olmslead, 90N.Y.363. 
 Ib. 24; Johnston <c. Kimball, 39 Ib. Rogers v. Odom.18 S. C. (15 Rep. 
 1 ; Tradesmen's Bank v. Woodward, 607); Hammer v. Kaufman, 39 111. 
 Anthon (N. Y.) 300 ; National Mech. 87 ; Waters v. Carroll, 9 Yerg. 102; 
 Banking Ass. v. Conkliug, 90 N. Y. State v. Blackinorc, 7 Heisk. 638.
 
 THE CONTRACT OF THE SURETY. 265 
 
 principal assumes additional duties in a new and independ- 
 ent office, while continuing the discharge of the duties of 
 the former position, and the default occurs in the discharge 
 of the duties of the latter. 1 As where a collector of certain 
 rates was also appointed collector of other independent rates, 
 such appointment formed no defense to an action against his 
 sureties for a default in the first office, caused by a defalca- 
 tion.* Nor is the liability of a surety for a bookkeeper in a 
 bank, who also acted as teller, affected by the additional 
 employment, unless the errors were connected with the 
 duties of teller, or caused by his employment as such. 3 And 
 the same rule was applied in the case of sureties for a teller, 
 afterwards appointed bookkeeper. 4 The surety's liability 
 is not affected, where the additional employment is only 
 temporary. A receiving teller, thus assisting a general teller, 
 embezzled moneys coming into his possession as such assist- 
 ant teller. His surety's liability was unaffected by the 
 merely temporary employment. 8 
 
 207. THE LIABILITY or MARRIED WOMEN AND MINORS 
 AS SURETIES. Under the common law, a married woman 
 could not bind her estate as surety; but this disability has 
 been generally removed. She has usually as to her separate 
 property the powers of a femme sole, 6 and may incur 
 
 1 Skillett 0. Fletcher, L. R. 2 Pelzer v. Campbell, 15 S. C. 582 ; 
 
 C. P. 469; United States v. Kirk- Mayo v, Hutchmson, 57 Me 547 ; 
 
 patrick, 9 Wheat. 720; People v. Derringfl. Boyle, 8 Kan. 529 ; Wicks 
 
 Vilas. 36 N. Y. 459 ; Supervisors v. v. Mitchell, 9 Ib. 88 ; Major v. 
 
 Clarke, 25 Hun, 386; Hatch v. At- Holmes, 124 Mass. 108; Kenworthy 
 
 tleborough. 97 Mass. 533; Common- . Sawyer, 125 Ib. 28 ; Gocdnow v. 
 
 wealth v. Holmes, 25 Gralt. 771. Hill, Ib. 588 ; Williams v. Wimston, 
 
 1 Skillett v. Fletcher, supra. 35 Ohio St. 296, overruling Levi v. 
 
 1 Home Savings Bank v. Traube, Earl, 30 Ib. 147, and Rice v. Rail- 
 
 76 Mo. 199 ; Rochester City Bank v. road Company, 32 Ib. 380. The 
 
 El wood. 31 N. Y. 88. rule in Penn. was changed by the act 
 
 4 Batchelor v. National Bank, 78 of April 10, 1879, P. L. 16. Wig-gin's 
 Ky. 435. App. 100 Pa. St. 155 (15 C. L. N. 67); 
 
 5 Detroit Savings Bank v. Ziegler, Davis . Statts, 43 Ind. 103 ; Illinois 
 Mich., supra. Rev. Stats. 1874, c. 68, p. 576.
 
 266 THE PARTIES TO THE INSTRUMENT. 
 
 liability as a surety for third persons. Her obligations in 
 this respect are enforced in law and equity, 1 except where 
 the obligation is shown to have been assumed under duress.' 
 A married woman is entitled, where she has mortgaged hex 
 real estate to secure a debt of her husband, to the benefit 
 as surety of the equitable principle that a creditor must first 
 exhaust the property of the principal debtor before resort- 
 ing to that of the surety, if he can do so without loss 01 
 injury to himself. 8 
 
 Persons under age can not "assume the liabilities of 
 suretyship, and such contracts are held to be void, especially 
 where the undertaking of the minor is manifestly against 
 his interest. 4 Where such contracts, however, are in fact 
 beneficial to the minor, they may be ratified b}^ some dis- 
 tinctive act on his part, if there be a clear knowledge of the 
 want of binding effect of the original contract. 8 A note 
 made by an infant may form a good consideration for an- 
 other note given after his majority in renewal of tho 
 same. 6 
 
 208. OBLIGATIONS OP SURETIES FOR MARRIED WO- 
 MEN AND MINORS. In states where the rule prevails of the 
 disability of married women to enter into contracts, the lia- 
 bility of third persons is not affected, who have become sure- 
 ties for performance or payment. The undertaking of such 
 sureties, being a separate and independent contract, is not 
 affected or rendered void, although the personal engagement 
 
 1 Woolsey v. Brown, 74 N. Y. 82 ; don, 11 Md. 46n ; Allis v. Ware, 27 
 
 Com. Exchange Nat. Bank v. Bab- Minn. 166; Wilcox v. Todd, 64 Mo. 
 
 cock, 42 Ib. 613; Carpenter v. O'- 388. 
 
 Dougherty, 50 Ib. 660; Maxon v. * Robinson 0. Weeks, 56 Me. 102; 
 
 Scott, 55 Ib. 247; Manhattan Nat. Chandler. McKinney, 6 Mich. 217; 
 
 Bank v. Thompson, 58 Ib. 80 ; Third Maples v. Wightman, 4 Conn. 376. 
 
 Nat. Bank v. Blake, 73 Ib. 260. Owen v. Long, 112 Mass. 403; 
 
 1 Loomis c.Ruck, 56 N. Y. 462. Hinely v. Margaritz, 3 Pa. St. 428; 
 
 * Niemcewicz v. Qahn, 3 Paige, Fetrow v. Wiseman, 40 Ind. 148. 
 
 614 ; s. c. 11 Wend. 312 ; Wright v. Baldwin v. Vundusen, 37 N. Y. 
 
 Austin, 56 Barb. 13 ; John v. Rear- 487.
 
 THE CONTRACT OF THE SURETY. 267 
 
 of the principal be worthless. 1 A building association made a 
 loan to a married woman, upon a mortgage of her separate 
 estate, requiring her husband also to execute a bond for the 
 amount of the loan. Although the contract could not be 
 enforced personally against the woman, an action upon the 
 bond given by her husband, who was regarded as a surety, 
 was supported, although he received none of the considera- 
 tion, the contract having been made in good faith, upon a 
 valuable advance. 8 The receipt of a note from a married 
 woman by a sheriff, is not a discharge of her surety, where 
 taken as a favor by the officer, and not by an act of duress. 1 
 A third person, who has fraudulently procured a minor to 
 indorse a note in blank, is liable for the amount of the 
 same when in the hands of a holder for value, before ma- 
 turity, without notice, although the first holder was charge- 
 able with notice of the infirmity of the indorsement. 4 
 
 1 "Weed Sewing Machine Co. v. 8 St. Alban's Bank v. Dillon, 30 
 
 Maxwell, 63 Mo. 486; State v. Wag- Vt. 123. 
 
 goner, 45 N. J. L. (14 Rep. 467.) * Lobdell v. Baker, 3 Met. 469; 
 
 Wiggins' App. 100 Pa. St. (15 Thrall v. Newell, 19 Vt. 202; Polliill 
 
 C. L. N. 69.) 9. Walter, 3 B. & Ad. 114.
 
 268 THE PARTIES TO THE INSTRUMENT. 
 
 CHAPTER XXI. 
 
 THE SURETY'S RIGHT TO COLLATERALS. 
 
 209. The creditor's responsibility, holding collaterals. 
 
 210. The creditor's primary resort to securities of principal. 
 
 211. Equitable limitations of the rule. 
 
 212. Subrogation of sureties to collateral securities of creditor. 
 
 213. The securities to which surety is subrogated. 
 
 214. Equitable conditions of subrogation to securities. 
 
 215. The surety's subrogation to the debt or judgment. 
 
 216. The surety's right of subrogation, when defeated. 
 
 217. Subrogation of creditor to collateral securities of surety. 
 
 218. The subrogation of creditors, as against pledgees. 
 
 219. Application of proceeds from collaterals. 
 
 220. The creditor's enforcement of the principal note. 
 
 221. The recovery of creditor, as against surety. 
 
 209. THE CREDITOR'S RESPONSIBILITIES, HOLDING 
 COLLATERALS. The relationship of creditor, principal debt- 
 or, and surety, where the former lias received from the 
 debtor collateral security for the performance of the princi- 
 pal promise in addition to the personal liability of the sure- 
 ty, creates a limited responsibility on the part of the creditor 
 as to the care and diligence required in the safe keeping and 
 realization thereof. The creditor, chargeable with know- 
 ledge that one or more of the parties bound upon the prin- 
 cipal bill or note are sureties, is bound to act in good faith 
 in his dealings with such collaterals, if he would enforce 
 the personal liability of the surety upon the maker's default. 
 Such securities are regarded in equity as given as much for 
 the benefit of the surety as for the creditor, and the former's 
 right to be subrogated thereto, upon payment of the debt, 
 upon the principal's default, is unquestioned. With this
 
 SURETY'S RIGHT TO COLLATERALS. 2G9 
 
 beneficial interest in the collateral securities, the surety is 
 entitled to be discharged pro tanto, if the creditor, by waste 
 or neglect so gross as to amount to fraud, or unauthorized 
 or fraudulent dealing therewith, impairs or destroys their 
 value. The creditor stands in the relation as to such col- 
 laterals of a secondary or quasi-trustee ; and although the 
 receipt thereof in no way limits his right, upon default, to 
 an action at law against the parties bound upon the princi- 
 pal instrument, yet in equity, he may be required, where 
 not injurious or prejudicial to his interests, to resort thereto 
 rather than to the personal responsibility of the surety. 1 
 
 210. THE CREDITOR'S PRIMARY RESORT TO SECURI- 
 TIES or PRINCIPAL. Upon equitable principles, the burden 
 of the debt is thrown primarily upon the estate and securi- 
 ties of the principal debtor, and such estate is exhausted in 
 exoneration of that of the surety. The equity of the surety 
 in this respect is preferred as against creditors holding gen- 
 eral liens thereon, and is enforced, in cases where not injur- 
 ious to the creditor, although process has been issued 
 against the surety. Such process will be retained until the 
 property and securities of the principal debtor have been 
 applied in payment.* Where the suret}' has placed securi- 
 ties with those of principal in the hands of the creditor, he 
 is entitled to require the securities of the principal first ap- 
 plied to the debt, and if both are sold, to have the same ap- 
 
 1 Black River Bank v. Page, 44 N. 98 Pa. St. 432; Phares v. Barbour, 
 
 Y. 453; Wooten v. Buchanan, 49 49111.370,375. 
 
 Miss. 386; Allen v. Woodward, 125 s Wilcox v. Todd, 64 Mo. 388; 
 
 Mass. 400; West Boston Savings Wright v. Austin, 56 Barb. 13; Ni- 
 
 Bank V. Thompson, 124 Ib. 506, 514; emcewicz v. Guhn,3 Paige, 614; s. c. 
 
 Warner v. Beardsley, 8 Wend. 194; on appeal, 11 Wend. 312; John v. 
 
 Bangs . Story, 7 Hill, 250; Schroep- Reardon, 11 Md. 465; Wooten v. 
 
 ptl v. Shaw, 3 N. Y. 446; Manning Buchanan, 49 Miss. 386. The prin- 
 
 ?'. Shotwell, 4 N. J. L. 584; Hall . ciple was applied in favor of an in- 
 
 Hoxey, 84 111. 618; Priest v. Watson, dorser in Union Bank v. Laird, 2 
 
 75 Mo. 315 ; Clow v. Derby Coal Co. Wheat. 390.
 
 270 THE PARTIES TO THE INSTRUMENT. 
 
 plication of their proceeds. 1 A surety upon a note, secured 
 by a deed of trust of the principal maker, is entitled, after 
 its maturity, to require that the real estate security of the 
 principal should be first exhausted for its payment ; and the 
 trustee, in the absence from the country of the holder of the 
 note, may properly make a sale of the property upon the re- 
 quest of the surety. Such surety may himself bid upon the 
 property in order to be protected from liability.* A valid 
 agreement may be made by a surety with a creditor that 
 the latter shall bring a bill in equity against the principal 
 debtor to collect the debt from securities held by him, or on 
 his behalf, although the surety has not paid the debt. 8 A 
 judgment having been entered upon default in the payment 
 of notes secured by mortgage, an appeal was taken upon 
 bond with surety. Pending appeal, the creditol' sold the 
 property covered by the mortgage, applying the proceeds 
 thereof to the payment of the notes. As this was all that 
 the surety could have done had he been subrogated to such 
 collateral securities, a judgment against him for a deficiency 
 arising at such sale was enforced. 4 
 
 211. EQUITABLE LIMITATIONS OP THE RULE. The 
 creditor's resort primarily to the collateral securities of the 
 principal debtor held by him, is subject to the equitable 
 rule that such proceedings will be equally as available as 
 an action at law against the surety, and would as fully 
 indemnify the creditor, subjecting him to no delay, and ex- 
 posing him to no loss. 5 The surety may, at any time after 
 
 1 Vartie v. Underwood, 18 Barb. Booth r>. Wiley, 102 111. 41. 
 
 561 ; Strong . Wooster, 6 Vt. 536. * Speiglemeyer t>. Crawford, 8 
 
 The same principle is applied be- Paige, 254. 
 
 tween lien creditors, in adjusting * Marchand v. Frellscn, 105 U. S. 
 
 their claims on funds in Pennsylva- 423; Wham v. Irvin, 27 La. Ann. 706; 
 
 nia. Delaware Canal Co. App. 38 Landry v. Vicker, 30 Ib. 1041. 
 
 Pa. St. 512; McLellan's App. 76 Ib. Gary v. Cannon, 3 Ired. Eq. 64; 
 
 235; Homing's App. 90 Ib. 388; Me- Irick v. Black, 17 N. J. Eq. 189; 
 
 Ilvain t>. Mutual Ins. Co. 93 Ib. 30; Wright v. Austin, 56 Barb. 18; Ster- 
 
 Hyff's App, 84 Ib. 40. ling v. Forrester, 3 Bligh. 590.
 
 SURETY'S RIGHT TO COLLATERALS. 271 
 
 the debt becomes due and payable discharge it by payment, 
 and thus become entitled to all the collateral securities 
 held by the creditor. 1 The mere receipt of securities from 
 the principal has no effect upon the obligation of the surety, 
 and is no defense against an action of the payee against 
 the surety upon the note for the payment of which the se- 
 curities were pledged. 9 Nor is such a defense available to an 
 indorser of a promissory note, as where a bank discounting 
 a note relied upon collateral securities of the principal, de- 
 posited with the creditor. An indorsee for value of the 
 note is entitled to look to all the parties thereto for pay- 
 ment, irrespective of any collateral securities held by any 
 of them. 8 It is no defense to an action at law for a surety 
 on a promissory note to show that the bank holding the 
 same, after maturity received deposits from the principal 
 largely in excess of the amount of the note. 4 Nor is the 
 liability of the surety affected by a depreciation in the value 
 of collateral securities in the interval between the maturity 
 of the debt and the commencement of an action against 
 the surety. 5 
 
 212. SUBROGATION OP SURETIES TO COLLATERAL 
 SECURITIES OF CREDITOR. The surety is entitled, upon 
 payment, to be subrogated to the collateral securities 
 held by the creditor from the principal debtor, whether 
 such securities were received at the time the contract of 
 suretyship was entered into or subsequently, or without 
 the knowledge of the surety. This right of the surety is 
 one not founded upon contract, but is supported upon prin- 
 
 1 Jones v. Fincher, 15 Ind. 308; * West Boston Savings Bank v. 
 
 Irick v. Freehold Nat. Bank Co. 37 Thompson, 124 Mass. 506, 514. 
 
 N. J. L. 307 ; Schroeppel v. Shaw, 3 4 Steincr v. Erie Dime Savings 
 
 N. Y. 446; and after payment may Bank, 98 Pa. St. 591. 
 
 file a bill to have the securities ap- B Brick v. Freehold Nat. Bank Co. 
 
 plied to his relief. Houser v. King, 37 N. J. 307, Schroeppel v. Shaw. 3 
 
 76 Va. 731. N. Y. 446. 
 
 * Allen v. Woodward, 125 Mass. 
 400.
 
 272 
 
 THE PARTIES TO THE INSTRUMENT. 
 
 ciples of equity and natural justice, and the tendency is to 
 enlarge and extend its application. 1 The right is applied 
 in favor of each of several sureties upon payment* and is 
 assignable by the surety, the assignee becoming entitled to 
 the equitable rights of the surety. 8 The right of subroga- 
 tion however, is limited to the indebtedness of the principal 
 to the surety on all accounts at the time the subrogation is 
 sought. If the surety is indebted to the principal, though 
 in a distinct account, to an amount equal to what he has paid 
 for his principal, he has no right of subrogation. 4 And the 
 right, being a mere equity, is denied in all cases where its 
 exercise would produce injustice. 6 But where the principal 
 himself is a surety upon the obligation upon which the 
 
 1 Knighton v. Curry, 62 Ala. 404; 
 Smith v. Harrison, 33 Ib. 706; Tal- 
 bott v. Wilkins, 31 Ark. 411; Jaques 
 t>. Fackney, 64 111. 87; Bishop . 
 O'Connor, 69 Ib. 431 ; Richeson . 
 Crawford, 94 Ib. 165; Beaver v. 
 Slanker, Ib. 175; Jones v. Fincher, 
 15 Ind. 308; Zook v. Clemmer, 44 Ib. 
 15; Patterson v. Pope, 5 Dana, 243; 
 Rice v. Downing, 12 B. Mon. 45; 
 Scott v. Featherston, 5 La. Ann. 306; 
 Magee v. Leggett, 48 Miss. 139 ; Lee 
 . Griffin. 31 Ib. 632; Osborne v. 
 Noble, 46 Ib. 449; Taylor v. Jeter, 
 23 Mo. 244; Berthold v. Berthold. 46 
 Ib. 577; Allison v Sutherlin, 50 Ib. 
 274; Easton v. Hasty, 6 Neb. 419; 
 Smith v. McLeod, 3 Ired. Eq. 390; 
 Irick v. Black, 17 N. J. Eq. 189; 
 Clason v. Morris, 10 Johns. 524 ; 
 Martin v. Howard, 12 Hun. 16; 
 Townsend v. Whitney, 15 Ib. 93; 
 Hayes v. Ward, 4 Johns. Ch. 130; 
 Green . Millbank, 3 Abb. N. Cas. 
 138 ; s. c. 56 How. 382; Fielding t>. 
 Waterhouse, 40 N. Y. Super. Ct. 
 
 424; Mathews v. Aikin, 1 N. Y. 595; 
 Lewis v. Palmer, 28 Ib. 271; Corey 
 is. Leonard. 56 N. Y. 494 ; Butler v. 
 Birkey. 13 Ohio St. 514: Cottrell's 
 App. 23 Pa. St. 294; McTormrck v. 
 Irwin, 35 Ib. Ill; Mullcr . Wad- 
 lington, 5S.C.342;Harlan v. Sweney, 
 1 Lea, 682; Allen v. Henley, 2 Ib. 
 141; Horton v. Bond. 28 Gratt. 815; 
 Dent v. Wait. 9 W. Va. 41 ; Lidder- 
 dale v. Triggs, 12 Wheat. 594; in re 
 Babcock, 3 Story, 393; Hodgson v. 
 Shaw, 3 M. & K. 183 ; Craythorne v. 
 Swinburne, 14 Ves. 159. 
 
 * Clapp v. Leb-mon Bank, 46 Pa. 
 St. 88; Sears v. Lcforce, 17 Iowa, 
 473; Brown t>. Kay. 18 N. H. 102; 
 Paris v. Hulett, 26 Vt, 308; Lane v. 
 Stacy, 8 Allen, 41, a case of joint 
 indorse rs. 
 
 * York t>. Limlis, 65 N. C. 535; El- 
 wood v. Diefendorf, 5 Barb. 398. 
 
 4 Neff v. Miller, 8 Pa. St. 347; 
 Coates' App. 7 W. & S. 99; Bailey t>. 
 Broomfield, 20 Pa. St. 41. 
 
 * Cassidy v. Keelcy, 13 Phila. 112.
 
 SURETY'S RIGHT TO COLLATERALS. 273 
 
 surety borrows the money with which to pay the debt, the 
 right of subrogation is not affected. 1 
 
 The right of subrogation of the surety extends to the 
 collateral securities received by the creditor from the prin- 
 cipal debtor subsequently to the creation of the relationship 
 of creditor, principal debtor, and surety. The securities 
 thus received are, like those received at the inception 
 of the contract, in the nature of a trust or quasi-trust fund 
 for the benefit of the sureties as well as of the creditor. 
 The indemnity resulting from the possession of such collat- 
 eral securities enures to the relief of the one as of the other. 
 The surety's bargain is, that the securities taken by the 
 creditor shall be transferred to him if and when he is called 
 upon to make payment, and it is the duty of the creditor to 
 keep such securities intact, whether received at the time of 
 the suretyship, or subsequently. Even where the creditor 
 has burthened such securities with new advances to the 
 principal debtor, the equities of the surety are preferred.* 
 
 213. THE SECURITIES TO WHICFT SURETY is SUBRO- 
 GATED. The surety, upon payment of the debt, is also sub- 
 rogated in equity to all such securities of the creditor as, 
 under technical rules of law, become extinct upon such pay- 
 ment, as well as to such independent collateral securities as 
 may be held by the creditor. 3 The surety is entitled, upon 
 payment, to the benefit of an attachment against the prin- 
 cipal obtained by the creditor, and the levy of an execution 
 
 1 Owen's App. 11 Weekly Notes 6 App 1 ; Pledge v. Buss, Johns. Ch. 
 
 Cas. 488. 665, 668; Williams . Owen, 13 Sim. 
 
 3 Hardin c. Eames, 4 Bradw. 153; 597; Farcbrotlier v. Woodhouse, 23 
 
 Phares v. Barbour, 49 111.370,375; Beav. 18; Newton v. Chorlton, 10 
 
 Rogers v. Trustees, 46 111. 428; Os- Hare. 646. 
 
 borne v. Noble, 46 Miss. 449 ; Baker 8 Allison v. Sutlierlin, 50 Mo. 274; 
 v. Briggs, 8 Pick. 121 ; Merchants' Furnold'0. Bank, 44 Ib. 336; Lath- 
 Banks. Baker, 4 Met. 164; Guild v. rop's App. 1 Pa. St. 512: and the 
 Butler, 127 Mass. 386 ; Forbes v. right may be enforced at law. Arnot 
 Jackson, L. R. 19 Ch. D. 615; Dun- v. Woodburn, 35 Mo. 99. Contra: 
 can v. Bank, L. R 11 Ch. D. 88; s.c. Bigelow v. Cassidy, 26 N. J. Eq.557. 
 18
 
 274 THE PARTIES TO THE INSTRUMENT. 
 
 thereon. Such attachment is a security within the rule. 1 
 And to the lien of an execution ;* and to a replevin bond ;* 
 but not to a distress warrant. 4 And under a Pennsylvania 
 statute authorizing a stay of execution for a year upon giv- 
 ing security, the surety for the original debt, upon payment, 
 is entitled to the remedy of the creditor upon the stay. 5 A 
 surety is entitled, upon the same terms, to the benefit of a 
 mortgage or other charge, held by the creditor as collateral 
 security, and to the proceeds of the enforcement of the 
 security, when it has been converted into cash, or to any 
 surplus remaining after discharging prior encumbrances.' 
 The special liens and priorities vested in the government of 
 the United States and the several state common wealths are, 
 upon equitable principles, preserved for the benefit of sure- 
 ties who have paid judgments or other obligations of their 
 principals to the federal or state authorities. The surety's 
 right of subrogation thereto is undoubted. 1 A provision in 
 a statute giving a lien to a state upon the recording of an 
 official bond, with sureties, until the conditions thereof 
 should be complied with, is enforced for the benefit of sure- 
 ties paying a deficiency of such official, the intention of the 
 
 1 Brewer v. Franklin Mills, 42 N. . Barbour, 49 Ib. 870; Jaques v. 
 
 H. 292; Edgerly . Emerson, 23 Ib. Fackney, 64 Ib.87; Beaver .Slankey, 
 
 365. 94 Ib. 175; Hayes v. Ward, 4 Johns. 
 
 Watts v. Kinney, 3 Leigh, 272; Ch 123; Root v. Bancroft, 10 Met. 
 
 Hunter v. Keller, 3 W. & S, 401. 48; Hodgson t>. Shaw, 3 M. &. K. 
 
 Glass V. Pullen, 6 Bush, 316. 190; Copis v. Middleton, 1 Turn. & 
 
 * Hall 9. Hoxsey, 84 111. 618. R. 224. 
 
 Schnittzell's App. 49 Pa. St. 23; * United States v. Herron, 20 Wall. 
 Potts v. Nathans, 1 W. & S. 155; 251; Hunter v. United States, 5 Pet. 
 Burns v. Bank, 1 P. & W. 395. 173; s. c. 5 Mason, 62; United States 
 
 Gerber v. Sharp, 72 Ind. 553; . Preston, 4 Wash. 446; Cochrane. 
 
 Fawcette v. Kennedy, 33 Ala. 261 ; Cushing, 124 Mass. 219; Smith v. 
 
 Osborne *. Noble, 46 Miss. 449; Hodson, 50 Wis. 279; Enders v. 
 
 Storms v. Storms, 3 Bush, 77 ; Jones Brine, 4 Rand. 438 ; Dias . Bouchard, 
 
 . Fincher, 15 Ind. 308; Lewis v. 3 Edw. 485; Gridcr v. Payne. 9 
 
 Palmer, 28 N. Y. 271; City Nat. 6ana, 188; Regina v. Saltcr, 1 H. & 
 
 Bank. . Dudgeon, 65111. 11; Rogers N. 274; King v. Bennett, Wight- 
 
 . School Trustees, 46 Ib. 428 ; Phares wick, 2, 6.
 
 SURETY'S RIGHT TO COLLATERALS. 275 
 
 Legislature being to give a collateral security not only for 
 the benefit of the state, but as indemnity to the sureties in 
 case of default. 1 
 
 214. EQUITABLE CONDITIONS OF SUBROGATION TO 
 SECURITIES. An essential condition of the right of a surety 
 to subrogation to securities held by the creditor from the 
 principal debtor is, that he shall first pay the debt upon 
 which he is bound. Until this has been done, the surety 
 has no equitable right to the securities, and is not entitled 
 to require the creditor to surrender them to him. In no 
 sense, are such securities his, until payment. Nor will a 
 satisfaction and discharge of a part of the debt entitle a 
 surety to demand such collateral securities, as the right of 
 the creditor to retain possession of all securities until fully 
 paid, is preferred.* Equity, however, will afford relief to a 
 surety, against whom a judgment has been entered and is 
 being pressed by execution, even before payment of the 
 debt, upon a bill against the creditor and the principal 
 debtor, for subrogation to collateral securities held by the 
 creditor, so as to prevent any dealing therewith to his pre- 
 judice.* The right of subrogation may be lost by such 
 delay upon the part of a surety to claim it as to amount to 
 laches ; especially where to permit it, after a lapse of years, 
 third persons, who had acquired liens and rights thereon in 
 good faith, would be injured. 4 
 
 But the payment of a debt for which a third person is 
 bound by a mere volunteer or stranger, is not sufficient to 
 
 1 Richeson v. Crawford, 94 111. 165 ; Magee v. Leggett, 48 Miss. 139 ; Dun- 
 
 8. c, 101 Ib. 351. can v. Mobile R. R. Co. 3 Woods, 
 
 1 Hoover v. Epler, 52 Pa. St. 522; 567, 581 ; ex parte Brett, L. R. 6 Ch. 
 
 Neptune Ins. Co. v. Dorscy. 3 Md. D. 841. 
 
 Ch. 334 ; Union Bank v. Edwards, Moore . Topliff, 107 111. 241, 
 
 1 Gill & J. 346; Glass . Pullen. 6 249. 
 
 Bush, 346; Ryner . Ryner, 6 Watts, * Gring's App. 89 Pa. St. 336; 
 
 221; Capen's App. 28 Conn. 220; Douglass' App. 48 Ib. 223.
 
 276 
 
 THE PARTIES TO THE INSTRUMENT. 
 
 entitle such persons to the benefits of the equitable princi- 
 ple of subrogation to the creditor's collateral socurities. It 
 is only in cases where the person advancing money to pay 
 the debt of a third party stands in the relationship of a 
 surety to the principal debtor, or where one person is com- 
 pelled to pay to protect his own individual interests, that 
 subrogation to such securities held by the creditor is per- 
 mitted, in the absence of any agreement for such subroga- 
 tion. 1 Subrogation, however, may be provided for, by 
 agreement, where such payments are made by volunteers 
 or strangers, 9 and, in the absence of contract, the intention 
 of such parties that there should be such subrogation will 
 control.* Where a debtor, being pressed to give security 
 for his debt, surrendered his property in pursuance of a 
 contract between the parties, to a third person, who agreed 
 to pay the debt, and gave his own promissory note therefor, 
 the creditor may maintain an action thereon, he being a 
 holder for value. 4 
 
 1 Sanforcl v. McLean, 3 Paige Ch. 
 122; Shinn fl.Budd, 14N.J. Eq. 238; 
 Hayes v. Wood, 4 Johns. Ch. 130; 
 Beaver t. Slnuker, 94 111. 175, 183; 
 Hough V. Etna Ins. Co. 57 Ib. 318; 
 Young a. Morgan, 89 Ib. 199 ; Bishop 
 . O'Connor, 69 Ib. 431, 437; Hoover 
 v. Epler. 52 Pa. St. 522; Mozicr's 
 App. 56 Ib. 76; "Wallace's Est.59 Ib. 
 401 : "Webster's App. 86 Ib. 409; 
 "Wormer v. Waterloo Society. 62 la. 
 699 ; Bacon v. Goodnow. 59 N. II. 41 5. 
 
 ' "Worncr v. Waterloo etc. Society, 
 supra ; Burr . Smith, 21 Barb. 262. 
 
 J Dodge v. Freeman's Savings and 
 Trust Co. 93 U. S. 379 ; Pacific Bank 
 t>. Mitchell, 9 Met. 297; Swope v. 
 Lefflngwell, 72 Mo. 348 ; Montgom- 
 ery Bank v. Albany City Bank, 7 
 N. Y. 459 ; White v. Knapp, 8 Paige, 
 175 ; Harbeck v. Vanderbilt, 20 N. 
 
 Y. 398 ; Lithcap v. Wilt, 4 Phila. 64; 
 Wilson v. Murphy, 1 Ib. 203 ; Green 
 v. Key, 3 B. & Ad. 313; Deacon v. 
 Stoclhart, 2 Man. & G. 317; Jones 
 v. Broadhurst, 9 M. G. & S. 173 In 
 Dodge v. Frecdman's etc. Co , supra, 
 the court (Hunt J.) say: "If the 
 maker had anything to say or do in 
 the premises, it was to present him- 
 self with the money when the notes 
 matured, pay them, and secure his 
 obligations. Failing in this, he 
 leaves the securities to be dealt with 
 as others interested may choose. 
 There would appear, therefore, in 
 the nature and propriety of the sub- 
 ject, to be no objection to a transfer 
 to a third person paying the money, 
 instead of a technical payment of 
 and discharge of the notes." 
 Parson v. Clark, 132 Mass. 569.
 
 SURETY'S RIGHT TO COLLATERALS. 277 
 
 215. THE SURETY'S SUBROGATION TO THE DEBT OR 
 JUDGMENT. The equitable principle of subrogation under 
 which the surety is entitled to collateral securities held by 
 the creditor, upon payment of the principal debt, is also 
 applied in equity, to the debt itself or the judgment ob- 
 tained thereon, and to remedies upon such debt or judg- 
 ment as against the principal debtor. This equitable claim 
 of the surety is not only that of subrogation, pure and sim- 
 ple, but it also includes the right to a formal assignment of 
 the debt or judgment by the creditor. The surety, by per- 
 forming his contract of payment, upon default of his 
 principal, the latter's obligation is, as to the creditor, dis- 
 charged, but is kept alive, as between the creditor, debtor 
 and surety, for the purposes of securing the rights of the 
 last. 1 Nor will a surety upon a judgment note, lose his 
 right of subrogation to the judgment entered thereon, be- 
 cause the fact of his suretyship does not appear in the 
 recitals of such judgment. 8 The right of subrogation of 
 the surety to the judgment of the creditor upon payment is 
 not defeated by the failure to execute a formal instrument 
 of assignment by the creditor. 8 A creditor, paid by the 
 proceeds of collateral securities deposited by a surety, is 
 
 1 Knauf 's App. 91 Pa. St. 78 ; was paid in ignorance of the right of 
 Bailey v. Brownfield, 20 Ib. 41 ; subrogation. Pempsey 0. Bush. 18 
 Richter v. Cummings, 60 Ib. 441 ; Ohio St. 376 ; Magee v. Leggett, 48 
 Hill V. Manser, 11 Gratt. 522; Me- Miss. 139; Bowen v. Haskins, 45 Ib. 
 Dougald v. Dougherty, 14 Ga. 674 ; 186 ; Mitchell v. DeWitt, 25 Tex. 
 Jones v. Fincher, 15 Ind. 308; (supp.) 180; Watts v. Kinncy, 8 
 Braught v. Griffith, 16 Iowa, 26; Leigh, 27; Lowe v. Newbold, 4 
 Johnson v. Belden, 49 Ib. 301 ; Spei- Jones Eq. 212. Where the creditor 
 glemeyer v. Crawford 6 Paige, 57 ; resorts to the collaterals deposited 
 Hayes v. Ward, 4 Johns. Ch. 123 ; by the surety, he must preserve the 
 Davis v. Perrine, 4 Edw. Ch. 65 ; original debt, for in equity the sure- 
 Ellsworth v. Lockwood, 42 N. Y. 89; ty is entitled thereto. To release an 
 Hinckley v. Kreitz, 58 Ib. 583, 591 ; indorser is so to impair a debt as to 
 Fielding v. Waterhouse, 40 N. Y. ; discharge a surety. Denny v. Lyon, 
 Sup. Ct. 424; Kummel v. Lowe, 28 38 Pa. St. 98. 
 Minn. 265; Smith . Rumsey, 33 'Owen's App. 11 W. N. C. 488. 
 Mich. 183 ; Nelson v. Fry, 16 Ohio "Duffiekl t>. Cooper, 87 Pa. St. 443. 
 St. 553. Even where the judgment
 
 278 THE PARTIES TO THE INSTRUMENT. 
 
 required to preserve his original demand against the princi- 
 pal debtor for the benefit of the surety. 1 The rule is also 
 applied to a partner who upon dissolution, by assuming and 
 agreeing to pay all the debts of the firm, has become the 
 principal debtor. Where in such case, the retiring partner 
 has been obliged to pay such debts, he is entitled to sub- 
 rogation as against the defaulting partner,* and also as 
 against the creditors of such partner. 8 
 
 Under the common law, where a judgment has been 
 rendered upon the debt against the principal, and the same 
 has been paid by a surety, and where the debt itself had 
 been paid to the creditor by the surety, both judgment and 
 debt being respectively extinguished, the surety was allowed 
 no subrogation thereto. Even an assignment of such debt 
 orjudgment to a third person is ineffective to secure con- 
 tinued vitality so as to be of value to the surety. This 
 rule prevails also in certain states. Generally, the surety 
 is entitled, by statutory provisions, to an assignment of the 
 judgment against the principal debtor, where he has paid 
 the same. 4 
 
 216. THE SURETY'S RIGHTS OP SUBROGATION, WHEN 
 DEFEATED. A surety, however, may estop himself by his 
 
 1 Denny v. Lyon, 38 Pa. St. 98. takes an assignment thereof to a 
 
 1 Scott's App. 88 Pa. St.; Frou's trustee for himself, he can only 
 
 Est. 73 Ib. 459; Burnside v. Fetzner, claim as against his principal the 
 
 63 Mo. 107, 111; Crafts v. Mott, 4N. sum he had actually paid. Reed . 
 
 Y. 604. Norris, 2 M. & C. 361. Dennis v. 
 
 * Fessler v. Hickernell, 82 Pa. St. Rider, 2 McLean, 451 ; Foster . 
 
 150. Trustees, 3 Ala.430; Morrisona.Mar- 
 
 4 Jones t>. Davids, 4 Russ. 297 ; vm, 6 Ib. 767 ; Veach t>. Wicker- 
 
 Copis v. Middleton, 1 Turn. & R. sham, 11 Bush, 261; Holmes . Day, 
 
 224, 231 ; Wofflngton v. Sparks, 108 Mass. 563 ; Hammatt v. Wyman. 
 
 2 Ves.569 ; Craythornec. Swinburne, 9 Ib. 138 ; Adams v. Drake, 11 Gush. 
 
 14 Ves. 159 ; Hodgson . Shaw, 8 M. 504. No action at law in Iowa. 
 
 & K. 183; Armitage . Baldwin, 5 Johnson v. Belden, 49 Iowa, 801. A 
 
 Beav. 278 ; Jones v. Davids, 4 Russ. statute relating to sureties only is 
 
 277. Where a surety compounds a not applied to indorsers. Dibrell c. 
 
 debt owing by hi.s principal, and Dandridgc, 51 Miss. 55.
 
 SURETY'S RIGHT TO COLLATERALS. 279 
 
 acts to claim the enforcement of the judgment against his 
 principal, as where it is satisfied and discharged, by reason 
 of a compromise of the claim, brought about by the active 
 efforts of the surety himself, 1 and his subrogation to the judg- 
 ment is not permitted as against his principal, where there 
 is clear proof of an agreement of the parties that it should 
 be discharged for all and every purpose.* And laches will 
 defeat the claims of a surety to subrogation to a judgment, 
 as in a case where a surety as joint judgment debtor was 
 forced under execution to pay the whole debt, but neg- 
 lected to have the judgment assigned to his use for more 
 than a year after its payment. Meanwhile the property 
 had been sold, and the surety claimed to be subrogated to 
 the rights of the creditor under the judgment as against 
 subsequent judgment creditors. 8 
 
 217. SUBROGATION OP CREDITOR TO COLLATERAL 
 SECURITIES OF SURETY. The equitable principle of subro- 
 gation to collateral securities is enforced in favor of the 
 creditor as well as the surety. Where the surety himself 
 has received such securities from the principal debtor on 
 account of the obligation assumed, equity creates a quasi 
 trust in relation thereto, in favor of the creditor and of co- 
 sureties, until the debt be discharged. The surety has no 
 right to discharge or defeat such trust. The resort, however, 
 of the creditor for the payment of his debt to such col- 
 lateral securities held by the surety, where the former is 
 not a party to any agreement by which they have been 
 placed in the hands of the latter, is optional with him. The 
 creditor is under no obligation to rely upon such collateral 
 securities, in place of enforcing the personal obligations of 
 the principal and surety, and without his consent, he is not 
 required primarily to attempt to realize his debt from them. 
 
 1 Fielding 0. Waterhouse, 40 N. Y. * Owen's App. 11 W. N. C. 488; 
 Sup. Ct. 424. Gring's App. 89 Pa. St. 336. 
 
 * Ibid ; Harbeck v. Vanderbilt, 20 
 N. Y. 395.
 
 280 THE PARTIES TO THE INSTRUMENT. 
 
 The right of subrogation thereto is only enforced -where the 
 creditor chooses to avail himself of it. It is his privilege 
 to avail himself of such securities, and not an absolute 
 duty, of which a court of equity will require the perform- 
 ance. 1 The right to such subrogation by the creditor 
 is strictly limited to cases where the claim as against 
 the surety is vfilid and existing, and capable of imme- 
 diate enforcement ;* nor can the creditor acquire any 
 greater interest in such securities than the surety him- 
 self had. 8 Where such securities are held by the surety 
 against loss by reason of an existing liability, fixed and 
 presently enforceable, the surety may, without and before 
 payment, unless otherwise agreed, apply the securities to 
 the satisfaction of the principal debt upon which he is obli- 
 gated. To this equity the creditor is also entitled by sub- 
 rogation, and by bringing a bill in equity to enforce the 
 same is able to secure payment of the debt and to release 
 the surety. 4 
 
 The right of the creditor to such subrogation to collat- 
 eral securities is not affected by the fact that he was not in- 
 
 1 Thornton v. National Bank, 71 App. 79 Pa. St. 168; Roberts v. Col- 
 Mo. 231; Hauser v. King, 76 Va. vin, 3 Gratt. 358 ; Curry 0. McCauley, 
 731; Leibert v. Tru->, 8 Kansas, 11 Fed. Rep. 365. A surety who 
 52 ; Ohio Life Ins. Co. v. Ledyard, 8 had taken out an insurance policy 
 Ala. 866; Van Orden v. Durham, 35 on the life of his principal assecur- 
 Cal 186; in re Fickett, 72 Me. 266; ity, received the money from the 
 Pool v. Doster, 59 Miss. 258; Clark company. So far as the same was 
 v. Ely. 2 Sandf. Ch. 166; Ten Eyk not required as indemnity for the 
 v. Holmes, 3 Ib. 428; Curtis v. Tyler, surety, the proceeds were appropri- 
 9 Paige, 432; Bank of Auburn v. ated in payment of the debt. Lea. 
 Throop, 18 Johns. 505; Moses . Hinton, 5 DeG. M.& G. 823; Wright 
 Murgatroyd, Uohns. Ch. 129; Vail v. p. Morley, 11 Ves. 22; Drysdale v. 
 Foster, 4 N.Y. 312; Crosby v. Crafts, Piggott, 22 Beav. 238. 
 5 Hun, 327 ; Brown t. Ray, 18 N.H. * Constant t>. Matteson, 22 111. 546. 
 102 ; Price v. Truesdell, 28 N. J. Eq. Bush t>. Stamps, 26 Miss. 468. 
 200; Wilcox v. Fairhaven Bank, 7 * Houser t>. King, 76 Va. (15 Rep. 
 Allen, 270; Eastman v. Foster, 8 63); Constant v. Matteson, 22111 546; 
 Met. 19; Rice v. Dewey, 13 Gray, 47; Belcher . Hartford Bank, 15 Conn. 
 Kelly t>. Herrick, 131 Mass. 373; 353; New London Bankc.Lee.il 
 Owens . Miller, 29 Md. 144; Rice's Ib. 118, 122.
 
 SURETY'S BIGHT TO COLLATERALS. 281 
 
 formed at the time the contract of suretyship was entered 
 into that the surety held such securities, and therefore no 
 reliance was placed upon them in making his loan and ad- 
 vances. 1 Nor that he has not reduced his claim against the 
 principal to judgment, nor exhausted his legal remedies. 8 
 And where the security is a mortgage, it is immaterial that 
 the same is made in terms simply for the indemnity of the 
 surety. 3 Even where, before the surety is called upon to 
 pay the debt, the mortgagor has sold the land, and con- 
 veyed the estate to a third person for value. 4 And a sure- 
 ty may, upon agreement, transfer his collateral securities 
 to the creditor, enabling him to retain possession thereof 
 until the debt of the principal be paid. 6 
 
 218. THE SUBROGATION OP CREDITORS, AS AGAINST 
 PLEDGEES. The principle of subrogation to securities held 
 by sureties, or parties in the position of sureties, is applied 
 where an agent, secured by a pledge of negotiable bonds, 
 obtained a loan of money in his own name, the money being 
 handed to and used by his principal. The creditor was 
 given a right of subrogation to the collaterals, although the 
 loan was made on the credit of the agent, betwen whom and 
 the principal equities existed. The creditor was also al- 
 lowed to receive a dividend upon such securities upon a fore- 
 closure of a mortgage securing their payment. 6 The like 
 rule was applied to a guarantor of such bonds who was 
 obliged to pay the debt of the company issuing the same. 7 
 
 1 Seibert t>. True, 8 Kan. 52; Crom- Holmes, 3 Sandf. Ch. 428 ; Clark . 
 well's App. 9 W. & S. 305 ; Krame's Ely, 2 Ib. 166; Kiddle v. Bow- 
 App. 37 Pa. St. 71 ; Rice's App. 79 man, 25 N. H. 236 ; Aldrich v. Mar- 
 Ib. 168; Moorehead v. Duncan, 82 tin, 4 R. I. 520; Ohio Ins. Co. v. 
 Ib. 488; Curtis v. Tyler, 9 Paige, 431. Ledyard, 8 Ala. 166. 
 
 2 Safford v. Wade, 51 Ala. 214. * Gossin v. Brown, 11 Pa. St. 527. 
 
 * New Bedford etc. Inst. v. Fair- 5 Calkins v. Lockwood, 17 Conn, 
 
 haven Bank, 9 Allen, 75; Curtis c. 174. 
 
 Tyler, 9 Paige Ch.432; Moses w.Mur- Rice's App. 79 Pa. St. 168. 
 
 tatroyd, 1 Johns. Ch. 119 ; Phillips . 7 Penn. R. R. Co. v. Pemberton R. 
 
 Thompson, 2 Ib. 418; Ten Eyck v. R. Co. 28 N. J. Eq. 338.
 
 282 THE PARTIES TO THE INSTRUMENT. 
 
 A former guardian gave negotiable bonds as collateral se- 
 curity to his sureties to indemnify them. Both the princi- 
 pal and sureties became insolvent, and a portion only of the 
 debt was paid by the sureties. A guardian, succeeding to 
 the trust, was given the same rights as a creditor, and an 
 order was entered to have the securities sold, and the pro- 
 ceeds applied to the payment of the balance of the debt. 1 
 The trust character of collateral securities held by a surety 
 from his principal for his indemnity from liability, is not 
 changed by a sale, and the acceptance by him of promissory 
 notes from the purchasers thereof. Where such notes are 
 pledged for an antecedent debt, without any further con- 
 sideration, the pledgee is not, in New York, a holder for 
 value, in the usual course of business, and was subject to 
 the prior equities of the holders of the notes upon which 
 the surety was bound. 9 
 
 2L9. APPLICATION OP PROCEEDS FROM COLLATER- 
 ALS. The creditor holding collateral securities from the 
 principal to secure the payment of several notes is entitled, 
 in the absence of any stipulation or agreement, to apply 
 them or their proceeds, in the event that sufficient is not 
 realized to discharge the whole amount of the indebted- 
 ness to such of the notes as he may select. 8 Nor is it ma- 
 terial that some of the notes so secured bear the names of 
 sureties, while others do not. The creditor has the elec- 
 tion, subject to agreement, to apply such securities or the 
 proceeds thereof to the payment primarily of such 
 of the notes as do not bear the names of sureties. Until 
 the surety has paid the full amount of his liability on the 
 notes for which such securities are deposited, he has no 
 claim to any of the proceeds. 4 The right of elec- 
 
 1 Kelly v. Herrick, 181 Mass. 373. Allen, 270; Reed t>. Boardman, 20 
 
 Clark v. Ely, 2 Sandf. Ch. 166. Pick. 411; Richardson v Washing- 
 
 1 National Bank v. Biglcr, 83 N.Y. ton Bank, 8 Met. 230; Harding*. 
 
 61, 64; Field t. Holland, 6 Cranch, 8. Tiflft, 75 N. Y. 461 ; Allen t>. Culver, 
 
 4 Wilcox v. Fairbaven Bank, 7 8 Den. 285; Stone v. Seymour, 15
 
 SURETY'S RIGHT TO COLLATERALS. 283 
 
 tion of the creditor is not affected by the unknown 
 equities of third parties. 1 Where the creditor, how- 
 ever, holds securities from the principal debtor to 
 cover all obligations held by him, and there are several 
 sureties upon different notes, the proceeds of such 
 securities should be divided pro rata.* 
 
 The rule relative to the application of the proceeds 
 of securities held by a creditor, in the absence of agree- 
 ment, is applied in favor of sureties also. Where a 
 surety has assumed liability on several notes, for which 
 he holds security, he may apply the proceeds thereof 
 in payment of such notes as he may desire. 8 A 
 deed of trust executed by the principal debtor for the 
 benefit of a surety, was delivered to a third person, holding 
 other indebtedness against the debtor. Pii a contest be- 
 tween the two, as to the application of the proceeds arising 
 from a sale of the security, the equitable right of the surety 
 that the particular indebtedness upon which he was liable 
 should be first paid, was preferred. 4 
 
 220. THE CREDITOR'S ENFORCEMENT OF THE PRINCI- 
 PAL NOTE. The contract of the surety upon a negotiable 
 promissory note is, that the maker of the note, the princi- 
 pal debtor, will pay the same at maturity. The creditor 
 holding such notes is bound to present the same for pay- 
 ment in due course, and upon the principal's default in pay- 
 ment, the surety becomes at once liable to pay. The 
 creditor is under no obligation or duty to use special or 
 active diligence to collect the note from the principal 
 debtor in order to charge the surety, since the obligation of 
 the latter is at once to pay the debt, upon which he may 
 
 Wend. 20; Copis v. Middleton, 1 'Norton v. Plumb, 14 Conn. 
 
 Turn. & R.224; Hodgson v. Shaw, 517. 
 
 3 M. & K. 183. * Kassing v. International Bank, 
 
 1 Harding v. Tiflft, 75 N. Y. 461. 74 111. 16. 
 
 * Breidenbecker v. Lowell, 32 
 Barb. 9.
 
 284 
 
 THE PARTIES TO THE INSTRUMENT. 
 
 resort to any suit or action to which the creditor was en- 
 titled. A failure to sue the principal, although no notice 
 of the default of the debtor be sent to the surety, is not 
 sufficient to affect the liability of the surety upon the prin- 
 cipal obligation. Where there are more than two sureties 
 upon such note, the creditor may sue both or either, at his 
 pleasure. No complaint can be made by sureties, as either 
 of them may pay the debt and become entitled to be 
 subrogated to the rights, remedies, and collateral securities. 1 
 Statutory provision is made in some states that a surety who 
 fears the insolvency of his principal or other sufficient 
 equitable cause, may, by serving a proper notice upon the 
 creditor, require him to commence an action against 
 the principal debtor forthwith, upon default at maturity. 
 Where the creditor fails to perform his duty in this respect, 
 and loss results to the surety by reason thereof, as where 
 the principal debtor has in fact become insolvent, the 
 surety is discharged to the full extent of his loss.' The 
 
 1 Neal v. Freeman, 85 N. C. 352; 
 Thornton v. same, 63 Ib. 211: Deal 
 t. Cochran, 66 Ib. 269; Peppin v. 
 Bond, 5 Ired. Eq. 91 ; Schroeppel v. 
 Shaw, 3 N. Y. 446; Brick v. Free- 
 holders etc. Co. 37 N. J. L. 307; 
 Grover v. Hoppock, 26 Ib. 191 ; Mor- 
 ris Canal Co. v. Van Vorst, 21 Ib. 100; 
 Hough 0. Etna Life Ins. Co. 57 111. 
 318 ; Taylor v. Bank of Kentucky, 2 
 Marsh. 564 ; Reeves v. Pullian, 9 
 Baxt. 153 ; Pittsburgh etc. Ry. Co. v. 
 Shaeffer, 59 Pa. St. 350; Allen v. 
 Brown, 124 Mass. 77 ; Moreland v. 
 State Bank, Breesc, 203, 263. The 
 creditor is under no obligation to the 
 surety of active diligence to collect 
 the debt of his principal. Glazier v. 
 Douglass. 32 Conn. 400; Orme v. 
 Young, 3 E. C. L. S. 84; Postmaster 
 Reeder, 4 Wash. 630; Black River 
 Bank v. Page, 44 N. Y. 453 ; Wells 
 c. Mann, 45 Ib. 327 ; Strong v. Wor- 
 
 cester, 6 Vt. 536; Herrick v. Borst, 
 4 Hill , 656; Shroepfel v. Shaw, 3 N. 
 Y. 454 ; in re Babcock, 3 Story, 393; 
 Hayes v. Ward, 4 Johns. Ch. 132 ; 
 Goodman v. Litaker, 84 N. C. 8. 
 
 * Paine v. Packard, 13 Johns. 174; 
 King v. Baldwin, 17 Ib. 384 ; s c. 2 
 Johns. Ch. 554 ; Damick v. Hub- 
 bard, 27 Hun, 349 ; Rein sen v. Beck- 
 man, 25 N. Y. 552 ; Colgrove v. 
 Tallman, 67 Ib. 95 ; Hunt v. Purdy, 
 82 Ib. 486; Church v. Simmons, 83 
 Ib. 264; Toles. Adee, 81 Ib. 562; 
 Peters v. Lineinschmidt, 58 Mo. 464; 
 Cope v. Smith, 8 S. & R 110 ; Thom- 
 as v. Mann, 28 Pa. St. 520 ; Conrad . 
 Foy, 68 Ib. 381 ; King t>. Haynes, 
 35 Ark. 463 ; Ward . Stout, 32 111. 
 399 ; Bartlett v. Cunningham, 85 Ib. 
 22 ; Inning v. Fielder, 8 Bradw. 256; 
 McCoy v. Lockwood, 71 Ind. 319 ; 
 Smitli v. Clayton, 48 Miss. 66 ; 
 Caines v. Bates, 85 Mo. 427 ; Cole v.
 
 SURETY'S RIGHT TO COLLATERALS.- 285 
 
 creditor is required to press such suit against the principal 
 debtor to final judgment and execution. 1 Under such 
 statutes the notice is required to be in writing and served 
 upon the creditor, or his representative, and must be full 
 and explicit in its demand for the commencement of pro- 
 ceedings against the principal debtor. It should be so 
 worded as that the creditor must know that unless he com- 
 plies with such notice, his claims upon the surety will be 
 discharged.* 
 
 221. THE RECOVERY OF CREDITOR, AS AGAINST SURE- 
 TY. The surety's liability in any action brought by the 
 creditor against him in cases where a judgment upon such 
 debt has been entered against the principal debtor, is the 
 amount of such judgment. The sum stated in such judg- 
 ment is conclusive as to the extent of liability of the surety. 
 The proceedings by which such judgment against the prin- 
 cipal are obtained must, however, be conducted in good 
 faith, since the principal cannot enlarge the surety's liabil- 
 ity, nor change his contract by any acknowledgement or 
 admissions made at such time. If such proceedings are 
 tainted with collusion or fraud, as between the creditor and 
 principal, to the injury of the surety, equity relieves the 
 surety from the operation of the rule stated, and allows 
 him to show his real liability, irrespective of the judgment 
 enteied against the principal debtor. 8 The holder of prom- 
 Fox, 83 N. C. 463; Davis v. Sucad, sen v. Bcekman, 25 N. Y. 552; Col- 
 32 Gratt. 705. See Hickox v. Farm- grove v. Tnllman, 67 Ib 95 ; Hunt v. 
 ers' Bank, 35 Vt. 470; Harris v. Ptmly, 81 N. Y. 486; Bartlett v. 
 Newell, 42 Wis. 687. Cunningham. 85 111. 22. 
 
 'Peters. Lineinschmiclt, 58 Mo. * United States 9 Allsbniy. 4 Wftll. 
 464. 186; Limlsley v. Reid, 101 Pa. 357; 
 
 * King v. Baldwin, 17 Johns. 384 ; Sice v. El om, 20 Johns GG9 ; Stoops 
 s. c. 2 Johns.Ch. 554; Singer v. Traut- v. Wittier, 1 Mo. App. 420; Berger 
 man, 49 Barb. 182 ; Demick v. Hub- . Williams, 4 McLean 125. Contra: 
 bard, 27 Hun, 347 ; Mutual etc. Ins. Norton v. Abercrombic. 16 S. C; 
 Co. v. Davies, 56 How. 440 ; Maier. Hcllams v. Abercrombic, 15 Ib. 110; 
 Canavan, 57 Ib. 504; Russell v. ex parte Youug, L. R. 17 Ch. D.G65. 
 Weintzer, 2 Abb. N. C. 422; Rem-
 
 286 THE PARTIES TO THE INSTRUMENT. 
 
 issory notes, however, can only collect from a surety there- 
 on, what remains due on the notes after deducting the 
 amount received from the principal debtor ; ' otherwise, as 
 against the maker, since he will hold any surplus in trust 
 for the indorser or surety.* 
 
 In an action upon a penal bond, recovery may be had 
 against the principal and sureties, not only of the amount of 
 the penalty named in the bond, but also interest upon such 
 amount from the time of the breach. 8 Such interest is not 
 considered as forming part of the penalty for the breach of 
 the condition of the bond, but as damages for non-payment 
 or detention of the penalty after it has become due and pay- 
 able, namely, immediately upon breach of the condition. 
 If the obligee then receives the amount thereof, he obtains 
 the sum provided for by the contract ; if lie is paid at a 
 later time, he secures less than what the contract provides. 
 Immediately upon forfeiture of the penalty, it assumes the 
 character of a debt due and payable. 4 
 
 1 In re Pulsifer, U. 8. D. Ct. 111. 14 ter v. Carter, 4 Day, 30; Smedes v. 
 
 Fed. Rep. 247. Houghtaliug, 3 Caines, 48 ; Clark v. 
 
 1 In re Pulsifer, supra; ex parte Bush, 3 Cow. 151 ; Harris v. Clapp, 
 
 Talcott, 9 N. B. R. 502; in re Weeks, 1 Mass. 307; Bank of Brighton*. 
 
 13 Ib. 263; in re Ellerhorst, 5 Ib. 144; Smith, 12 Allen, 243. 
 Downing v. Traders' Bank, 11 Ib. * Wyman v. Robinson, 73 Me. 584; 
 
 871. United States v. Arnold, 1 Gall. 348 
 
 3 Peril v. Dallis, 2 Dallas, 253; (Story, J.); Gainsforth v. Griffith, 1 
 
 Branierd v. Jones, 18 N. Y. 35; Car- Baund. 51, n. 1.
 
 SURETY'S COLLECTION OF COLLATERALS. 287 
 
 CHAPTER XXII. 
 
 THE SURETY'S COLLECTION OF COLLATERALS. 
 
 222. The surety's enforcement of collaterals from principal. 
 
 223. Equitable aid to surety in such enforcement. 
 
 224. The surety's recovery upon principal's collateral promise. 
 
 225. The rule when security is for indemnity merely. 
 
 226. Surety's right of set-off against insolvent principal. 
 
 227. The surety's obligations as to collateral securities. 
 
 228. The surety's action at law against principal debtor. 
 
 229. Surety's right to lien of judgment as against principal. 
 
 222. THE SURETY'S ENFORCEMENT OF COLLATERALS 
 FROM PRINCIPAL. The surety who has received securities 
 from his principal under some new and independent agree- 
 ment for indemnity and payment, as against the liability in- 
 curred by him upon the principal note, is entitled to enforce 
 such collateral contract upon the maker's default, even be- 
 fore payment of the debt. The liability of the surety to 
 pay the creditor must be fixed and certain, and the collat- 
 eral contract of the principal with the surety must be to 
 pay the debt, and not one of indemnification merely. The 
 liability of the principal to pay the surety, where bound 
 upon bond or covenant, is not affected at law by the equita- 
 ble right of the principal that the money so paid shall be 
 applied in payment of the debt. The obligation of the 
 principal to the surety upon his independent contract arises 
 upon default in payment of the principal debt, and is with- 
 out limitation, and the securities given may be enforced 
 without a prior payment of the debt. 1 A mortgage or deed 
 
 1 Locke v. Homer, 131 Mass. 93 ; Smith v. Pond, 11 Gray, 234 ; Bet- 
 Furnace v. Durgin, 119 Ib. 508 ; tune v. Wallace, 2 Rich. 80 ; Stout .
 
 288 THE PAKTIES TO THE INSTRUMENT. 
 
 of trust is a common form of security given by a principal 
 debtor for the benefit of a surety and is equally available 
 whether executed by the debtor himself, or is the mortgage 
 of some third person held by the debtor, and by him as- 
 signed and delivered to the surety. Where a mortgage or 
 deed of trust is conditioned to indemnify and to save a 
 surety harmless, and to pay the debt upon maturity, the 
 failure of the mortgagor and principal to pay constitutes a 
 breach of the condition, and the surety is entitled to enforce 
 the security in equity by foreclosure and sale. The contin- 
 gent liability of the surety is a valuable and sufficient con- 
 sideration to support the transfer or execution of such mort- 
 gage, and the foreclosure and sale of the property, and 
 appropriation of the proceeds in satisfaction of his liabilities 
 as surety. Nor is it material under such mortgage securi- 
 ties, that the surety shall have first paid the principal debt 
 to entitle himself to the aid of equity. 1 
 
 223. EQUITABLE AID TO SURETY IN SUCH ENFORCE- 
 MENT. Courts of equity afford relief to sureties upon col- 
 lateral contracts and securities received by them from the 
 principal debtor, upon the default of the latter to discharge 
 
 Folger, 34 Iowa, 71 ; Churchill v. of his debt ; but at law the plaintiff 
 
 Hunt , 3 Denio, 321 ; in re Negus, 7 is entitled to be placed in the samo 
 
 AVend. 499; Port v. Jackson, 17 situation under this agreement as if 
 
 Johns. 239, 479, 482 ; Trinity Church he had paid the money to the payee 
 
 v. Higgins, 48 N. Y. 532, Belloni v. of the bill." Baron Parke, in Loose- 
 
 Freeborn, 63 Ib 383 ; National Bank more v. Radford, 9 M. & W. C57 ; 
 
 v. Biglcr, 83 Ib. 51, 61; Lathrop 0. Carr v. Roberts, 5 B. & Ad. 78; 
 
 Attwood, 21 Conn. 117; Redfleld . Smith v. Howcll, 6 Exch. 930. 
 
 Haight, 27 Ib. 31 ; Gage v. Lewis, 68 ' Baven v. Haskins, 45 Miss. 186 ; 
 
 III. 604; 'Hodgson v. Hell, 7 Term. R. Goodhcart v Johnson, 88 111. 61, 
 
 97; Holmes v. Rhodes, 1 B. & P. Moore v. Topliff, 107 Ib. 241, 
 
 638; Warwick v. Richardson, 10 M. 249; Irick v. Black, 17 N. J. Eq. 
 
 & W. 284; Lethbridge v. Mytton, 2 189; Gibbs v. Maynard, Paige'sCh. 
 
 B. & Ad. 772; Penny v. Foy, 8 B. 258 ; Butler v. Ladue, 12 Mich. 180 ; 
 
 & C. 11 ; s. c. 2 M. & Ry. 181. Rockfellcr v. Donnelly. 8 Cowen, 
 
 "The defendant may perhaps have 628; Norton v. Reid, 11 S. C. 593; 
 
 an equity that the money he may Hellams v. Abcrcrombic, 15 Ib. 110. 
 pay shall be applied in discharge
 
 SURETY'S COLLECTION OF COLLATERALS. 289 
 
 the debt when clue and payable. In order effectively to aid 
 the surety to discharge himself from his liability, the cred- 
 itor as well as the principal debtor may be made a party to 
 the suit. The former, being present in court to receive 
 payment, the whole litigation may thus be disposed of. 1 
 And where the principal debtor has deceased, his represent- 
 atives may be brought into a court of equity with the cred- 
 itor, and the same relief obtained." Nor will a court of 
 equity require a release by a surety of collateral securities 
 received from the principal as a preliminary to proof of the 
 debt against his estate. 1 
 
 Where the condition of a mortgage is to save the mort- 
 gagee harmless from any loss by reason of his entering into 
 a contract of suretyship, and to pay the debt upon maturity, 
 the failure of the mortgagor and principal to pay is a breach 
 of such condition. Nor will a power of sale contained in 
 such mortgage, to arise only upon the damnification of the 
 surety, affect the rights of the latter to foreclosure and sale 
 upon a breach of the covenant, although the principal debt 
 remains unpaid. 4 A bond or mortgage containing a prom- 
 ise to pay as well as an indemnity covenant, extends to a 
 liability jointly incurred by the surely with the principal 
 for money borrowed to pay the note for which such bond 
 or mortgage was given as security, and by which such note 
 was actually paid.* 
 
 224. THE SURETY'S RECOVERY UPON PRINCIPAL'S 
 COLLATERAL PROMISE. The surety's right of recovery of 
 the whole amount of his liability upon the principal ob- 
 ligation, before payment thereof, by the collection of col- 
 
 1 Gibbs v. Menard, 6 Paige's Ch. West v. Bank of Rutland, 19 Vt. 
 
 258 ; Irick t>. Black, 17 N. J. Eq. 403. 
 
 189 ; Hellams v. Abercrombie, 15 Ib. 4 Butler v. Ladue, 12 Mich. 180 ; 
 
 110 , Baven v. Haskins, 45 Miss. 186; Rockfeller v. Donnelly, 8 Cowen, 628. 
 
 Moore v. Topliff, supra. 6 Nesbit v. Worts, 37 Ohio St. 
 
 * Woodbridge v. Norris, L. R. 6 378. 
 Eq, 410. 
 
 19
 
 290 THE PARTIES TO TLIE INSTRUMENT. 
 
 lateral securities received from the principal under contracts 
 of indemnification and to pay the debt, 1 is supported in 
 cases where bonds with covenants to save the makers of 
 negotiable promissory notes payable to third persons harm- 
 less and indemnifying them therefrom and to pay the 
 notes, are given. 9 Upon the execution of a joint note, both 
 parties appearing as principals, but one being a surety, the 
 principal debtor gave a bond to the surety covenanting to 
 pay the amount of the note to the payee thereof at ma- 
 turity. Upon default, a recovery was permitted the surety 
 upon the bond to the whole face value of the note, although 
 no payments had been made thereon by him. 8 The rule is 
 applied where the person standing in the relation of surety 
 gives his own notes payable in the future in payment of the 
 debt. A bond given by one partner upon the dissolution of 
 the firm covenanted to indemnify and save harmless the 
 retiring partner, and " to pay and satisfy " the debts of the 
 partnership. Default occurring in such covenant, the re- 
 tiring partner was allowed to recover upon the bond 
 damages to the amount of outstanding indebtedness, al- 
 though notes had been given for it. 4 
 
 1 Wicker. Hoppock, 6 Wall. 94; * Churchill . Hunt, 3 Den. 321; 
 
 Lathrop v. Attwood, 21 Conn. 117; Trinity Church v. Higgins, 48 N Y. 
 
 Redficld v. Haight, 27 Ib. 31; Gage 532; Belloni v. Frecborn, 63 Ib. 383: 
 
 v. Lewis, 68 111. 604; Stout. Folger, Hart v. Folger, 34 Iowa, 71; Smith 
 
 34 Iowa, 71 ; Locke v. Homer, 131 . Pond, 11 Gray, 234. 
 
 Mass 93; Furnace. Durgin, 119 Ib. 3 Looscmore v. Radfbnl, 9 M. & 
 
 508; Smith v. Pond, 11 Gray, 234; W. 657. 
 
 Churchill v. Hunt, 3 Denio, 321; in 4 Lathrop v. Atwood. 21 Conn. 
 
 re Negus, 7 Wend. 799; Port. Jack- 117; Redfield v. Haight, 27 Ib. 31 ; 
 
 json, 17 Johns. 239. 479; Trinity Gage v. Lewis, 68 111. 604; In re 
 
 Church. Higgiiis. 48 N.Y. 532; Bel- .Negus, 7 Wend. 499; Locke . 
 
 loni. Freeborn, 63Ib383; Bothune Homer, 131 Mass. 93; Robinson v. 
 
 . Wallace, 2 Rich. 80; Loosemorc. Robinson. 24 L T. Rep 112; Loose- 
 
 Radford, 9 M. & W. 657; Warwick more . Radford, 9 M. & W. 657, 
 
 . Richardson, 10 Ib. 284; Leth- Lethbridge v. Myttoa, 2 B. & Ad. 772. 
 bridge . Mytton, 2 B. & Ad. 772; 
 Carr v. Roberts. 5 B. & Ad. 78 ; Smith 
 v. Howell, 6 Exch. 730; 1 Saund. 
 116, .
 
 SURETY'S COLLECTION OF COLLATERALS. 291 
 
 The enforcement of collateral securities, without pay- 
 ment of the debt, was allowed where an indemnity bond to 
 save harmless and to pay the money was given upon a 
 misappropriation of trust funds by one of two trustees to 
 the other. The trustee, or his representatives, recovered 
 from the fraudulent trustee the amount of the bond. 1 The 
 recovery of the probable loss of a surety was permitted 
 without any payment having been made, where a mortgage 
 was given as security against loss by reason of indorsement 
 of notes for the mortgagor, the stipulation in the mortgage 
 security being that the mortgagors should " pay the sum of 
 money above secured."* A third person holding securities 
 of the principal in trust for the benefit of a surety, is re- 
 quired in equity to apply the proceeds of the same in pay- 
 ment of the debt, upon default of the principal, although 
 the surety has not actually been damnified. 8 
 
 225. THE RULE WHERE SECURITY is FOR INDEMNITY 
 MERELY. A surety who receives from the principal debtor, 
 upon entering into the contract of suretyship, or subse- 
 quently, collateral securities as against his liability on the 
 principal obligation, the condition of such securities being 
 to indemnify and save him harmless but with no affirmative 
 promise to pay, is not entitled to relief by the enforcement of 
 such securities until damnified. Under this rule, payment 
 of the debt is generally required before a court of equity 
 will aid the surety in rendering the mortgage or other 
 security available for his indemnification. Until the surety 
 has discharged his personal obligation upon the principal 
 note, the debtor having failed to pay the same, he has 
 suffered no loss. Where proceedings, however, have been 
 taken against the surety so that in order to save his own 
 property from execution and sale, resort must be had to the 
 
 1 Warwick v. Richardson, 10 M. * Daniel v. Joyner, 3 Ired. Ch. 
 & W. 284. 513. 
 
 'Gunel v. McCue, 72 Ind. 34; 
 Wright v. Whiting, 40 Barb. 235.
 
 292 THE PARTIES TO THE INSTRUMENT. 
 
 securities held from the principal debtor, the equity of the 
 surety is preferred. In such cases, the property of the 
 principal debtor thus pledged for the indemnification of the 
 surety is first exhausted, if it can be done without injury or 
 loss or delay to the creditor. 1 Nor will a court of equity 
 give relief to a surety seeking to enforce payment from the 
 principal upon securities given by him, where there is 
 another equity of equal weight which would suffer by such 
 enforcement.* Nor will relief be given in the case of a surety 
 in a bond to the government, where a breach of the condition 
 operates as a forfeiture of the whole penalty of the bond, as a 
 court of equity will not lend its aid to enforce a forfeiture or 
 penalty against the principal until the surety has become ab- 
 solutely fixed with the payment of such penalty by the re- 
 covery of judgment against him. 8 
 
 226. A SURETY'S RIGHT OF SET-OFF AGANST INSOL- 
 VENT PRINCIPAL. An insolvent principal is not allowed to 
 enforce the collection of a debt which is owing to him by a 
 surety without first indemnifying the latter upon his obli- 
 gations. A surety lias, as against his principal, the rights 
 of a creditor ; and upon the insolvency of the principal, 
 may retain any funds or securities in his possession belong- 
 ing to his principal by way of indemnity against his liabil- 
 ity. 4 A court of equity will upon application by a surety, 
 restrain a principal from proceeding at law to enforce the 
 collection of a debt owing by such surety, where the latter 
 is obligated for the principal by his contract to an amount 
 
 1 National Bank v. Bigler, 88 N. Johns 249; Rockfellow v. Donnelly ; 
 
 Y. 53, 61 ; Trinity Church v. Hig- 8 Cow. 628. 
 
 gins, 48 N. Y. 537 ; Shaw v. Loud. * Loosemore . Radford, 9 M. & 
 
 12 Mass. 449 ; Oilman v. Moody, 43 W. 657 ; Lethbndge v. Mytton, 2 B. 
 
 N. H. 243 ; Post v Tradesmen's & Ad. 772. 
 
 Bank, 28 Conn. 420 ; Shepard v. * Gibbs t>. Menard, 6 Paige's Ch. 
 
 Shepard, 6 Ib. 37 ; McLean v. Rags- 258. 
 
 dale, 31 Miss. 701; Butler v. Ladue, * Mattingly . Sutton, 19 W. Va. 
 
 12 Mich. 180; Powell v. Smith, 8 19.
 
 SURETY'S COLLECTION OP COLLATERALS. 293 
 
 in excess of the debt, unless upon full indemnification. 1 
 The insolvency of one of the parties is sufficient to give 
 jurisdiction to enforce an equitable set-off, which is allowed, 
 although the debt of the principal to the surety be not 
 due.* A surety indebted to his principal may, upon equit- 
 ible grounds, require him to pay the debt as soon as 
 it matures, and may file a bill to compel the appropriation 
 of the amount he owes the principal to discharge his obliga- 
 tion to the creditor. 8 A payment by a surety to the creditor 
 may be set off in an action by the principal against such 
 surety, although not made until after suit brought. 4 An 
 assignee of a judgment obtained by a principal against a 
 surety in the cases mentioned, stands in no better position 
 than his assignor.' 
 
 227. THE SURETY'S OBLIGATIONS AS TO COLLATERAL 
 SECURITIES. A surety who has received collateral securi- 
 ties from his principal to protect him in the obligations in- 
 curred, is required, upon the discharge of the debt by the 
 principal to return the same to the pledgor. Mere techni- 
 cal objections are not allowed to be set up as a ground upon 
 which to refuse to make such re-transfer. 6 The return of 
 such securities, however, cannot be demanded until the 
 contract obligations of the surety upon the principal debt 
 have been satisfied, and the surety fully released. 1 Only 
 fraud or gross negligence sufficient to create a presumption 
 of fraud, will charge sureties who have received collateral 
 securities from their principals with their loss. Such charge 
 is only made where it would be unjust and inequitable to 
 the principal were the sureties not so charged.* 
 
 1 Abbey v. Van Empen, 1 Freem. St. 475 ; Beaver v. same, 23 Ib. 166; 
 
 Ch. 273. Brittain . Quitt, 1 Jones Eq. 328. 
 
 'Lindsay t. Jackson, 2 Paige, * Haltingly. Button, 19 W.Va. 19. 
 581 ; Simpson v. Hart, 14 Johns, 63; < Blackford v. Brown, 34 Mich. 4. 
 Mattingly v. Sutton, 19 W. Va. 19. 7 Jewett v>. Warren, 12 Mass. 300; 
 
 1 Haltingly v. Sulton, supra. Vest v. Green, 3 Mo. 219. 
 
 4 Thompson v. McClelland, 29 Pa. Wells v. Wells, 53 Vt. 1.
 
 294 THE PARTIES TO THE INSTRUMENT. 
 
 In the absence of a special agreement between the prin- 
 cipal debtor and surety, the mere receipt by the latter of 
 collateral security in fulfilment of a promise of indemnifica- 
 tion, whether express or implied, is not sufficient of itself 
 to discharge the principal from his obligation to the surety 
 to pay the debt al maturity. 1 Where such security proves 
 worthless, a surety may, upon the equitable terms of pay- 
 ment of the debt, proceed at once to an action at law to re- 
 cover the amount thus paid. 8 But a surety holding collat- 
 eral security from his principal who has neglected to avail 
 himself of the proceeds thereof to pay the debt, and has 
 suffered his own property to be sold at a great sacrifice, 
 upon an execution issued upon the principal debt, is not 
 entitled to maintain an action against the principal for his 
 special damage. 8 
 
 228. THE SURETY'S ACTION AT LAW AGAINST PRIN- 
 CIPAL DEBTOR. No recovery at law as against his principal 
 is permitted the surety until he has himself first paid the 
 debt or judgment rendered thereon, unless by an express 
 agreement giving a right of action to the surety before 
 payment. 4 The surety's right of action at law as against his 
 principal accrues at the time of payment of the principal 
 debt, from which time the statute of limitations begins to 
 run. 6 Nor will any tiling less than a payment and satisfac- 
 tion of the whole amount of the principal debt be sufficient, 
 as a surely is not allowed to sue his principal as often as he 
 chooses to pay a portion of the debt which, upon the prin- 
 
 1 Cornwall v. Gould, 4 Pick. 444. den, 2 Scam. 257; Lcabo . Goodc, 
 
 Coburn v. Parker, 11 Gray. 335. 67 Mo. 126; Hearne v. Keath, 63 Ib. 
 
 Vance & Lancaster, 3 Hay 84. Hellams v. Abcrcrombic, 15 S. 
 
 (Tenn.) 130. C. 110; Peters v. Barnhill. 1 Hill, 
 
 4 Morgan . Smith, 70 N. Y. 537; 234 ; Stinson v. Brennan, Cliev. 16. 
 
 Powell v. Smith, 8 Johns. 249 ; El- Peacock v. Jeffrey, 1 Taunt. 426. 
 wood v. Diefendorf, 5 Barb. 398; * Loughbridge v. Bowland, 52 
 
 Trotter v. Strong, 63 111. 272 ; Darst Miss. 546; Bonham v. Galloway, 13 
 
 v. Bates, 51 Ib. 439; Bcnham v. 111.68; Shepard t>. Ogden, 2 Scam. 
 
 Galloway, 13 Ib. 68 : Skcpard . Og- 257.
 
 SURETY'S COLLECTION OF COLLATERALS. 295 
 
 cipal's default, he is bound to pay in full. 1 Where a judg- 
 ment is entered against himself and the principal, and the 
 surety has paid the same, he may sue the principal at law, 
 although entitled to an execution upon the judgment on 
 the principal note. 8 No rights are acquired by payments 
 made by a surety under a mistaken belief that he was liable, 
 nor will they be sufficient to support an action at law against 
 the principal debtor, 8 nor where such surety has given his 
 own promissory notes, on time, unless he shows that they 
 have been paid, or that he has means to pay them at matur- 
 ity. 4 The rule is the same where the payment of such new 
 notes are secured by mortgage, unless the creditor has 
 received the same in full satisfaction of his claim against the 
 principal debtor.* The surety's recovery is generally re- 
 stricted to the amount he has actually paid to discharge the 
 debt and costs. 6 No action, however, can be maintained to 
 enforce an indemnity against a liability which has not arisen, 
 and which may never exist. 7 
 
 It is a good defense to an action at law by a surety for 
 money paid to his principal's use, that the defendant offers 
 to show that he has assigned, in pursuance of an agreement 
 with plaintiff and other sureties, the whole of his property 
 in consideration of being exonerated from all liabilities, and 
 to be subject to no further claims growing out of such con- 
 tract of suretyship. An agreement to this effect constitutes 
 a good accord and satisfaction, and is supported as a com- 
 promise, executed, and with evidence to sustain it. 8 A 
 
 1 Jones v. Trimble, 3 Rawle, 381. Bormey v. Seeley, 2 Wend. 481; Mor- 
 
 * Kimmel v. Lowe, 28 Minn. 265; gan v. Smith, 70 N. Y. 537. 
 Lange v. Peiley, 47 Mich. 352. 'Hughes . Indian Mines Co., L. 
 
 8 Bancroft v. Abbott, 3 Allen, 524. R. 20 Ch. D. 561 ; Lloyd v. Dimmack, 
 
 4 Lynch v. Hancock, 1 4 S. C. 66. L. R. 7 Ib. 398. Otherwise, as to an. 
 
 * Witherby v. Mann, 11 Johns. existing liability. Phene V. Gillian, 
 518 ; Bormey . Seeley, 2 Wend. 5 Hare, 1, 12. 
 
 481. Lange v. Perley, 47 Mich. 352; 
 
 Hearne v. Keath, 63 Mo. 84; Pulliam B.Taylor, 50 Miss. 251; Bull 
 
 Eggeshall v. Ruggles, 62 111. 401; c. Bull,43 Conn. 455; Marvin 0. Treat,
 
 296 THE PARTIES TO THE INSTRUMENT. 
 
 judgment was obtained against a principal debtor and sure- 
 ties on a note, and the recovery being less then expected, 
 the creditor obtained an indictment of perjury against the 
 principal. Subsequently the felony was compounded by 
 the transfer to him of a note of a third person, being the 
 whole property of the debtor. The surety's liability on the 
 judgment remaining unaffected, a court of equity required 
 the proceeds of the note to be appropriated to the payment 
 of the judgment, the surety being without part in the 
 illegal transaction. 1 
 
 229. SURETY'S RIGHT TO LIEN OP JUDGMENT AS 
 AGAINST PRINCIPAL. A surety who has paid a judgment 
 entered against him by a creditor upon his obligation for his 
 principal, is entitled to be subrogated for his indemnity to 
 the lien of the judgment upon his principal's land. The 
 rule was applied where separate judgments had been entered 
 at different terms of a court, one against the principal, and 
 the other against the surety, and subsequently ;i further 
 judgment was entered in another state upon the record of 
 the judgment rendered against the surety. This last judg- 
 ment was paid by the surety, who was allowed subrogation 
 to the judgment lien of the creditor as against the land of 
 the principal on the first judgment.* A surety was allowed 
 where several judgments had been obtained against both 
 principal and surety for the same debt, and the latter had 
 paid the judgment against himself, whereupon the sheriff 
 
 37 Conn. 96; Blinn v. Chester, 5 Day, "VVaysdall v. Duer, 3 Den. 410; La 
 359; Eaton v. Lincoln, 13 Mass. 424; Farge v. Herter, 11 Barb. 171 ; Wat- 
 Peck v. Davis, 19 Pick. 490 ; Brooks kins . Inglesby, 5 Johns. 386; Ren- 
 t>. "White, 2 Met. 283 ; Tuttle v. same, ard v. Fuller. 4 Bosw. 107; Luding- 
 12 Ib. 551 ; Douohoe t>. Woodbury, ton v. Bell, 77 N. Y. 138 ; Boyd v. 
 6 Cush. 149; Bigelow v. Baldwin, 1 Hind. 1 H. & N. 947 ; Good . dices- 
 Gray, 245; Ball v. Wyett, 99 Mass. man, 2 B. & Aid. 328; Mellon v. 
 838 ; Guild t>. Butler, 127 Ib. 386 ; Goldsmith, 29 E. L. & E. 241. 
 Savage . Everman, 70 Pa. St. 315; ' Breese . Schuler, 48 111. 429. 
 McCreaiy v. same, 5 Gill. & J. 147 ; Bank . Allen, 76 Va. 200. 
 Mellen t>. Goldsmith, 47 Wis. 573 ;
 
 SURETY'S COLLECTION OF COLLATERALS. 297 
 
 entered satisfaction on both executions, to vacate such satis- 
 faction of the judgment against his principal, and to enforce 
 it against his estate. 1 Generally judgments rendered in one 
 state upon judgments previously rendered in another state, 
 merge the first judgment, so that a surety has no right upon 
 payment to be subrogated to the first judgment as it is 
 extinguished. 9 
 
 1 Perkins v. Kershaw, 1 Hill's Ch. Beebe, 7 Eng. (Ark.) 549; Frazicr v. 
 
 (S. C.) 344. McQueen, 20 Ib. 68 ; Hannab . Guy, 
 
 J Gould v. Hayden, 63 Ind. 443; 3 Bush, 91;Denegrc, Ham, 13 Iowa, 
 
 Cook v. Armstrong. 25 Miss. 63; 240 ; Bank of U. S. . Pattern, 5 How. 
 
 Purdy v. Doyle, 1 Paige, 558; Chitty 200. 
 e. Glenn, 3 Monr. 424; Whiting t>.
 
 THE PARTIES TO THE INSTRUMENT. 
 
 CHAPTER XXIII. 
 
 CONTRIBUTION BY SURETIES WITH COLLATERALS. 
 
 230. Contribution as to collateral securities by co-sureties. 
 
 231. Surety with collaterals a trustee for co sureties. 
 
 232. Holding collaterals, no bar to suit for contribution. 
 
 233. The surety's right to collateral securities of co-sureties. 
 
 234. Limitation and waiver of right of contribution. 
 
 235. Application of proceeds of cosurety's securities. 
 
 236. The right of contribution where part only of debt paid. 
 
 237. Contribution between accessory sureties. 
 
 238. The surety's action at law for contribution. 
 
 230. CONTRIBUTION AS TO COLLATERAL SECURITIES 
 BY CO-SURETIES. Contribution between co-sureties is 
 founded upon the maxim " Equality is equity," and rests 
 upon natural justice. Persons holding the relations of co- 
 sureties stand upon a common ground of interest and right, 
 and are entitled to contribution as well in the application of 
 collateral securities given by the principal debtor to one or 
 more of such co-sureties, as to contribution from them in 
 payment of the principal debt. The claim of sureties to the 
 benefit of collateral securities held by a co-surety is founded 
 upon principles of equity governing the relations of co-sure- 
 ties to one another. The right is given independently of 
 any contract, or of the intentions of the principal debtor 
 giving and surety receiving such securities ; for the right to 
 contribution from the co-surety holding such collaterals is 
 equally as strong where they are given for the special benefit 
 of such co-surety as where given generally. The principal 
 debtor is not permitted, while the principal obligation 
 remains unpaid, and the liabilities of sureties to each other 
 unsettled, to cast a greater burden upon one or more sureties
 
 CONTRIBUTION BY SURETIES. 
 
 299 
 
 by securing the others, when all at the inception of the un- 
 dertaking stood upon an equal footing. The securities the 
 principal puts in the power of one surety for his own relief 
 constitute a quasi trust fund for the indemnity of all his co- 
 sureties. 1 
 
 231. SURETY WITH COLLATERALS A TRUSTEE FOR 
 CO-SURETIES. One of two or more co-sureties who holds 
 collateral securities from the principal debtor to indemnify 
 him in his obligations as surety, is chargeable with a quasi or 
 secondary trust concerning the same for the benefit of the 
 co-sureties. In connection therewith he is required to act 
 in good faith ; and if, by fraudulent dealings or gross negli- 
 gence amounting to fraud, such securities are lost or 
 rendered valueless, it is a good defense pro tanto against 
 any suit for contribution by such surety. 1 A surety may by 
 
 1 Logan v. Talcott, 59 Cal. 652; 
 Scribner v. Adams, 73 Me. 541; 
 Steele v. Mealing, 24 Ala.285; Taylor 
 v. Morrison, 26 Ib. 728; Monson . 
 Drakely, 40 Conn. 552; Robertson v. 
 DethcM-agc, 82 111. 511 ; Paul v. Berry, 
 78 Ib. 158; Salyers v. Ross, 15 Ind. 
 130; Siebert v Thompson, 8 Kan. 
 65 ; Batchelder v. Fi>k, 15 Mass. 464; 
 Chaffee v. Jones, 10 Pick. 260; Hood 
 v. Lcland, 1 Met. 387; McCunc v. 
 Bolt, 45 Mo. 174; State . Berning, 
 74 Ib. 98; Nally v. Loner, 56 Mel. 5G7; 
 Smith v. Conrad, 15 La. Ann. 594; 
 Brown v. Ray, 18 N.H. 102; Paulin 
 V. Kaighn, 27 N. J. L. 503; s. c. 29 
 Ib. 480; Hall v. Robinson, 8 Ired. L. 
 56; Bell v. Jasper, 2 Ired. Ch. 597; 
 Leury v. Cheshire, 3 Jones Eq. 170; 
 Campbell v, Mesier, 4 Johns. Ch. 334; 
 Elwood v. Diefendorf . 5 Barb. 398 ; 
 Norton v. Cooms, 6 N. Y. 33 ; Wells 
 0. Miller. 66 Ib. 255 ; Armitage v. 
 Puliver, 37 Ib. 494 ; Sayles v. Sims, 
 73 Ib. 551 ; Hinckley *. Kreitz, 58 
 Ib. 543 ; Butler v. Birkey, 13 Ohio 
 
 St. 514; McCrory . Parks, 18 Ib. 1; 
 Agnew v. Bell, 4 Watts, 31; McMa- 
 hon v. Fawcett, 2 Rand. 514; Mit- 
 chell v. Bass, 24 Tex. 392; Miller v. 
 Sawyer, 30 Vt. 412; Aldrich . Hop- 
 good, 39 Ib. 617; Mayhew v. 
 Crickett, 2 Swanst. 198 ; Craythorne 
 v. Swinburne, 14 Ves. 160; Swain v. 
 Wall, 1 Rep. Ch. 149 ; Knight v. 
 Hughes, Mood. & M. 247; Deering 
 v. Winchelsea, 2 B. & P. 270; Steel 
 v. Dixon, L. R. 17 Ch. D. 825. 
 
 8 Green v. Millbank, 56 How. 382; 
 Fielding v Waterhouse, 40 N. Y. 
 Supr. Ct. 414; Paiilin v. Kaighn, 29 
 N. J. L. 480 ; Schmidt v. Coulter, 
 6 Minn. 492; Taylor v. Morrison, 26 
 Ala. 728 ; Roberts v. Sayer, 6 Monr. 
 188; Ramsey v. Lewis, 30 Barb. 403; 
 Morrison v. Poyntz, 7 Dana, 307. 
 Where he sells the securities, and 
 fails to collect the proceeds. Chilton 
 v. Chapman, 13 Mo. 470. Taylor v. 
 Morrison, 26 Ala. 728; Hall v. Rob. 
 inson, 8 Ired. 56 ; Cheeseborough v. 
 Millard, 1 Johns. Ch. 409.
 
 300 THE PAETIES TO THE INSTRUMENT. 
 
 his default in this respect estop himself from asserting an 
 equitable right to contribution which otherwise he might 
 have as against co-sureties. 1 The release or surrender by a 
 surety of a mortgage or other security given by the principal 
 debtor to one of two or more sureties without the consent 
 of other co-sureties, operates as a waiver of the right to con- 
 tribution to the extent at least of the value of the securities 
 so released or surrendered. 8 An agreement by a principal 
 debtor under which he has deposited funds with a person who 
 has signed notes with him as surety, that the same shall be 
 applied to the payment thereof, cannot be revoked after the 
 negotiation of such notes for value. Upon a failure of the 
 surety to apply the money as agreed co-securities are dis- 
 charged of any claim to contribution. 8 Such surrendered 
 securities are estimated at their face value, unless sliown to 
 be of less value. 4 
 
 232. HOLDING COLLATERALS, NO BAR TO SUIT FOR 
 CONTRIBUTION. The claim of the surety to contribution 
 from his co-sureties is not defeated by his mere receipt of col- 
 lateral securities from the principal. Upon payment of his 
 aliquot portion of the debt by a co-surety, the latter is 
 entitled to contribution from the securities held by his co- 
 surety. 6 This relief, however, is granted only upon 
 equitable terms. A surety obtaining indemnity for a valu- 
 able consideration paid, is not required to extend the 
 benefits arising therefrom to a co-surety, without the latter 
 first pays his proportion of the consideration. If an offer 
 of security be made by the principal debtor upon condition 
 that the sureties shall execute a release, and one surety only 
 accepts, the other refusing, although the latter may require 
 
 1 Steel v. Dixon, L. R. 17 Ch. D. Morrison . Taylor, 21 Ala. 779 ; 
 
 832. Mandigo v. same. 26 Mich. 349. 
 
 * Goodloe v. Clay, 6 B. Mon. 236 ; 4 Paulin v. Kaighn, supra. 
 
 Ramsey t>. 'Lewis, 80 Barb. 403 ; 6 Paulin . Kaighn, 29 N. J. L. 
 
 Taylor v. Morrison, 26 Ala. 728 ; 480 ; Johnson's Admr. v. Vaughan, 
 
 Paulin . KaSghn,29 N. J. L. 480. 65 111. 425.
 
 CONTRIBUTION BY SURETIES. 301 
 
 that the proceeds of the securities shall be applied in reduc- 
 tion of the common debt, such proceeds can in no other way 
 enure to his benefit. Payment of the debt would discharge 
 the former surety from contribution if it amounted to his 
 proportion of the common liability. 1 Co-sureties are not 
 discharged by a mere exchange of securities by a surety re- 
 ceiving the same from the principal debtor if made in good 
 faith, although without the knowledge of co-sureties. 1 
 
 Where, however, the securities given to one of two or 
 more sureties by the principal debtor are of sufficient value 
 to reimburse the surety holding the same upon payment of 
 the debt, equity requires him to enforce such securities 
 rather than to bring an action or suit for contribution 
 against his co-sureties.* Where such securities upon 
 realization prove to be less in value than the debt, the 
 surety paying the debt, is entitled to contribution as to the 
 excess paid. 4 
 
 233. THE SURETY'S RIGHT TO COLLATERAL SECURI- 
 TIES OF CO-SURETIES. As affecting the rights of co-sure- 
 ties to contribution, it is immaterial whether the collateral 
 securities held by a surety from the principal debtor are 
 received in virtue of a bargain made at the time of the 
 entry into the relations of suretyship or are given subse- 
 quently. The rule is that whatever goes to diminish the 
 total burden of such sureties must be brought as between 
 the co-sureties into " hotch-pot." 4 Nor is the claim to con- 
 tribution affected by the fact that the co-sureties, upon 
 entering into the contract, were uninformed of the agree- 
 
 1 White v. Banks, 21 Ala. 705. v. Bray, 10 Pa. St. 519 ; Hall v. Rob- 
 
 * Carpenter v. Kelly, 9 Ohio, 106. inson, 8 Ired. 56; Miller v. Sawyer, 
 8 Morrison r>. Taylor, 21 Ala. 779. 30 Vt. 412; McCune v. Belt, 45 Mo. 
 4 Currier v. Fellows, 27 N. H. 366; 174 ; Whipple v. Briggs, 28 Vt. 617; 
 
 Batcheldor v. Fisk, 17 Mass. 464 ; Fuller v. Hapgood, 39 [b. 617 ; Dear- 
 
 John v. Jones, 16 Ala. 454. ing a. Winchelsea, 1 Cox, 318; Steel 
 
 Norton v. Cooper, 6 K Y. 33; v. Dixon, L. R. 17 Ch. D. 832. 
 Agnew v. Ball. 4 Whart. 31 ; Moor
 
 302 THE PARTIES TO THE INSTRUMENT. 
 
 ment between the principal and surety for the giving of 
 such securities. 1 Sureties, to be entitled to contribution, 
 must not only be bound as co-sureties, but there must be 
 the same relation to the common principal and an absence 
 of equities as between themselves. The actual relations 
 of the parties may be shown by parol. 9 Nor will contribu- 
 tion exist as against a co-surety, by reason of any considera- 
 tion existing between the principal debtor and the co-surety 
 after the entry of the latter into his original contract of 
 suretyship, especially where the rights of third parties 
 would be affected. 3 
 
 The rule that the surety is entitled upon payment of the 
 debt to collateral securities held by the co-surety, is en- 
 forced where the security is an absolute bill of sale of cer- 
 tain property, parol proof being admitted to show thatit was 
 given only as security. 4 The equitable principle of contri- 
 bution was not applied where a surety of a defendant in 
 execution having paid the amount of the judgment and 
 obtained an assignment thereof, by a summary proceeding 
 at law sought to sue out an execution against his co-surety. 
 Such a proceeding being a purely legal one, conducted in a 
 summary manner, without the formalities of pleading, 
 rendered it impossible to invoke equitable doctrines in favor 
 of the surety.* 
 
 234. LIMITATION AND WAIVER OF THE RIGHT OF 
 CONTRIBUTION. A surety, before becoming such, may fair- 
 ly stipulate with the principal debtor for a separate indem- 
 
 1 Wells v. Miller, 66 N. Y. 255; Gregory v. Murrell, 2 Ired. Eq. 
 
 Norton v. Cooins, 6 Ib. 133; Barry v. 233 ; Hall v. Hoxsey, 84 111. 616. 
 
 Ransom, 12 Ib. 462; Campbell v. Hull v. Sherwood. 59 Mo. 172; 
 
 Mesier,4 Johns. Ch. 337; Craythorne Hammond . Wyman, 9 Mass. 138 ; 
 
 . Swinburne, 14 Ves. 640 ; Steel v. Brackett v. Winslow, 17 Ib. 154 ; 
 
 Dixon, L. R. 17 Ch. D. 825. Stevens v. Moore, 7 Grcenl. 24 ; 
 
 1 Sayles v. Sims, 73 N. Y. 551 , Adams . Drake, 11 Cush. 503 ; Spie- 
 
 Hinckley v. Kreitz, 58 Ib. 583; Wells gelmeyer t. Crawford, 6 Paige, 254; 
 
 0. Miller, supra. Clason t>. Morris, 10 Johns, 524; 
 
 Hines . Keller, 3 W. & S. 401. Harbeck c. Vanderbilt, 20 N. Y. 395.
 
 CONTRIBUTION BY SURETIES. 303 
 
 nity for himself. If he does so, his co-sureties are entitled 
 to the surplus only after his full exoneration. 1 And as be- 
 tween themselves, co-sureties may by agreement so fur sever 
 their unity of interest and obligation as to waive or aban- 
 don their claim to contribution. 2 A surety loses his right 
 of contribution where, by a previous agreement with the 
 principal, made without the knowledge of the co-surety, he 
 received a part of the money obtained on the negotiation of 
 the paper, although he had paid the whole debt. 3 A surety 
 receiving securities for individual claims against the princi- 
 pal debtor, will not be subjected to contribution by co-sure- 
 ties upon another and independent debt. 4 Sureties may 
 contract themselves out of any benefit to which they would 
 be entitled from collateral securities held by co-sureties. 5 
 The securities so received or the proceeds thereof when ap- 
 propriated to a particular debt, can not be applied by the 
 surety to the pa} T ment of any other debt of the principal, to 
 the injury or prejudice of the co-sureties. 6 Equity will fol- 
 low such securities into the hands of a co-surety or of a 
 third person, where it can be done without injury. 7 
 
 235. APPLICATION OP PROCEEDS OF CO-SURETY'S SE- 
 CURITIES. Collateral securities, or the proceeds thereof, 
 held generally by one who is a surety on different obliga- 
 tions, with different co-sureties on each, are applied pro 
 rata to the several claims, and for the benefit of such co- 
 sureties. 8 Where securities are given by the principal 
 debtor to one who is sole surety in one case and joint surety 
 in others, as a general indemnity for the surety's liabilities, 
 the application of the proceeds of such securities is govern- 
 ed by the maturity of the obligations the payment of which 
 
 1 New Bedford Savings Inst v. * McCune v. Belt, 45 Mo. 174. 
 Fairhaven Bank 9 Allen, 175; Scrib- B Steel v. Dixon, L. R. 17 Cb. D. 
 
 ner . Adams, 73 Me. 541. 825. 
 
 1 Paul v. Berry, 78 111. 158. Steele v. Mealing, 24 Ala. 285. 
 
 1 McPherson v. Talbott, 5 Gill & J. 7 Wbipple . Briggs, 30 Vt. 111. 
 499. Brown v. Ray, 18 N. H. 102.
 
 S04 THE PARTIES TO THE INSTRUMENT. 
 
 they are given to secure, irrespective of the fact whether 
 they bear the name of the surety only or of co-sureties in 
 addition thereto. 1 A surety who is also a creditor may ap- 
 ply securities first to the payment of his own debt as against 
 the right of contribution of co-sureties on other obligations. 1 
 
 236. THE RIGHT OF CONTRIBUTION WHERE PART 
 ONLY OF DEBT PAID. The equitable right of contribution 
 among co-sureties arises also in cases where a surety has 
 paid more than his share of the principal debt. In such 
 case the paying surety is entitled to recover of his co-sure- 
 ties the amount paid in excess of his proportion of the debt. 
 This equity, however, arises only where the surety lias paid 
 such an amount of the debt as to make it clear that, as 
 between himself and his co-sureties, he has paid all he ever 
 can be required to pay. When this is ascertained the surety 
 is entitled to proceed for contribution against the co-sureties 
 for the excess paid. 8 Sureties paying but a portion only of 
 the liability for which they are bound, are not admitted as 
 against the creditor remaining unpaid as to the remaining 
 part of the debt, in an action of contribution against co- 
 sureties, to the benefit of collateral securities deposited by 
 the debtor with such co-sureties. The equitable right of 
 the creditor is preferred, for until his debt is fully paid, 
 sureties who have paid only a part of the debt, are not en- 
 titled to any equitable claim upon such collaterals for reim- 
 bursement. 4 The bar of the statute of limitations runs, in 
 an action for contribution, only from the time the surety 
 pays in excess of his pro rata liability. 1 
 
 1 Whippier Briggs, 30 Vt. 111. Kelly v. Herrick, 181 Mass. 
 
 Brown v. Ray, 18 N. H. 102. 373. 
 
 * Morgan v. Smith, 70 N. Y. 537 ; * Magruder v. Admire, 4 Mo. App. 
 
 Backus v. Coyne, 45 Mich. 584; ex 133; Lytle t>. Pope, 11 B. Monr. 297; 
 
 parte Gifford, 6 Ves. 805; Davis v. Daveis v. Humphreys, 6 M. & W. 
 
 Humphreys, 6 M. & W. 158 ; Lawson 153. 
 9. Wright, 1 Cox, 275; ex parte 
 Snowden, L. R. 17 Ch. D. 44.
 
 CONTRIBUTION BY SURETIES. 305 
 
 237. CONTRIBUTION BETWEEN ACCESSORY SURETIES. 
 Where two bonds with sureties are given for the perform- 
 ance of the same duty, and different parties are sureties 
 thereon, any one of such sureties, on paying the debt, is 
 entitled, in equity and at law, to contribution from the co- 
 sureties on both bonds. 1 A surety, who has been compelled 
 to pay the amount of a judgment against the principal 
 debtor, may compel contribution from sureties on a second 
 bond for the same principal, which has been executed as 
 security for the same obligation. 1 Where a second bond 
 was executed by a guardian, a surety upon the first, who 
 had paid a deficiency of his principal, was allowed to enforce 
 the rights of the ward as to the second bond so far as to 
 compel contribution from sureties thereon. 8 In an action 
 by A against B an attachment on B's property was dissolved 
 upon a bond with C and D as sureties. A recovered judg- 
 ment against B, which not being paid, suit was brought 
 upon the bond, and judgment was recovered against B, C 
 and D, and B was arrested on execution. B took the oath 
 as a poor debtor, and entered into recognizances, with E as 
 surety. After breach thereof, C and D paid the judgment, 
 and brought suit in the name of A against E. As payment 
 of a judgment by one of several joint debtors extinguishes 
 it as to all, the claim for contribution was not allowed. 4 
 
 A surety is entitled to contribution and to subrogation as 
 against an accessory surety, where the latter enters into the 
 obligation for the purpose of gaining time or other favor for 
 the principal debtor, but in such a manner that the obliga- 
 tion of the first surety is not discharged. 5 Such subrogation 
 
 1 Deering v. Winchelsca, 2 B. & * Commonwealth v. Cox, 36 Pa. 
 
 P. 270; Craythornc v. Swinburne, 14 St. 442. 
 
 Ves. 160 ; Mayhew v. Crickett, 2 * Holmes v. Day, 108 Mass. 563; 
 
 Swanst. 184; Emicks v. Powell, 2 Kammatt . Wyman, 9 Ib. 138; 
 
 Strobh. Eq. 196 ; Chaffce v. Jones, Brackett v. Winslow, 17 Ib. 153 , 
 
 19 Pick. 260; Norton v. Cooms, 3 Adams v. Drake, 11 Cush. 504. 
 
 Denio, 130. 5 Schnitzel's App. 49 Pa. St. 23; 
 
 * Bosley v. Taylor, 5 Dana, 157. Potts . Nathans, 1 W. & S. 155 ; 
 20
 
 306 THE PARTIES TO THE INSTRUMENT. 
 
 and contribution, however, does not follow in cases where 
 the accession of a surety is made so that the further liability 
 of the first surety is extinguished. 1 But where two judg- 
 ments having been obtained in part against the same person 
 upon the same liability, the last being upon an appeal bond, 
 and the suieiius* bound thereon paid the last judgment, they 
 were given the rights of the holders of the first judgment, 
 notwithstanding an entry of satisfaction had been made on 
 the record, as against a purchaser of the land subject there- 
 to, who was not a purchaser for value, without notice, in 
 the usual course of business. 9 
 
 238. THE SURETY'S ACTION AT LAW FOR CONTRIBU- 
 TION. The right to an action at law of one of two or more 
 co-sureties for contribution is dependent upon the fact that 
 the surety has paid the judgment or debt. Before payment 
 one co-surety has no right of action against another. Up to 
 such payment the co-sureties stand to each other upon a 
 perfect equality. 3 The recovery of a surety who has 
 paid the whole debt from a co-surety in an action at law for 
 contribution, is limited, unless otherwise provided by 
 statute, to an aliquot part of the whole debt, regard being 
 had to the number of sureties, irrespective of their solvency. 
 If any of the co-sureties are insolvent, equity will aid the 
 paying surety to recover a larger proportion from the 
 
 Burns . Huntington Bank, 1 P. & Sandf. Ch. 438 ; Wilcox v. Fair- 
 
 "W. 395. Laven Bank, 7 Allen, 270 ; Clark v. 
 
 1 Webster's App. 86 Pa. St. 409. Ely, 2 Saudf. 166; Reeves. Pullian. 
 
 9 Burgett P. Patton, 99 111. 288, 9 Baxter, 153. Such payments may 
 
 302; Poe v. Darrah, 20 Ala. 238; be made in property, money, nego- 
 
 Stilcs P.Eastman, 1 Kellcy (Ga.) 205; liable paper or secuiitics, and where 
 
 Wilson V. Wright, 7 Rich. 401 ; it is received in full satisfaction, the 
 
 Lintz . Thompson, 1 Head, 456; right of contribution arises. Ral- 
 
 Smith v. Alexander, 4 Snced, 482. ston . Davis, 15 111. 159. Davis v. 
 
 * Kelly v. Herrick, 131 Mass. 373; Emerson, 17 Me. 64; Bachclder . 
 
 Ohio Life Ins. Co. v. Ledyard, 8 Fiske, 17 Mass. 464. 
 Ala. 866; Ten Eyck v. Holmes, 3
 
 CONTRIBUTION BY SURETIES. 307 
 
 solvent sureties, that the burden may be borne equally. 1 
 Where, after the debt has been discharged by the sureties, 
 money is paid by the principal to one surety in order to 
 reimburse both, the co-surety, upon default, may bring his 
 action at law against the surety receiving the money as for 
 money had and received. Equity courts will not take juris- 
 diction thereof, as the remedy is complete at law.* 
 
 A co-surety sued at law may show in defense that the 
 surety paying the debt received securities from the princi- 
 pal debtor, and has converted them into money. The pro- 
 ceeds thus retained by the surety are treated as a payment 
 pro tanto of the debt. 1 Nor is it any defense to an action 
 for contribution between co-sureties that the plaintiff, who 
 paid the debt, did not avail himself of the defense of usury, 
 if he had no knowledge thereof. 4 And a party who has 
 signed a note as surety for one who is himself only a 
 surety for the principal maker, is not liable in a suit for 
 contribution. 6 
 
 1 Griffin v. Kelleher, 132 Mass. Swinburne, 14 Ib. 160. The right is 
 
 82 ; Brigden v. Cheever, 10 Mass. supported as against the estate of 
 
 450,454; Chaffee v. Jones, 19 Pick, the deceased co-surety. Conover v. 
 
 260, 265 ; Wood v. Leland, 22 Ib. Hill, 76 111. 342. 
 
 503, 506 ; Caity v. Holmes, 16 Gray, 9 Allen v. Wood, 3 Ired. Eq. 386. 
 
 127; Morgan v. Smith, 70 N. Y.537; Paulin t>. Kaighn, 29 N. J. L. 
 
 Dodd 0. Winn, 27 Mo. 503; Magru- 480. 
 
 der v. Admire, 4 Mo. App. 133 ; 4 Warner v. Morrison, 3 Allen, 
 
 Cowell v. Edwards, 2 B. & P. 268; 566. 
 
 Brown v. Lee, 6 B. & C. 689; Batard 6 Robertson . Detherage, 82 I1L 
 
 v. Hawes, 2 El. & Bl. 287; Wright 511; Salyers t>. Ross, 15 Iiid 130 
 . Hunter, 5 Yes. 792j Cray thorne v.
 
 308 THE PABTIES TO THE INSTRUMENT. 
 
 CHAPTER XXIV. 
 
 THE DISCHARGE OF THE SURETY. 
 
 239. The surety's discharge, upon creditor's surrender or loss of collat- 
 erals. 
 
 240. The rule as to collateral securities limited and illustrated. 
 
 241. Mere inaction of creditor as to collateral securities, no discharge. 
 
 242. Acceptance of collateral security, without more, no discharge. 
 
 243. Acceptance of new security of principal, discharges surety. 
 
 244. Discharge by misrepresentations as to collateral securities by creditor. 
 
 245. Discharge of surety by changes in the instrument. 
 
 246. Surety when not released in cases of forgery. 
 
 247. Release of surety, by extension of time to principal. 
 
 248. When surety not released, by extension of time. 
 
 249. Like rules as to sureties upon specialties. 
 
 250. Rights against surety reserved upon release of principal or co-surety. 
 
 251. Discharge of deceased surety's estate, as to creditors. 
 
 252. No discharge of such estate, as to co-sureties. 
 
 239. SURETY'S DISCHARGE, UPON CREDITOR'S SUR- 
 RENDER OR LOSS OF COLLATERALS. A surety is discharged 
 from his liability on the principal obligation by any affirma- 
 tive act of the creditor by which the terms of the con- 
 tract of suretyship are changed to the prejudice of the 
 surety, without his consent. Such discharge results from a 
 valid and definite extension of time, or by unauthorized 
 changes in the instrument, or by new duties and responsi- 
 bilities imposed upon the principal, or by the conduct of the 
 creditor in relation to collateral securities received by him 
 from the principal debtor to secure the payment of the debt. 
 A creditor holding collateral securities is chargeable with a 
 trust concerning the same for the benefit of the surety, 
 where he has notice of the existence of such relation as be- 
 tween the parties to the note. By his voluntary accept-
 
 THE SURETY S DISCHARGE. 
 
 309 
 
 ance of such securities, the creditor assumes responsibilities 
 in relation thereto not ordinarily undertaken by the holder 
 of paper upon which are the names of a principal and sure- 
 ty. The personal obligation of the surety to pay the note 
 upon default of the principal, is not affected by the receipt 
 of such collateral securities by the holder from the debtor, 
 but the interest of the surety in the proper management 
 and realization of such securities is recognised, at law and 
 If the creditor by an act of a positive character, 
 
 n 
 
 or by his gross negligence or bad faith, and without the 
 knowledge and consent of the surety, releases, surrenders, 
 impairs, destroys, or fraudulently transfers such collateral 
 securities so as to defeat any claim of the surety, upon pay- 
 ment of the debt, to be subrogated thereto for his indemni- 
 fication, the surety is discharged to the extent of his actual 
 loss, at any rate, and of his whole liability in cases of fraud or 
 negligence so gross as to raise a presumption of fraud. 1 And 
 
 1 Guild v. Butler, 127 Mass. 388 ; 
 Wilcox 0. Fairhaveu Bank, 7 Allen, 
 272; Merchants' Bank 0. Baker, 4 
 Met. 164; Eastman 0. Foster, 8 Ib. 
 19 ; Stewart 0. Davis, 18 Ind. 74; 
 Cheesebrough 0. Millard, 1 Johns. 
 Ch. 409 ; Griswold v. Jackson, Ib. 
 430; Hayes v. Ward, 4 Ib. 123 ; In- 
 galls v. Morgan, 10 N. Y. 178; Ches- 
 ter 0. Kingston Bank, 16 Ib. 336; 
 Lewis v. Palmer, 28 Ib. 271: Super- 
 visor v. Otis, 62 Ib. 88; New Hamp- 
 shire Savings Bank 0. Colcord, 15 
 N. H. 119 ; New London Bank v. 
 Lee, 11 Conn. 112; Belcher v. Hart- 
 ford Bank, 15 Ib. 480; Pratt's case, 
 16 La. Ann. 357; Priest v. Watson, 
 75 Mo. 315; Clopton v. Spratt, 52 
 Miss. 251 ; Nelson 0. Munch, 28 
 Minn. 314; Springer 0. Toothaker, 
 42 Me. 381; Moore 0. Gray, 26 Ohio 
 St. 525; Waite 0. Dennison, 51 111. 
 319; Dillon 0. Russell, 5 Neb. 484; 
 Smith 0. McLeod, 3 Ired. Ch. 390; 
 
 Miller 0. Ord, 1 Pa. St. 382; Clow 0. 
 Derby Coal Co., 98 Ib. 432 ; Neff's 
 App. 9 W. & S. 36; Kurd 0. Spencer, 
 40 Vt. 581; Austin 0. Belknap. 54 Ib. 
 495; Brinton 0. Gerry, 7 Bradw. 238; 
 Kirkpatrick 0. Howk, 80 111. 122; 
 Rogers 0. School Trustees, 46 Ib. 
 428, 434; Phares 0. Barbour, 49 Ib. 
 370; Darst 0. Bates, 95 Ib. 513; 
 Cherry 0. Miller, 7 Lea, 305. The 
 rule is applied to indorsers: Ross 0. 
 Jones, 22 Wall. 576; Bank 0. Hatch, 
 6 Pet. 258; McLemore 0. Powell, 12 
 Wheat. 556; Bank 0. Haurick, 2 
 Story, 416; Wood 0. Bank, 9 Cow. 
 194; Newcomb v. Raynor, 21 Wend. 
 108. Aldrich 0. Cooper, 8 Ves. 388, 
 395; Wright 0. Morlcy, 11 Ib. 22; 
 Capel 0. Butler, 2 Sim. & St. 457; 
 Strange 0. Fooks, 4 Gift. 412; Wulff 
 0. Jay, L. R. 7 Q. B. 756; Rees v. 
 Barrington, 2 W. & T. Lead. Cas. 
 Eq. 1003. And courts of law will, 
 in proper cases, apply the rule.
 
 310 THE PARTIES TO THE INSTRUMENT. 
 
 under the tendency of modern legislation and decisions, the 
 surety is entitled to interpose in an action at law by the 
 creditor the like defenses, as above stated, as in equity. 
 His discharge results in the one case equally as in the other. 1 
 The like rule applies where a person pledges his proper- 
 ty as collateral security for the performance of the contract 
 of a third person. Such property stands in the position of 
 a surety, and any changes in the contract of suretyship 
 which would discharge a surety discharges the property" 
 held as collateral security. 1 So, where land subject to a 
 judgment lien is sold by the judgment debtor to a third 
 person for its full value, it is regarded as standing in a sure- 
 tyship relation, and is subject to be discharged from such 
 lien like any other collateral security by the affirmative acts 
 of the creditor or by his gross negligence. 8 
 
 240. THE RULE AS TO COLLATERAL SECURITIES 
 LIMITED AND ILLUSTRATED. A limitation imposed upon 
 the rule stated under which a surety is discharged by any 
 affirmative act of the creditor surrendering, impairing or 
 destroying the collateral securities held by him from the 
 principal debtor is, that such security must be a mortgage, 
 pledge, lien, or some right to or interest in property, which 
 
 Kirkpatrick v. Howk, 80 111. 122 ; Rowan . Sharp Rifle Man. Co., 
 
 Rogers v. School Trustees, 46 111. 33 Conn. 18, 22, 24; White v. Ault, 
 
 428; People v. Jansen, 7 Johns 332; 19 Geo. 551; Christener v. Brown, 16 
 
 Chester t>. Bank of Kingston, 16 N. Iowa, 130; Ryan v. Shaw, 14 111. 20; 
 
 Y. 337; Guild v. Butler, 127 Mass. Crawford v. Richeson, 101 Ib. 351; 
 
 386; Uaker v. Briggs, 8 Pick. 122 ; Barnes e. Mott, 64 N. Y. 377; Deni- 
 
 Carpenter %. King, 9 Met. 311; son . Gibron, 24 Mich. 187; Union 
 
 Home v. Bodwell, 5 Gray, 457. Bank v. Ewan, 18 Miss. 333; Robin- 
 
 1 People v. Jansen, 9 Johns. 332; son v. Mngee. 1 Ves. Sr, 251; Royal 
 
 Baker v. Briggs, 8 Pick. 121; Rogers C. Bank v. Payne, 19 Grant's Ch. 
 
 . School Trustees, 46 111. 428; Kirk- 180. 
 
 Patrick v. Howk, 80 Ib. 122 ; Ncff 's Barnes v. Mott, 64 N. Y. 377; 
 
 App. 9 W. & S. 36; Mayhew v. Lowery v. McKinney, 68 Pa. St. 
 
 Crickett, 2 Swans.t. 185: Philpott v. 294; Leffingwell v. Fryer, 21 Wis. 
 
 Briant, 4 Bing. 117; Samuel v. How- 392. 
 arth, 2 Her. 287.
 
 THE SURETY'S DISCHAKGE. 311 
 
 a creditor can hold in trust for the surety, and to which the 
 surety, if he pay the debt, can be subrogated ; and the 
 right to apply and to hold must be absolute. 1 Nor will it 
 apply to a statutory remedy, such as a right of distraint. Al- 
 though after payment of the debt by the surety, he is 
 subrogated to this right, as to the unexpired term of the 
 lease.* Nor to the surrender of securities which have be- 
 come void or valueless. 1 
 
 The surety is discharged where collateral securities held 
 by the creditor from the principal debtor are voluntarily 
 returned without the consent of the surety, at least to the 
 value of such collateral securities. 4 And where a debtor 
 executes a mortgage or deed of trust, or other security, for 
 the benefit of the creditor, the trust thus created for the 
 sureties, bound for the payment of the debt, may not be 
 discharged by any surrender or act in connection 
 with such securities discharging the same, without the con- 
 sent of the surety. 5 The surety is released, if a right of 
 subrogation to securities be absolutely defeated by the 
 supine negligence of a creditor to comply with statutory 
 
 1 Glazier . Douglass, 32 Conn. 399; App. 9 W. & S. 36 ; Holt . Body, 18 
 
 Clow v. Derby Coal Co. 98 Pa.St. 432; Pa. St. 207; Everly v. Rice, 20 Ib. 
 
 Phares t>. Barbour, 49 111. 370: Bill- 297; Denny t>. Lyon, 38 Ib. 98; 
 
 ings . Sprague, Ib. 509; Waite v. Commonwealth v. Vanderslice, 8 S. 
 
 Dennison, 51 Ib. 319 ; Loomis v. & R. 452 ; Clopton v. Spratt, 52 
 
 Fay, 24 Vt. 240. Miss. 251. And where the creditor 
 
 * Hull v. Hoxsey, 84 111. 616. permits the debtor to take and sell 
 
 3 Union National Bank*. Crowley, such security, and retain the pro- 
 
 27 La. Ann. 202. ceeds. Rablew. Newman, 7 Bush, 584. 
 
 4 Kirkpatrick v. Howk, 80 111. 122; The rule is not affected even by the 
 
 Rozet v. McClellan, 48 Ib. 345; substitution of security of greater 
 
 Cherry v. Miller, 7 Lea, 305 ; Sprin- value than that surrendered, without 
 
 ger . Toothaker, 43 Me. 381; Austin the consent of the surety. N. H. 
 
 . Belknap, 54 Vt. 495 ; Taylor v. Savings Bank . Colcord, 15 N. H. 
 
 Jeter, 23 Mo. 244 ; Saline County v. 119. 
 
 Bull, 65 Ib. 63 ; Perrine v. Firemen's ' Clow v. Derby Coal Co. 98 Pa. 
 
 Ins. Co. 22 Ala. 575 ; Pittsburgh v. St. 432 ; Phares v. Barbour, 49 111. 
 
 Thompson, 3 Grant's Gas. 114 ; Phil- 370; Billings v. Sprague, Ib. 509; 
 
 bricks . McEwen, 29 Ind. 347; Bar- Waite v. Dennison, 51 Ib. 319. 
 row v. Shields, 13 La. Ann. 57; Neff'a
 
 312 THE PARTIES TO THE INSTRUMENT. 
 
 requirements requisite to its validity and preservation. 1 
 Or where such collateral securities have been received by 
 the creditor after the maturity of the debt and the proceeds 
 thereof misappropriated to other debts to the injury and 
 loss of the surety. 1 The surety is also discharged where 
 the creditor fraudulently treats such securities as his own 
 so that the surety is damnified,* or has released the princi- 
 pal debtor from a judgment, entered against him or sus- 
 pended his right of action against him upon the principal 
 debt without the surety's consent. 4 
 
 241. MERE INACTION OF THE CREDITOR AS TO COL- 
 LATERAL SECURITIKS NO DISCHARGE. In the absence of an 
 express agreement to use diligence, or of such special cir- 
 cumstances as to render prompt action of the creditor an 
 absolute duty, the mere inaction or passive delay, or omis- 
 sion of the creditor to enforce the collection of collateral 
 securities held by him from the principal debtor, is not 
 sufficient of itself to discharge or release a surety from his 
 obligation to pay the debt upon default.* Nor is a failure 
 
 1 Curry t>. Mack, 90 111. 606 ; Rog- Appeal, 102 Penn. St. 441; Board 
 
 era v. School Trustees, 46 Ib. 428 ; of Supervisors v. Otis, 62 N. Y. 88; 
 
 Burr t>. B yer, 2 Keb. 265; Phil- Clark . Sicklcr, Ib. 231 ; Thompson 
 
 brooks v. McEwen, 7 Bush, 5C4; . Hall, 45 Barb. 214; Fullon v. 
 
 Ducker t>. Rapp, 67 N. Y. 464; Lang Matthews, 15 Johns. 433; Reynolds 
 
 e. Brevard, 3 Strobh.Eq. 59; Strange v. Ward, 5 Wend 501; Marsh v. 
 
 v. Fooks, 4 Giff. 412 ; Wulff v. Jay, Dunkel, 25 Hun, 167; Cherry v. Mil- 
 
 L. R. 7 Q.B.756; Rainbows Juggins, ler, 7 Lea, 305; Clopton v. Spratt, 
 
 L. R. 5 Q.B D. 138; Rees v. Barring- 52 Miss. 251 ; Dundas . Sterling, 4 
 
 ton, 2 W. & T. Lead. Cos. 1003. Pa. St. 73; Miller t>. Knight, 7 Baxt. 
 
 'Smith v. Clopton, 48 Miss. 66; 127; Richardson v. Ins. Co.27Gratt, 
 
 Rosborough t>. McAlilcy, 10 S. C. 749; Pbarr v. McHugh, 32 La. Ann. 
 
 235; Chaffee . Talliaferro, 58 MJss. 1280; Pearl v. Williams, 11 111. 253; 
 
 544. Villars v. Palmers, 67 Ib. 204; Rozet 
 
 1 Clopton v. Spratt, 52 Miss. 251. v. McClellan, 48 Ib. 345; Orme v. 
 
 4 Case v. Hawkins, 53 Miss. 702; Young, Holt, 84; Goring . Ed- 
 
 Pomeroy v. Tanner, 70 N. Y. 547, monds, 6 Bing. 94; Strong t>. Foster, 
 
 cases of indorscrs. 17 C. B. 216; Bank v. Beresford, 6 
 
 ' Winton v. Little, 94 Pa. St. 64; Dow. 238; Holl v. Hadley, 2 A. & E. 
 
 Est. of Bush., 12 Phila. 53; Kindt's 758; Eyre . Everett, 2 Russ. 381.
 
 THE SURETY'S DISCHARGE. 313 
 
 of the holder of a negotiable promissory note, having a lien 
 on personal property of the principal debtor, to enforce the 
 same a discharge of the surety, although the security has 
 become worthless. 1 The failure of a creditor to record a 
 mortgage given by the principal debtor as security for the 
 debt, no positive act of the creditor occurring but only 
 mere delay and omission,* or to revive a judgment against 
 the principal debtor, so that a lien on land is lost, and the 
 property passed into the hands of subsequent creditors, in 
 the absence of an express agreement that it should be kept 
 alive for the benefit of the surety," will not operate as a dis- 
 charge. 
 
 A surety is not discharged even where the creditor has 
 given positive order to delay enforcing an execution against 
 the principal debtor. 4 Nor by a failure to levy an execution 
 upon the property of the principal debtor, although by reason 
 thereof it is lost to the surety, unless such surety has required 
 the creditor to enforce the same by proper notice. 8 If by 
 reason of delay in enforcing an execution the principal 
 debtor is enabled to remove his property beyond the reach 
 of process, the surety is not discharged, in the absence of 
 fraud or collusion on the part of the creditor. 8 A discharge 
 of the principal debtor, taken on a ca. sa., is not a release of 
 
 The same rule is applied in the case McEwen, 28 Ind. 347; Lang v. Brev- 
 
 of indorsers. Ross t>. Jones, 22 ard, 3 Strobh. Eq. 59; Hampton . 
 
 Wall. 576; Bank v. Myers, 1 Bail. Levy, 1 McCord Ch. 107. See 
 
 418; Gwin v. Moore, 79 Ind. 103; Schroeppel t>. Shaw, 3 N. Y. 459. 
 
 Powell v. Waters, 17 Johns. 179 ; Wintou v. Little, 94 Pa. St. 64; 
 
 Stafford . Yates, 18 Ib. 329; Bank U. S. v. Simpson. 3 P. & W. 437. 
 
 . Ives, 17 Wend. 502; Bank v. Rol- But the release of a principal debtor 
 
 lins, 13 Me. 205; Sterling v. Mari- from a judgment will release the 
 
 etta etc. Co. 11 S. & R. 182 ; Ken- surety. Anthony . Capel, 53 Miss, 
 
 nard v. Knott, 4 Mann. & G. 474 ; 350. Or where it is put out of the 
 
 Trimble v. Thorne, 16 Johns. 159 ; power of the surety to collect the 
 
 Beebe e. Bank, 7 W. & S. 375; Phil- same. Ducker v. Rnpp, 67 N. Y.464. 
 
 pott v. Briant,4 Bing. 717. * McNeilly v. Cooksey, 2 Lea, 39. 
 
 1 Fuller fl.Tomlinson, 57 Iowa, 111. 8 Thompson v. Robinson, 34 Ark. 
 
 * New York Nat. Exchange Bank 44. 
 
 v, Jones, 9 Daly, 248; Philbrook v. McKennyc. Waller, 1 Leigh, 434
 
 "314 THE PARTIES TO THE INSTRUMENT. 
 
 a surety .' A failure to sell negotiable bonds deposited as 
 collateral security for the payment of a negotiable promis- 
 sory note, upon default in the payment of the principal 
 obligation, and the subsequent depreciation in value there- 
 of, forms no defense for a surety upon such note, when sued 
 thereon.* Nor will the failure of a bank to appropriate 
 funds of a principal debtor on deposit to the payment of a 
 note at its maturity, be a discharge pro tan to of a surety 
 upon the principal obligation. 8 A material change in the 
 principal instrument discharging a surety, the result is not 
 affected by the fact that such surety holds collateral securities 
 from the principal. 4 And although the estate of a deceased 
 surety is not liable upon his contracts of suretyship, resort 
 is allowed to any collateral securities given to such deceased 
 surety by the principal debtor, and remaining in Iris posses- 
 sion at the time of his decease. 6 
 
 242. ACCEPTANCE OP COLLATERAL SECURITY, BY 
 CREDITOR, NO DISCHARGE. The receipt by the creditor 
 from the principal debtor of the negotiable promissory note 
 of a third person, indorsed where required, as collateral 
 security for the payment of his own note, the latter bearing 
 also the name of a surety, does not affect the right of such 
 creditor to an action at law against the surety upon the 
 principal note, upon default of payment and proper notice. 
 The fact that such collateral note matures at a time subse- 
 quent to the principal note, raises no presumption of any 
 agreement on the part of the creditor to extend the time of 
 payment of the principal note, and the surety is not released. 
 His obligation is entirely independent of any promise con- 
 tained in the collateral paper. The receipt of such collateral 
 securities by the creditor from the principal debtor is a 
 benefit to the surety, as the latter, upon payment of the 
 
 1 U. 8. t>. Stanbury, 1 Pet. 111. 599 ; Nat. Bank v. Smith, 66 N. 
 
 673. Y. 271. 
 
 Cherry t>. Miller, 7 Lea, 805. Rounswell v. Wolf, 47 Wis. 253. 
 
 Voss t>. International Bank, 83 Crosby v. Crafts, 69 N. Y. 607.
 
 THE SURETY'S DISCHAUGE. 315 
 
 debt, becomes entitled to subrogation thereto, and to enforce 
 the same for his own relief. 1 Where such collateral secur- 
 ities mature before maturity of the principal note, the surety 
 may require the creditor to apply the money collected there- 
 on, in payment pro tanto of the debt and to his relief.* In 
 states where the indorsee of negotiable paper as collateral 
 for an antecedent debt, without any further consideration, 
 is not a holder for value, in the usual course of business, the 
 indorsement of such paper to a creditor holding a principal 
 note, upon which a surety is bound, will not release such 
 surety, as no presumption arises by the receipt thereof of 
 any extension of time upon the principal note.' A valid 
 agreement for an extension of time, made upon the indorse- 
 ment and delivery of collateral securities, and i'n considera- 
 tion thereof, without the surety's knowledge and consent, 
 discharges the latter. 4 A principal maker of a note, with- 
 out the knowledge and consent of the surety, borrowed 
 money upon a new note, also signed by sureties, for the pur- 
 pose of taking up the first note, and upon an agreement to 
 indorse the same to the sureties on the second note as col- 
 
 1 Fireman's Ins. Co. v. Wilkinson, 117; Globe Ins. Co. v. Carson, 31 Mo. 
 
 35 N. J. Eq. 160; Hayes v. Wells, 34 218; Oxford Bank v. Lewis, 8 Pick. 
 
 Md. 512; Brengle . Bushey, 40 Ib. 458. Fringe. Clarkson.l B.& C. 14; 
 
 141 ; Thurston v. James, 6 R. 1. 103; Twopenny v. Young, 3 B. & C. 208; 
 
 Austin v. Brooks, 31 Vt. 64; Steven- Bedford . Deakin, 2 B. & A. 210 ; 
 
 son D. Austin. 3 Mete. 474; Bangs Perfect v. Musgrave, 6 Price, 111. 
 
 v. Strong, 10 Paige, 11; Neimcewicz Unless it is given as consideration 
 
 1). Gahn, 3 Paige, 614; Van Etten v. for an extension of time. Liquidat- 
 
 Trouden, 67 Barb. 342 ; Remsen v. ors etc. v. Same, L. R. 7 H. L. 348. 
 
 Graves, 41 K Y. 471; Wood v. Rob- 2 Lincoln v. Bassett, 23 Pick. 154. 
 
 inson, 22 Ib. 564; Cary v. White, 52 a United States v. Hodge, 6 How. 
 
 N. Y. 138; Hubbard . Gurney, 64 279; Weakly v. Bell, 9 Watts, 280; 
 
 N. Y. 457; Norton <o. Soule, 2 Gahn v. Niemcewicz, 11 Wend. 312; 
 
 Greenl. 341 ; Lincoln D. Bassett, 23 Day v. Leal, 14 Johns. 404 ; Elwood 
 
 Pick. 154; United States v. Hodge, v. Diefendorf, 5 Barb. 398, 409; 
 
 6 How. 279; Cruger v. Burke, 8 Sigourney . Witherell, 8 Met, 564; 
 
 Tex. 66; s. c. 11 Ib. 694; Wade v. Wallace . Agry, 4 Mason, 336; 
 
 Stanton, 6 Miss. 631. The same Pring v. Clarkson, 1 B. & C. 14; 
 
 rule is applied to inclorsers : Mo- Ernes v. Widowson, 4 C. & P. 151. 
 
 hawk Bank v. Van Home, 7 Wend. * * Greene v. Bates, 74 K Y. 333.
 
 316 THE PARTIES TO THE INSTRUMENT. 
 
 lateral security. The money thus obtained having been 
 paid in discharge of the first note, the surety thereon was 
 discharged, and no enforcement thereof as against him was 
 allowed the sureties upon the second note, upon default, 
 although an action against the maker was allowed. 1 
 
 243. ACCEPTANCE OF NEW SECURITY OF PRINCIPAL 
 DISCHARGES SURETY. The rule that an extension of the 
 time of payment of the debt by the creditor to the principal 
 debtor, without the knowledge and consent of the surety, 
 will discharge the latter, is applied where the holder of a 
 negotiable promissory note receives a new note from the 
 principal debtor, payable at a future day. The acceptance 
 of such new note operates to suspend the right of action 
 upon the principal demand until the maturity of the note, 
 being a sufficient consideration for the extension of time 
 thereon.* It is necessary in order to bring the surety within 
 the rule, either that the new note should be taken in pay- 
 ment of the first note, or that the time of payment of the 
 latter should be extended for a definite period. 1 The 
 rule is applied where, on the maturity of the original obli- 
 gation, the principal debtor pays a portion of the debt, 
 giving a new note for the balance, the creditor retaining 
 
 1 Greening v. Patton, 51 Wis. 146. Hill 0. Bostwick, 10 Yerg 410 ; 
 
 * Hubbard v. Gurney, 64 N. Y. Gahn . Niemcewicz, 11 Wend 312; 
 
 457; Fellows c. Prentis, 3 Denio, Hard v. Little, 12 Mass. 502; Baker 
 
 510; Bangs v. Moslier, 23 Barb. 478; v. Walker, 14 M. & W. 465. The 
 
 Dorlon v. Christie, 39 Ib. 610; Al- mere receipt of a new note from the 
 
 bany etc. Co. . Devendorf, 43 Ib. principal, without a valid agreement 
 
 444; Place v. Mcllvain, 38 N. Y. 96; to extend the time of payment of 
 
 Linn v. Neldon, 23 N. J. Eq. 109; the first note, does not discharge the 
 
 Thomson v. Bowne, 39 N. J. L., 2; surety. El wood v. Diefendorf, 5 
 
 Paulin v. Kaighn, 27 Ib. 503; Bell v. Barb. 398 ; Cary v. White. 52 N. Y. 
 
 Martin, 18 Ib. 167; Grover v. Hop- 138, but see Hubbard v. Gurney. su- 
 
 pock. 26 Ib. 191 ; Sayre t>. King. 17 pra Moss v. Hall, 5 Exch. 50 (Parke, 
 
 W. Va. 562; First Nat. Bank v. Lea- Baron). 
 
 vitt, 65 Mo. 562. The rule is applied Hough v. Etna Life Ins. Co., 57 
 
 in favor of indorsere: Wood v. Jeff- 111. 118. 
 ereon County Bank, 9 Cow. 194;
 
 TUB SURETY'S DISCHARGE. 317 
 
 possession of the old note. The sureties thereon are dis- 
 charged, as the creditor, by accepting the new note, has 
 made a valid and definite extension of the time of payment 
 to the principal debtor. 1 The omission to redeliver such 
 old note does not of itself change or affect the contract of 
 extension of time for payment, nor render the same invalid.* 
 Sureties upon the original note, however, are not discharged, 
 where the new note is void on account of forgery, although 
 the other be destroyed.* 
 
 244. DISCHARGE BY MISREPRESENTATIONS AS TO 
 COLLATERAL SECURITIES BY CREDITOR. Where a creditor 
 or the holder of a promissory note, signed by a principal and 
 surety, induces the latter, by fraudulent misrepresentations 
 about the surety's liability, to release or forego the obtain- 
 ing of collateral security or other indemnity from the prin- 
 cipal debtor, and the surety thereby suffers loss or damage, 
 such creditor or holder is estopped as against such surety, 
 to enforce any claim to the extent of such loss or damage. 4 
 The failure to communicate a fact to a surety, or a misrep- 
 resentation thereof, made in respect to the subject matter of 
 the contract of suretyship, in order that the rules of equita- 
 ble estoppel may be invoked to protect the surety, must 
 have the effect necessarily of increasing the responsibilities 
 of the surety, or operate to his prejudice and loss.* The 
 
 1 Andrew v. Marrett, 58 Me. 540; Schofield t>. Tcmpler, 4 DeG. & J. 
 
 Fellows v. Prcntiss, 3 Denio, 512; 429. 
 
 Putnam v. Lewis. 5 Johns. 389; and 4 High v. Cox, 55 Geo. 662; Whit- 
 
 to indorscrs, Bailey v Baldwin, 7 aker v. Kirby, 54 Ib. 277; Carpenter 
 
 Wend. 280; Mohawk Bank v. Van v. King, 9 Met. 511; Bank. Haskell, 
 
 Home, Ib. 117. Gould v. Robson. 51 N. H. 116; Thomburg v. Harden, 
 
 8 East, 576; Stedmau v. Gooch, \ 33 la. 380; White v. Walker, 31 111. 
 
 Esp. N. P. 3. 422; Booth v. Storrs, 75 111. 438; 
 
 * Hubbard v. Gurney, 64 N. Y. Roper v. Sangamon Lodge, 91 111. 
 
 457; Hart v. Hudson, 6 Duer, 304; 518; Baker v. Briggs, 8 Pick. 123; 
 
 Meyer v. Wells, 5 Hill, 465. Carpenter v. King, 9 Met. 511; Ern- 
 
 Emerine v. O'Brien, 36 Ohio St. erine v. O'Brien, 36 Ohio St. 491. 
 
 491; Goodrich v. Tracy, 43 Vt. 314; * Comstock v. Gage, 91 111. 328.
 
 318 THE PARTIES TO THE INSTRUMENT. 
 
 surety is not discharged, where the element of fraud does 
 not intervene in such representations, and the creditor does 
 not intend to mislead, although the collateral securities 
 agreed to be given by the principal debtor are never deliv- 
 ered, others of less value being substituted. 1 Where the, 
 creditor is without knowledge, it is no discharge of a surety 
 that he was induced to sign the note by the fraudulent or 
 false misrepresentations of his principal." 
 
 245. DISCHARGE OF SURETY BY CHANGES IN INSTRU- 
 MENT. The erasure of the word surety or security in a prom- 
 issory note, without the consent of the person bound, or the 
 names of other sureties, made without consent, or of an 
 erasure of a seal upon a specialty, changing the legal effect 
 of an instrument, are sufficient to discharge sureties. 5 
 Where a promissory note is fully executed by a principal 
 and surety and delivered to the payee, and thereafter, 
 without the knowledge of the surety, the name of an- 
 other person is added thereto as additional surety, the 
 first surety stands discharged, 4 and also where a note 
 is delivered without the name of a co-surety as agreed, 
 and no notice thereof until the principal is insolvent. 5 
 An exception to the rule that an extension of time for 
 payment to the principal debtor will discharge a surety 
 arises where both parties appear upon the face of the note 
 as joint debtors. The equity of the surety to relief is not 
 
 1 Fitchburgli Savings Bank v. 550 ; Bonar v. McDonald, 3 II. L. 
 
 Rice, 124 Mass. 72. Cas. 239 
 
 1 Booth . Storrs, 75 111. 438 ; Da- * Evans t>. Bremridgc. 25 L. J. Ch. 
 
 vis Sewing Machine Co. v. Buckles, 104. If the surety is informed 
 
 89 Ib. 237; Ladd v. Trustees, 80 Ib. thereof, and suffers the principal to 
 
 233. act without objection, he is estopped' 
 
 1 Oregon v. Allison, 9 Baxter, 459; from setting up the condition to 
 
 Blakely v. Johnson, 13 Bush, 197. avoid liability on the bond. Wright 
 
 4 Berry man v. Mauker, 56 Iowa, v. Lang, 60 Ala. 389. If he promise 
 
 150; Dickerson v. Miner, 43 Ib. 508; to pay. after knowledge, lie can only 
 
 Whicher v. Hall, 5 B. & C. 276; be sued upon his promise. Loving 
 
 Navigation Co. v. Roll, 6 C. B. N. S. v. Dixon, 56 Tex. 75.
 
 THE SURETY'S DISCHARGE. 319 
 
 preferred in the absence of knowledge of its existence, as 
 against the claims of the creditor or indorsee for value of 
 the note. Clear proof of the knowledge of the creditor or 
 indorsee of the real relations of the parties must be shown 
 to entitle the surety to relief. 1 And it is only in equity and 
 not at law, that relief will be given. 8 The creditor, how- 
 ever, is charged with the equitable claims of the surety 
 where he has knowledge of the true relations of the parties, 
 acquired at any time before he does the act which alters 
 the surety's position.* 
 
 246. SURETY, WHEN NOT RELEASED IN CASES OP 
 FORGERY. The forgery of a name of a pretended surety 
 upon a note, by means of which another person is induced 
 to sign as surety, believing such signature to be genuine, is 
 not a discharge of such surety. No defense arises there- 
 upon as against an action upon the note by the creditor, or an 
 indorsee for value, before maturity, without notice. 4 The 
 
 1 Davis v. Graham, 29 Iowa, 514 ; Thorn, 56 N. Y. 502; Bank v. Hoge, 
 
 Torrencev. Alexander, 84 N. C. 4; 6 Ohio, 18; Orville v. Newell, 17 
 
 McMillan v. Parkell, 64 Mo. 286; Conn. 97; Burke v. Kruger, 8 Tex. 
 
 Albright . Griffin, 78 Ind. 182; 66; Peake v. Estate, 25 Vt.31; Riley 
 
 Claremont Bank v. Wood, 10 Vt. . Gregg, 16 Wis. 671; In re Good- 
 
 585; Neil v. Heilman, 9 Biss. 358. win, 5 Dillon, 144 ; Pooley v. Har- 
 
 * Paulin v. Kaiglm, 27 N. J. Eq. radine, 7 E. & B. 431; Greenough v. 
 
 508. McClelland, 2 El. & El. 424; Bailey 
 
 1 Guild v. Butler, 127 Mass. 386; v. Edwards, 4 B. & S. 761 ; Ewin v. 
 
 Harris V. Brooks, 21 Pick. 195; Lancaster, 7 B. & S. 571; Davis v. 
 
 Home v. Bod well, 5 Gray, 457; Car- Stainbank, DcG. M. & G. 696; Oak- 
 
 penter v. King. 9 Met. 511; Kennedy ley . Pasheler, 4 Cl. & F. 207; Li- 
 
 . Evans, 31 111. 269 ; Branch Bank quidators v. Liquidators, L. R. 7 Ch. 
 
 v. James, 9 Ala. 949; Kelly v. Gilles- 142; s. c. 7 H. L. 348 ; Wilson . 
 
 pie, 12 Iowa, 55; Smith v. Shelden, Lloyd, L. R. 16 Eq. 60, 71; Swire v. 
 
 35 Mich. 42; Lime Rock Bank v. Redman, L. R. 1 Q. B. D. 536, 542. 
 
 Mallett, 42 Me. 429; Marine Bank v. * York County Ins. Co. v. Brooks, 
 
 Abbott, 28 Ib. 280; Davis v. Barring. 51 Me. 506; Selser v. Brock, 3 Ohio 
 
 ton, 30 N. H. 524; Wheat v. Ken- St. 302; Stoncr v. Milliken, 85 111. 
 
 dall, 6N. H. 504; Miller v. McCan, 218; State v. Baker, 64 Mo. 167; 
 
 7 Paige, 451; Manchester etc. Co. v. Stern B. People, 102 111. 540. 
 Sweating, 10 Wend. 163 ; Millerd v.
 
 320 THE PARTIES TO THE INSTRUMENT. 
 
 recovery of such creditor or other indorsee for value, with- 
 out notice, is supported upon the rules of estoppel in pais 
 or equitable estoppel, that where one of two innocent per- 
 sons must suffer from the fraud and deceit of a third person, 
 he who first trusts such third person and places in his 
 hands the means to commit the wrong, must bear the loss. 1 
 Sureties are not discharged where a new note, with the 
 names of sureties forged thereon, is given by the principal 
 to the indorsee of the original security, upon which such 
 sureties are bound, although such note was cancelled and 
 destroyed ; nor will the surrender of a fictitious and forged 
 security held by the creditor for the benefit of a surety, 
 to whom the same was of no possible use, except as a mat- 
 ter to be held in terrorem over other persons, entitle such 
 surety to a decree in equity relieving him from his obliga- 
 tion on the principal note.* A surety is not discharged 
 where, having executed a bond on the faith that his prin- 
 cipal would also execute the same, which was not done, but 
 an instrument was in fact executed by the principal in the 
 transaction by reason of which the surety became a special- 
 ty creditor, and had a right of action.* 
 
 247. RELEASE OP SURETY BY EXTENSION OF TIME TO 
 PRINCIPAL. A creditor or indorsee of a negotiable promis- 
 sory note executed in form by a principal and surety, or 
 where the note is executed by both as principals, but the 
 creditor or holder is chargeable with the knowledge that one 
 of the parties is a surety for the other, who agrees with the 
 principal debtor, upon a valuable consideration and by a 
 contract binding upon both parties, to extend the time for 
 the payment of such note for a definite period, without the 
 consent of the surety, discharges the latter absolutely from 
 his obligation. The creditor, by such an undertaking, 
 practically agrees that during such extension, he will not 
 
 1 Selser v. Brooks, and Stoner v. ' Cooper . Evans, L. R. 4 Eq. 45; 
 Milliken, supra. Mackintosh . Wyatt, 3 Ilarc, 562. 
 
 Loomis . Fay, 24 Vt. 240.
 
 THE SURETY'S DISCHARGE. 321 
 
 receive paj-ment of the debt from any one standing in the 
 position of surety ; since, upon payment, the surety would 
 at once be entitled to sue his principal. The surety, being 
 thus deprived of his remedies against his principal under 
 the origiiiiil contract of suretyship, is discharged of his obli- 
 gation upon recognized equitable principles. Courts of 
 equity will give him relief by injunction as against an 
 action at law brought by the creditor or holder to enforce his 
 personal obligation upon the principal debt. 1 The same 
 rule applies as to bills of exchange. The acceptor, being 
 the principal debtor, and the other parties sureties, if the 
 holder of the bill, by a valid contract for valuable consider- 
 ation, gives time for a definite period to the acceptor, the 
 other parties to the bill are discharged from any liability 
 contracted by becoming parties thereto. 9 
 
 In order that an extension of time of payment by the 
 creditor to the principal debtor should have this effect of 
 releasing the surety, it is essential that the agreement for 
 delay should be for a definite time, upon sufficient considera- 
 tion, and binding upon both parties, and without the consent 
 
 1 Bradshaw . Combs, 102 111. 428; 512; Halliday v. Hart, 30 K Y. 474, 
 
 First Nat. Bank v. Pierce, 99 Ib. 272; 488; Blydeuburgh v. Bingham, 38 
 
 Grossman v. Wohlleben, 90 Ib. 537; Ib. 371; Merchants' Bank. Wixen, 
 
 Danforth v. Semple, 73 Ib. 170; 42 N. Y. 438; Hubbard v. Gurney, 
 
 Woolford v. Dow, 34 111. 428; 64 Ib. 457, 468; a single day will be 
 
 Phares v. Barbour, 49 Ib. 370; Da- sufficient, Ducker . Rapp, 67 Ib. 
 
 vis v. People, 1 Gilm. 409; Globe 464; Jester. Sterling, 25 Hun, 344; 
 
 Ins. Co. v. Carson, 31 Mo. 218; Denick v. Hubbard, 34 K Y. Supr. 
 
 Rucker v. Robinson, 38 Ib. 154; Ct. 347; Dunham v. Countryman, 66 
 
 Headlee v. Jones, 43 Ib. 235; Hosea Barb. 268; Brown v. Prophit, 53 
 
 v. Rowley, 57 Ib. 357; Newcomb v. Miss. 649; Farnsworth v. Coots, 46 
 
 Blakeley, 1 Mo. App. 289; Jennison Mich. 117; Bebout v. Bodle, 38 Ohio 
 
 v. Stafford, 1 Cush. 168 ; Greeley . St. 500 ; Liquidators . same, L. R. 
 
 Dow, 2 Met. 176; Paulin v. Kaighn, 7 H L. 348; Howell v. Jones, 1 C. 
 
 29 N. J. L. 505; s. c. 29 Ib. 480; M. & R. 97; Philpot v. Briant, 4 
 
 Thompson v. Bowne, 39 Ib. 2 ; Gray Bing. 717. Combe v. Wolf, 8 Ib. 
 
 v. Brown, 22 Ala. 273; Bangs v. 162; Strong v. Foster, 17 C. B. 219; 
 
 Strong, 10 Paige, 11; s. c. 7 Hill. Bailey v. Edwards, 4 B. & S. 761. 
 
 250; Fellows v. Prentice, 3 Demo, * Philpot v. Briaut,4 Bing. 717. 
 21
 
 322 THE PARTIES TO THE INSTRUMENT. 
 
 of the surety or indorser.'* Such extension of time for pay- 
 ment must involve the substitution of a subsequent for a 
 former agreement.* Where these considerations exist, 
 whether the extension of time to the principal is beneficial 
 to the surety or not, the latter stands absolutely discharged. 1 
 A surety may, however, consent to an extension of time to 
 his principal; 4 or may subsequently ratify the agreement 
 entered into by the creditor and the principal debtor for 
 such extension. 5 The surety may also waive his right of 
 release by entering into a new agreement, which will be en- 
 forced, provided the surety upon making the same was 
 aware of his release from the prior obligation. 8 
 
 248. WHEN SURETY NOT RELEASED BY EXTENSION 
 OF TIME. The discharge of a surety, where the creditor or 
 holder of the note has given the principal debtor an exten- 
 sion of time for payment, is subject to certain conditions as 
 stated, and does not follow in cases where the requisites of 
 a valid extension do not exist. The surety is not discharged, 
 if the extension of time be granted without a valuable con- 
 sideration therefor, so that the creditor remains under no 
 legal obligation to delay suit against the principal creditor. 7 
 A mere promise to pay interest by the principal debtor for 
 
 1 Cherry v. Miller, 7 Lea, 305; 403 ; Adams v. Way, 32 Conn. 
 
 Gardner v. Watson, 13 111. 347; 172. 
 
 Flynn*?. Mudd, 27 Ib. 323;Danforth Wool ford v. Dow, 31 111. 424; 
 
 . Semple, 73 Ib. 170; Globe Ins. Co. First Nat Bank v. Whitman, 66 Ib. 
 
 . Carsou, 31 Mo. 218; Moss v. Hall, 331. 
 
 5 Exch. 50 ; Thompson v. Robinson, Hinds v. Ingham, 31 111. 400. 
 
 34 Ark. 44. T Corbett v. Woodward, 5 Sawy. C. 
 
 4 Bebout v. Boclle, 38 Ohio St 500. C. 403, 416; Creath v. Sims, 5 How. 
 
 8 Dunham n. Countryman, 66 192; McKenny t>. Waller, 1 Leigh, 
 
 Barb. 268; Davis v. People, 1 Gilm. 434; Reynolds?). Ward, 5 Wend. 501; 
 
 409; Water v. Crame, 20 111. 148; Gardner v. Watson, 13 111. 347 ; Gal- 
 
 Warner v. Campbell, 26 Ib. 282 ; braith v. Fullerton, 53 Ib. 126 ; Lieb- 
 
 Galbraith v. Fullerton, 53 Ib. 126; brandt v. Myron Lodge, 61 Ib. 81 ; 
 
 Phares . Barbour, 49 Ib. 390 ; Dan- State v. Manning, 55 Mo. 142 ; Den- 
 
 forth v. Semple, 73 Ib. 170. ick . Hubbard, 27 Hun. 347 ; Halli- 
 
 4 Corbett v. Woodward, 5 Sawy. day v. Hart, 30 N. Y. 474, 488.
 
 THE SURETY'S DISCHARGE. 323 
 
 the forbearance, when he already is under a like obligation 
 by the original contract, is not sufficient. 1 If the considera- 
 tion for the extension be itself illegal, as being usurious, the 
 surety is not discharged. 9 Nor where, the contract for ex- 
 tension having been made with a stranger, the surety may 
 still pay the debt and pursue his remedy against the princi- 
 pal. 3 The surety is not discharged where the extension of 
 time is indefinite, or during the pleasure of the creditor. 4 
 
 Where an extension of time was secured upon the false 
 representations of the principal that the surety had con- 
 sented thereto and a payment of interest, the creditor, upon 
 discovery of the fraud, was allowed to repudiate the agree- 
 ment and sue upon the original contract, without refunding 
 or tendering the amount received as interest, the agreement 
 for extension being wholly invalid. 5 The constructive 
 presence of a surety, and his presumed consent, are suffi- 
 cient to defeat the usual operation of an extension of time 
 upon the obligation of a surety, where in an action against 
 both principal and surety upon a note the principal confesses 
 judgment upon an agreement that execution shall not issue 
 for a year, although without the knowledge of the surety. 6 
 
 249. LIKE RULES AS TO SURETIES UPON SPECIAL- 
 TIES. Sureties bound upon specialties are released from 
 their obligations under like rules as to extension of time. 
 Where a creditor gives an extension of time on a judgment 
 to the principal debtor, the surety is discharged, if such 
 
 1 Reynolds v. Ward, 5 Wend. 501. a payment of usury is made, but 
 
 * Real Estate Trust Co. v. Leech, not in pursuance of a binding agree- 
 
 69 N. Y. 248 ; Church v. Malley, 70 ment, a surety is not discharged. 
 
 Ib. 63 ; Vilas v. Jones, 1 N. Y. 274 ; Hemery v. Marksberry, 57 Mo. 399. 
 
 National Bank v. Place, 15 Hun, 564; Frazer v. Jordan, 8 El. & B1.312. 
 
 Denick v. Hubbard, 27 Ib.347; Wiley 4 Thompson v. Robinson, 34 Ark. 
 
 V. Keight, 39 Mo. 130; Marks v. 44. 
 
 Bank, 8 Ib. 316; Charlotte Bank v. Bebout v. Bodle, 38 Ohio St. 500. 
 
 Lineberger, 83 N. C. 454. Contra; * Carraway v. Odeneal, 56 Miss. 
 
 Wild . Howe, 74 Mo. 551. Where 223 ; Ammons v. Whitehead, 36 Ib. 79.
 
 324 THE PARTIES TO THE INSTRUMENT. 
 
 time be granted without his knowledge and consent. 1 An 
 agreement by parol to extend the time of payment upon 
 a specialty debt, represented by a bond, under seal, being 
 sufficient to bind the creditor, releases a surety, if made 
 without his consent.* Relief of the surety, where it is 
 sought to establish a discharge from liability upon a 
 specialty debt or judgment, by reason of an extension of 
 time by parol, must be sought in equity, as it is not availa- 
 ble in an action at law upon such bond or judgment. 8 The 
 sureties on a bond were released, where the principal 
 debtor gave the creditor his own promissory note for the 
 same amount, payable in terms at the same time as the time 
 stipulated in the bond, as the maker thereby became en- 
 titled to three days of grace for payment beyond the 
 time set by the original security. 4 
 
 260. RIGHTS AGAINST SURETY RESERVED, UPON RE- 
 LEASE OP PRINCIPAL OR CO-SURETY. An agreement, 
 upon valuable consideration, by a creditor to release and 
 discharge a principal debtor, but expressly reserving in 
 such instrument of release, and as a part of the same 
 transaction, the right of the creditor to proceed as against 
 a surety bound upon the same obligation, does not affect, in 
 equity or at law, the continuing liability of the latter. 
 Such a covenant operates not as an absolute, but only as a 
 qualified and conditional suspension of the right of ac- 
 tion. Necessarily it must be treated as if it were made, in 
 
 1 Boling v. Young, 38 Ohio St. 135; v. Young, supra; Baker v. Cincinnati, 
 Blazer v. Bundy, 15 Ib. 57; Sayre v. 11 Ohio St. 534; Denier t>. Myers, 20 
 King, 17 W. Va. 562; McNulty . Ib 336 ; Stcpban t>. Daniels, 27 Ib.527. 
 Hurd, 18 Hun, 1. If the surety has Carter v. Duncan, 84 N. C. 676. 
 by compulsory process paid the * Witncr v. Ellison, 72 111.302; 
 judgment to save his goods and Tate v. Wymand, 7 Blackf. 240; 
 chattels from forced sale, he is en- Lock v. U. S. 3 Mason, 446; Davy t>. 
 titled to recover from the judgment Prendcrgrass, 5 B. & Aid. 187; Par- 
 creditor the amount so paid, and the ker v. Watson, 8 Ex. 404. 
 latter is remitted to his remedies * Appleton v. Parker, 15 Gray, 173. 
 against the principal debtor. Boling
 
 THE SURETY'S DISCHARGE. 
 
 325 
 
 express terms, subject to the consent of the surety. The 
 rights of the surety, under his contract, can not be limited 
 or destroyed to his loss, by any secret agreement between 
 the principal and creditor. If the latter has surrendered 
 all claims upon the principal debtor, so that they are ab- 
 solutely unenforceable, the surety is discharged ; if the agree- 
 ment, however, is in effect only a covenant not to sue the 
 principal, the surety's rights, as against both parties, are 
 not affected, and no discharge results. The surety may at 
 once upon payment proceed against his principal for the 
 money paid to his use ; and, in proper cases, will be given 
 equitable relief as against the creditor and principal even 
 before payment. 1 It was sought in an early case to extend 
 the rule to a release by a creditor of one of two or more co- 
 sureties, reserving his rights against the other sureties,* but 
 
 1 Oxley V. Storer, 54 111. 159; Par- 
 malee v. Lawrence, 44 Ib. 405; Muel- 
 ler v. Dobscheutz, 86 111. 176 ; Ains- 
 worth v. Brown, 31 Ind. 270; Mc- 
 Lellan v. Cumberland Bank, 24 Me. 
 566; McAllister v. Sprague, 34 Me. 
 296; Rucker . Robinson, 38 Mo. 
 154 ; Farnsworth v. Coots, 46 Mich. 
 117; Greenleaf v. Lorin?, 35 Mich. 63; 
 Clagett v. Salmon, 5 Gill & J. 314; 
 Blackburn ^.Ball. 21 Md. 208; Shaw 
 v. Pratt, 22 Pick. 305; Sohler v. Lor- 
 ing, 6 Cush. 537; Smith v. Barthol- 
 amew, 1 Met. 276; Stirewalt v. Mar- 
 tin, 84 N. C. 4 ; Charlotte . Line- 
 berger, 83 Ib. 454; Durrell v. Wen- 
 dell, 8 N. H. 369; Snow v. Chandler, 
 10 Ib. 92; Crane . Ailing 15 N. J. 
 L. 423; Catskill Bank v. Messenger, 
 9 Cow. 38; Rowley v. Stoddard, 7 
 Johns, 207; Bronson . Fitzhugh, 1 
 Hill, 183 ; Frink v. Green, 5 Barb. 
 455; Couch v. Mills, 21 Wend. 424; 
 Hubbell ft Carpenter, 5 N. Y. 1-71 ; 
 
 Morgan ft Smith, 70 N. Y. 545; Cal- 
 vo v. Davies, 72 Ib. 211; National 
 Bank v. Bigler, 83 Ib. 51, 66; Palmer 
 v. Purdy, Ib. 143 ; Burke v. Noble, 
 48 Pa. St. 168 ; Vieley v. Ho;ig, 24 
 Vt. 46-; Morse v. Huntington, 40 Ib. 
 488, 496; Ex parte Glendenning, 
 Buck, 519; Kearsley v. Cole, 16 M. 
 & W. 128 : Price v. Barker, 4 El. & 
 Bl. 760 ; North . Wakefield. 13 Q. 
 B. 541; Braler . Mayor, 19 C. B.N. 
 S. 76; Solly ft Forbes, 2 B. & B. 46; 
 Green v. Wyman, L. R. 4 Ch. 204 ; 
 Liquidators v. Liquidators, L. R. 7 
 Ch. 142; s. c. 7 H. L. 348; Muir ft 
 Crawford, L. R. 2 H. L. Sc. 456 (a 
 bill of exchange). 
 
 Ex parte Gifford, 6 Ves. 505 
 (Lord Eldon); Stirling v. Forrester, 
 3 Bligh, 591, 596; United States v. 
 Murphy, 13 Fed. Rep. 589, recog- 
 nizes the rule, although under the 
 circumstances of the case, it was not 
 applied. Story's Eq. Jur. 498 a.
 
 326 THE PARTIES TO THE INSTRUMENT. 
 
 the case has been expressly overruled in later decisions. 1 
 Where such a release has been made, it is no defense to an 
 equitable suit for contribution by other sureties who have 
 paid the debt.* 
 
 251. DISCHARGE OP ESTATE OP SURETY UPON 
 DEATH, AS AGAINST CREDITOR. Upon the death of a 
 surety, bound jointly, his estate is absolutely discharged 
 both at common law and equity as to the creditor, the sur- 
 vivor or survivors alone being responsible. Receiving no part 
 of the consideration of the note either from the creditor or 
 principal debtor, equity finds no moral ground upon which 
 it can rest an obligation to pay, and discharges the estate 
 of the surety after his death. 8 And this, whether the 
 creditor knew the deceased was a surety on the note 
 or not. 4 Where two persons gave a joint and several 
 bond, and the obligee elected to take a joint judgment 
 thereon, and the surety deceased, the obligee was not allowed 
 to enforce such judgment against the estate of the surety,* 
 although the surety alone had appealed from such judgment, 
 giving an indemnity bond, the appeal being pending at the 
 time of his death.* Where a surety, however, holds se- 
 curity from the principal for the payment of the debt, it 
 remains as available to the creditor after the surety's 
 decease as before. 7 
 
 1 Nicholson . Revill. 4 Ad. & E. v. Craighead, 67 Ib. 432; Risley t>. 
 
 683; Evans v. Bremridge, 25 L. J. Brown. 67 Ib. 160; Dixon v. Vand- 
 
 Cu. 104 ; Pledge v. Buss, Johns, enbergh 35 K J. Eq. 47. The con- 
 
 Eng. Ch. 6C3. tra rule is held in Hudelson v. Arra- 
 
 1 Clapp v. Rice, 15 Gray, 559; Hill strong, 70 Iiid. 99; Smith v. Martin, 
 
 c. Morse, 61 Me. 541 ; Crosby v. Wy- 4 Dess. 149. 
 att, 23 Ib. 163. 4 Dixon v. Vandeiibergh, 35 N. J. 
 
 ' United States v. Price, 9 How. Eq. 47. 
 
 83; Pickersgill v. Lahers, 15 Wall. United States v. Price, supra. 
 140; Fielden v. Lahers, 6 Blatch. Risley . Brown, 67 N. Y. 160. 
 524 ; Gette v. Binsee, 49 N. Y. 385 ; ' Crosby v. Crafts, 69 N. Y. 607. 
 Wood t>. Fiske, 63 Ib. 245; Hanck
 
 THE SURETY'S DISCHARGE. 327 
 
 252. NO DISCHARGE OF ESTATE, AS AGAINST CO- 
 SURETIES. The death of one of two or more sureties will 
 not relieve the estate of a deceased surety from the equit- 
 able obligation of contribution to other sureties upon pay- 
 ment of the debt. This obligation of the contract of co- 
 suretyship is rested upon an implied agreement of the parties 
 to contribute towards discharging the liability incurred on 
 behalf of a common principal. Where there has been a 
 default on the part of the principal, before the death of the 
 surety, the obligation to contribute descends upon the 
 representatives of the deceased surety, in like manner as 
 any other contract by him to pay money upon a future 
 event or contingency. 1 The recovery of a surety against 
 the estate of his deceased co-surety in a suit for contribution 
 has been restricted to an aliquot portion of the money, not- 
 withstanding some of the other sureties may be insolvent.* 
 
 Johnson v. Harvey, 84 N. Y. wards, 2 B. &. P. 268; Deering v. 
 
 363; Bradley v. Burwell, 3 Den. 61; Winchelsea, Ib. 270. Contra : Waters 
 
 Tour v. Goodrich, 2 Johns. 213; v. Riley, 1 H. & G. 305. 
 
 Powell v. Smith, 8 Ib. 249; Batchel- s Stothoff v. Dunham, 10 N. J. L. 
 
 der 9. Fisk, 17 Mass. 464 ; Wood . 181. 
 Leland, 1 Met. 387 ; Cowell . Ed-
 
 328 THE PARTIES TO THE INSTRUMENT. 
 
 CHAPTER XXV. 
 
 INDORSEES AND GUARANTORS. 
 
 
 
 253. The contracts of the indorser and guarantor. 
 
 254. Subrogation of holders to collaterals of accommodation indorsers. 
 
 255. Subrogation of accommodation indorser to securities. 
 
 256. Contribution and subrogation between successive accommodation 
 
 indorsers. 
 
 257. The indorser, as charged by pledgee of collateral notes. 
 
 258. The discharge of the indorser. 
 
 259. Tbe law of continuing guaranties. 
 
 260. Guaranties of contracts, void or ultra vires. 
 
 261. The enforcement of the liability of the guarantor. 
 
 262. The guarantor's liability, where creditor holds collateral securities. 
 
 253. THE CONTRACT OP THE INDORSER AND GUAR- 
 ANTOR. The contract of an indorser of a negotiable prom- 
 issory note is, that the instrument and antecedent signatures 
 are genuine ; that he himself has a good title and is compe- 
 tent to bind himself as indorser ; that the maker is competent 
 to bind himself and will pay the note at maturity, upon due 
 presentment ; otherwise, upon default, he, the indorser, 
 upon due and reasonable notice of dishonor, will pay the 
 same to the indorsee or other holder. 1 The indorser of a bill 
 of exchange belongs to that general class of sureties in 
 which, strictly speaking, there is no suretyship, but in 
 which there is a primary and secondary liability of two 
 persons for one and the same debt ; the debt being, as be- 
 tween the two persons, that of one of those persons only, and 
 not equally of both, so that the other, if he should be com- 
 pelled to pay it, would be entitled to reimbursement by the 
 
 1 Ross t>. Jones, 22 Wall. 576, 589 (Clifford, Jus).
 
 INDORSERS AND GUARANTORS. 329 
 
 person by whom (as between the two) it ought to have been 
 paid. As between the indorser and the acceptor, the former 
 is, upon payment, entitled to the securities held by the 
 creditor, and also to sue the acceptor. 1 
 
 A guaranty is a separate, independent contract, by 
 which the guarantor undertakes in writing, for a valuable 
 consideration, to be answerable for the payment of some 
 particular debt, or future debts, or the performance of some 
 duty, in case of the failure of another person primarily 
 liable to pay or perform.* Such guaranty is assignable with 
 the notes or other obligations secured thereby. 8 The liabil- 
 ity of the guarantor is not extended by implication, the rule 
 of strict construction being applied in his favor. 4 A contract 
 of guaranty is regarded as an irrevocable and absolute en- 
 gagement to pay the debt upon maturity. 5 
 
 254. SUBROGATION OF HOLDERS TO COLLATERALS OP 
 ACCOMMODATION INDORSERS. The principle of subrogation 
 is applied in favor of the holders of negotiable paper in cases 
 
 1 Duncan North & S. W. Bank, Cooper v. Deitrich, 22 Barb. 516; 
 
 L. R. 6 App. 1. Partridge .Da vis, 20 Vt.499. Contra: 
 
 9 Gallagher v. Nicholls, 60 N. Y. Hayden v Weldon, 43 N. J. L. 128; 
 
 438,444; Winchell v. Doty, 15 Hun, Huck v. Hagcr, 51 Pa St. 459; Mc- 
 
 1 ; Brown v. Cartes, 2 N. Y. 230 ; Dowl v. Yeomans, 8 Watts, 361; 
 
 Forbes v. Eowe, 48 Conn. 413; Wei- Smith v. Dickinson, 6 Humph. 261; 
 
 ton v. Scott, 4 Conn. 533; Rich. Ten Eyck . Brown, 4 Chaiull 151; 
 
 Hathaway, 18 111. 548; McMillan v. True v. Fuller, 21 Pick. 140. A 
 
 Bank, 32 Ind. 11; Singer Manfg Co. guaranty is not negotiable, nor does 
 
 v. Littler, 56 Iowa. 601; Dole fl.Young, it become so by being indorsed on 
 
 24 Pick. 250; Reigart v. While, 52 negotiable paper, the payment of 
 
 Pa. St. 440; Wood . Sherman, 71 which it is designed to secure. Hay- 
 
 Ib 406. den v. Weldon, supra. 
 
 8 Ellsworth v. Harmon, 101 111. 4 bhinefl. Central Savings Bank, 70 
 
 274; Webster e. Cobb, 17 Ib. 459; Mo. 524, 533;Sclmltze v. Crane, 64 N. 
 
 First National Bank v. Carpenter, Y. 659; Burns v. Burrows 61 Ib 89. 
 
 41 Iowa, 518; Waldringfl. Harring, 28 5 Hernandez v. Stillwell, 7 Daly, 
 
 Mich. 493; Claflin v. Ostrom, 54 N. 360; Tator v. Thayer, 47 How. Pr. 
 
 Y. 581; Craig v. Parkes, 40 Ib. 181; 180; Russell v Clarke, 7 Cranch, 90. 
 Ketchall v. Barnes, 24 Wend. 456;
 
 330 THE PARTIES TO THE INSTRUMENT. 
 
 where accommodation indorsers have received collateral 
 securities from the principal debtor. Such holder is, upon 
 failure of the maker to pay, at once subrogated to the secur- 
 ities held by the indorser. Such securities are regarded as 
 in the nature of a quasi trust fund. 1 Where such security 
 is expressly given, as well for the benefit of the holder as 
 for the indorser, upon an assignment thereof to a third 
 person, with notice, the equitable lien of the holder of the 
 paper will be preferred. 8 Such securities may be transferred 
 by the indorser to the holder upon default of the principal, 
 and the proceeds applied to the payment of the note, 3 and is 
 sustained where, upon dishonor of the old paper, new notes 
 are given, it being the intention of the parties to keep alive 
 the security. 4 Where the indorser still retains possession of 
 the collateral securities, a court of equity will require them 
 to be applied in payment of notes when indorsed to an inno- 
 cent holder for value, in the usual course of business.* And 
 the misappropriation of the proceeds thereof by a trustee in 
 whose possession the securities had been placed, will not 
 limit the liability of the maker or accommodation indorser 
 to such holder for value. 8 Where both the maker and in- 
 dorsers are insolvent, the holders for value of negotiable 
 paper are entitled, as against creditors, to the enforcement 
 of securities given to such indorsers as indemnity, although 
 their liability has not become absolute, nor been discharged. 1 
 Upon insolvency of the principal debtor, the holders of notes 
 
 1 Burnside v. Fetzner, 63 Mo. 107; * Wells v. Smith, 2 Utah, 39. 
 
 Haven . Pippin, 18 Ib. 136; Nation- * National Bank v. Ncwbiirgh, 83 
 
 al Exch. Bank v. Silliman, 65 N. Y. N. Y. 51, Pond v. Clarke, 14 Conn. 
 
 475; Bennett v. Cook, 45 Ib. 268; 334; Nightingale 0. Chuff ee, 11 R. I. 
 
 Curtis v. Tyler, 9 Paige, 432; Vail t>. 609. 
 
 Foster, 4 N. Y. 312; Homer v. Sav- * New London Bank v. Lee, 11 
 
 ings Bank, 7 Conn. 478; Ohio Life Conn. 112; Lewis v. DeForest, 20 Ib. 
 
 Ins. Co. v. Ledyard. 8 Ala. 866 ; But- 440. 
 
 ler TJ. Berkie, 13 Ohio St. 514; Rob- Fischer v. Meyer, 24 Mo. 90. 
 
 erts . Colvin, 3 Gratt. 358. ' National Bank v. Small, 7 Fed. 
 
 1 Hudson etc. Transfer Co. v. Na- Rep. 83; Rogers v. Abbott, 128 Mass, 
 
 tional Bauk, 46 Conn. 573. 102.
 
 INDORSEES AND GUARANTORS. 
 
 331 
 
 are entitled to subrogation to securities held by an accom- 
 modation indorser under an agreement for his general indem- 
 nity, not to exceed a certain sum. 1 The holder may prove 
 for the full amount against the estate of the insolvent prin- 
 cipal, notwithstanding securities are held by the accommo- 
 dation indorser.* 
 
 But where the holder of a bill, being informed that the 
 acceptor is an accommodating party, holding collateral secur- 
 ities, and makes an express renunciation of any claim there- 
 on, agreeing to look to the drawer for payment, the accom- 
 modation acceptor is discharged, and other creditors acquir- 
 ing rights to such securities are protected. 3 The holders of 
 notes are not permitted to resort to property where one of 
 two mortgages received by an indorser as security from his 
 principal, was released as being unnecessary for his indem- 
 nification. The release was made after the insolvency of 
 the maker and indorser for the purpose of securing a further 
 loan, which was advanced by an innocent person. 4 Nor 
 where the right has been defeated by the acts of the holder 
 himself, seeking such subrogation; 5 and, pending the crea- 
 tion of other equities, the indorser holding securities for his 
 general indemnification, may release such security, as he 
 pleases.' 
 
 1 Post v. Tradesman's Bank, 28 
 Conn. 421; TiiraH v. Spencer, 16 Ib. 
 139; Lewis v. De Forest, 20 Ib. 427; 
 Homer v. Savings Bank, 7 Ib. 478. 
 
 2 Meed v. Nelson, 8 Gray, 55; 
 Cabot Bank 0. Bodman, 11 Ib 134. 
 
 8 Wluxrtley v Trk>kt>r, 1 Campb. 
 351 : Parker v. Leigh, 2 Stark. 229. 
 
 4 Thrall Spencer, 16 Conn. 139. 
 The Court say: "T. had no legal 
 title. The first mortgage was not 
 made to the holders of these notes, 
 but to the accommodation indorser 
 for his security. Even if A. were 
 still the owner of the property, the 
 plaintiff could only reach it through 
 
 the intervention of a court of equity. 
 But he has taken the notes without 
 making any claim for the property, 
 while A. retained the title. He has 
 lain still until the latter has parted 
 with the title and the possession, 
 and the property has gone into the 
 hands of a bona fide holder for a 
 valuable consideration. He there- 
 fore conies too late for relief." 
 
 8 New Bedford Inst. v. Fairhaven 
 Bank. 9 Allen, 125. 
 
 6 Jones v. Quininipiack Bank, 29 
 Conn. 25; Post v. Tradesman's Bank, 
 28 Ib. 421; Thrall v. Spencer, 16 Ib. 
 139.
 
 332 THE PARTIES TO THE INSTRUMENT. . 
 
 255. SUBROGATION OF ACCOMMODATION INDORSERS 
 TO SECURITIES. The subrogation of the accommodation in- 
 dorser to the securities held by the creditor or holder for 
 value is subject to the condition that he shall have 
 himself first paid or discharged the note. Nor can the in- 
 dorser insist, after his liability for the debt is fixed, that the 
 creditor or holder should first exhaust the collaterals held 
 by either of them from the principal debtor before en- 
 forcing his personal liability upon the principal note. 1 
 Prior payment is also necessary to entitle the accommo- 
 dation acceptor of a bill of exchange to subrogation to col- 
 lateral securities of the creditor or holder of the negotiable 
 paper.* Where a judgment is rendered on the debt, an 
 iudorser upon payment is subrogated to the rights of the 
 creditor against the maker thereunder.* The right of subro- 
 gation is restricted to securities held for the particular debt, 
 and does not extend to all the securities which may be held 
 by the creditor upon a general account. 4 The right to such 
 securities, being a mere equity, is not preferred as against 
 equities of creditors equally deserving, where so to do 
 would be to sanction a fraud upon such creditors. 5 The 
 principle of subrogation has no application in a case where 
 a new note, with a new accommodation iudorser, is taken 
 by a bank in payment of another note, signed by other in- 
 dorsers. The indorser of the new note being a mere vol- 
 unteer, is not entitled to subrogation to a judgment held as 
 indemnity by the indorser of the former note. 6 
 
 1 First National Bank v Wood, 71 9 Bank of Toronto v. Hunter, 4 
 
 N.Y. 405, 411 ; Beebe v. Banks.7 W. & Bosw. 646. 
 
 8. 375; Cottrell's App.23 Pa. St.294; Rosst>. Jones, 22 Wall. 586; Lenox 
 
 in re Babcock, 3 Story, 893; Rosso, v. Prout, 3 Wheat. 525; Hunt v. 
 
 Jones, 22 Wall. 576, 592. But where Brigham, 2 Pick. 581 ; Frye . Bar- 
 
 a bank had a lien in the nature of ker. 4 Ib. 382; Trimble e. Thome, 
 
 security on the principal's stock, as 16 Johns. 153; Warner v. Beardsley, 
 
 in Union Bank v. Laird, 2 Wheat. 8 Wend 199; s. c. 6 Ib 610 
 
 890, resort thereto would be more 4 City Bank v. Luckie, L. R. 5 Ch. 
 
 equitable than to sue an indorser, 774 n.\ Wright t>. MorJey, 11 Ves. 12. 
 
 who- was only liable upon the de- ' Greer v. Bush, 57 Miss. 575. 
 
 fault of the acceptor. Webster's App. 86 Pa. St. 409.
 
 INDORSEES AND GUARANTORS. 383 
 
 256. CONTRIBUTION AND SUBROGATION BETWEEN SUC- 
 CESSIVE ACCOMMODATION INDORSERS. The liability of par- 
 ties to negotiable instruments is determined by the contract 
 established by the position of their names upon the paper, and 
 if the right of contribution between two or more persons 
 whose names appear on negotiable paper can not be sup- 
 ported under such contract, no enforcement thereof can be 
 had. 1 Where one of two accommodation parties executes 
 a note as a joint maker with the principal debtor and the 
 other as payee and indorser, the former is not, after pay- 
 ing the note, in the absence of a special agreement, entitled 
 to contribution as against the latter.* And one of two ac- 
 commodation indorsers on promissory note having paid the 
 note, was not allowed to sue for contribution. 8 An accom- 
 modation indorser, holding collaterals from the principal, 
 who sold the same for the exact amount of the note, which 
 he paid, is not entitled to an action against prior accommo- 
 dation indorsers, as the note was paid with the proceeds of 
 the collaterals. If the money had still remained in the 
 hands of the indorser, it would have been devoted to the 
 payment of the note, to avoid further litigation. 4 And 
 where the indorser of a note was a non-resident, and not a 
 party to the action, nor to a cross-claim by the maker 
 insisting upon equitable defenses as against the holder, the 
 maker was not allowed subrogation to securities held by the 
 holder from such indorser, whose alleged fraud had wronged 
 the maker. 6 The principle of subrogation is applied for the 
 benefit of successive indorsers. The last indorser having 
 paid the judgment for the debt, he may take an assignment 
 
 'West Boston Savings Bank v. * Hillegas c.Stephcnson, 75 Mo 118. 
 
 Thompson, 124Mass. 506, 514; Long- 3 Lane v. Stacey, 8 Allen, 411. Uu- 
 
 ley v. Griggs, 10 Pick. 121; Smith. less by special agreement, Drake v. 
 
 Smith, 1 Dev. Eq. 173; Braham v. Christy, 10 Mo. App. 566. 
 
 Ragland, 3 Stew. (Ala) 247; Post v. * Rowland v. Smith, 49 Conn. (15 
 
 Tradesman's Bank, 28 Conn. 421 ; Rep. 710.) 
 
 Farmers' Bank v. Van Metter, 4 ' American Nat. Bank v. Harrison 
 
 Rand. 553; McCarty v. Roots, 21 Wire Co., 11 Mo. App. 446. 
 How. U. S. 432.
 
 THE PARTIES TO THE INSTRUMENT. 
 
 thereof in order to enforce payment by preceding in- 
 dorsers. 1 
 
 257. THE INDORSEE, AS CHARGED BY PLEDGEE OP 
 COLLATERAL NOTES. As between the parties to a contract 
 of pledge, the holder of negotiable instruments as collateral 
 security is not held to strict rules as to demand and notice 
 of non-payment. His failure in this respect will not dis- 
 charge the pledger from his principal debt, although the 
 latter may be credited thereon with actual loss. 8 Upon an 
 action against a holder of such securities for neglecting to 
 protest a note, and thus discharging an indorser, the recovery 
 is limited to the sum which will be a full satisfaction for the 
 damages, subject to equitable deduction where the creditor 
 holds other securities for the debt. 3 An indorser is dis- 
 charged where a notary public upon demanding payment of 
 the maker fails to produce the collateral securities held by 
 the pledgee to secure its payment. 4 It is no defense to an 
 action against an indorser upon a note discounted by a 
 bank, that at the time of the discount, it was understood 
 that the bank would rely upon certain collateral securities 
 rather than the indorser. Such an agreement, if it had a 
 valuable consideration, would not affect the liability of 
 parties to the principal note. 5 Where, however, an in- 
 dorser holding a promissory note as security, had been 
 discharged on the principal debt, but waived the want of 
 notice and paid the same, he was not permitted to enforce 
 the collateral note for his own benefit, upon has voluntary 
 payment of the principal note.' 
 
 1 Lloyd . Barr, 11 Pa. St. 41. tional Bank, 77 N. T. 320, 329; Bo- 
 
 * Douglass 0. Reynolds, 7 Pet. 125; rup v. Meininger, 5 Minn. 523. 
 
 B. c. 12 fb. 497; Wildes t>. Savage, 1 * Ocean Nat. Bank t>. Faut, 50 N. 
 
 Story, 22; Russell v. Hester, 10 Ala. Y. 274; see Spaldang v. Bank. 9 Pa. 
 
 535 ; Whitten . Wright, 34 Mich. 92. St. 28 ; Stuart v. Bigler, 98 Ib. 80. 
 
 ' Mott . Havana Bank, 22 Hun, * West Boston Savings Bank c. 
 
 854; Allen . Suyclam, 20 Wend. 321 Thompson, 124 Mass. 506, 514. 
 
 First National Bank v. Fourth Na- Bachellor v. Priest, 12 Pick. 279.
 
 INDORSERS AND GUARANTORS. 335 
 
 258. THE DISCHARGE OF THE INDORSER. The 
 liability of an indorser of negotiable paper, bills and notes, 
 is limited and dependent upon the condition that the holder 
 of the paper shall have made demand of payment at maturity 
 and upon default has given notice of non-payment to the 
 indorsers. Should the holder omit to perform these essen- 
 tial duties the indorser stands discharged. 1 Where securi- 
 ties are held by an indorser specially for his own benefit, 
 whether received at the time of indorsement or later, and a 
 failure has been made as to demand and protest, so that he 
 is discharged from his liabilities, the holder of the note has 
 no right to complain if he return such securities to the 
 maker.* Demand and notice of dishonor are not required 
 to charge an indorser where he has received from the prin- 
 cipal an assignment of the whole of his property, or of so 
 much thereof as is clearly equal in value to the notes upon 
 which the indorser is bound, and is holding the same at the 
 maturity of the note. 8 Although where such indemnity is 
 limited to " legal obligations/' the indorser of notes is dis- 
 charged if proper demand and protest be not made. 4 The 
 general rules under which an indorser is discharged in cases 
 
 1 Lenox v. Pratt, 3 Wheat. 520; vail t>. Farmers' Bank, 9 G. & J. 31; 
 
 Bailey . Buchanan, 21 Kan. 474; Hill v. Martin. 12 Lea, 177 ; Codding- 
 
 Clark v. Devlin, 2 P. & B. 366. ton . Davis, 3 Den. 16 ; s. c. 1 N.Y. 
 
 9 Ray v. Smith, 17 Wall. 411; Hoi- 186 ; Benedict v. Coffe, 5 Duer, 233, 
 
 land v. Turner, 10 Conn. 308; Has- 266; Mechanics' Bank v. Griswold, 
 
 kell v. Boardman, 8 Allen, 38; 7 Wend. 165; Seacord *>. Miller, 13 
 
 Creamer v. Perry, 17 Pick. 332 ; Mar- N. Y. 55 ; Perry v. Green, 19 N. J. 
 
 shall v. Mitchell, 35 Me. 221 ; Moses L. 61; Kramer v. Samlford, 4 W. & 
 
 0. Ela, 48 N. H. 557 ; Spencer v. Har- S. 328; Durham v. Price, 5 Yerg. 300; 
 
 vey, 17 Wend. 489 ; Seacord D. Mil- Watkins v. Croach, 5 Leigh, 522, 
 
 ler, 13 N. Y. 55 ; Wilson v. Senior, 547; Barrows v. Hannigan, 1 Mc- 
 
 13 Wis. 380. Lean, 309 ; Corney v. DeCosta, 1 
 
 8 Stephenson v. Primrose, 17 Ala. Esp. 303; Whitfield v. Savage, 2 B. 
 
 155 ; Holland v. Turner, 10 Conn. & P. 277. 
 
 308 ; Marine Bank v. Smith, 18 Me. 4 Haskell v. Boardman, 8 Allen, 38; 
 99; Marshall v. Mitchell. 34 Ib. 221 ; Moses v. Ela, 43 N. H. 557; Denny v. 
 Lewis v. Kramer, 3 Md. 265. 291 ; Palmer, 5 Ired. 610; Wilson v. Sen- 
 Walters v. Monroe, 17 Ib. 154 ; Du- ior, 14 Wis. 480.
 
 336 THE PARTIES TO THE INSTRUMENT. 
 
 of extension of time to the principal debtor, or by the sur- 
 render or loss of collaterals, or release of properly of the 
 principal seized upon execution, or by operation of law, and 
 other recognized causes of discharge, are the same as in the 
 case of sureties' and will be found distinguished in the 
 notes of Chapter xxiv. 
 
 259. THE LAW OF CONTINUING GUARANTIES. If one 
 proposes to lend his credit as guarantor for the benefit of 
 another, and wishes to restrict his liability to a particular 
 transaction, he should take care to say so clearly and 
 distinctly in his proposition or contract of guaranty. 4 What 
 form of words will constitute a " continuing guaranty " is a 
 question of construction. Such expressions as " We hold 
 ourselves responsible for the payment of any suni not ex- 
 ceeding $5,000 X may receive of you," 8 or a guaranty to a bank 
 " of all liabilities to said bank now existing or which may 
 hereafter arise, to the extent of $25,000," 4 or where the 
 guarantors agreed " to be responsible to you at any time 
 not exceeding $8,000," ' or a guaranty to A to pay " uncon- 
 ditionally at all times, any indebtedness of B to the extent 
 and not exceeding the sum of $10,000 for any overdrafts 
 now made, or that hereafter shall be made," * were declared 
 to be continuing guaranties ; but " I am willing to go secur- 
 ity for the amount of $2,500," was not. 7 
 
 Where the contract for a continuing guaranty is in the 
 form of a letter of proposed guaranty addressed generally 
 or to a particular person, notice of the acceptance of the 
 
 'Priest v. Watson, 75 Mo. 315; ' Poughkcepsie City Bank v. 
 
 Smith t. Rice. 27 Mo. 505; Bank of Phclps, supra. 
 
 United States v. Hatch, 6 Pet. 250. Lazear t>. National Bank, 52 Md. 
 
 * Poughkeepsie City Bank v. 78. 
 
 Phelps, 16 Hun, 158; Rindge t>. 8 Reynolds v. Douglass, 12 Pet. 
 
 Judson, 24 N. Y. 64; Clark v. Bur- 497. 
 
 clett, 2 Hall, 219; Mayer v. Isaac, 6 Davis v. Wells. 104 U. S. 159. 
 
 M. & W. 605; Coles v. Pack. L. R. ' Gerson v. Hamilton, 80 La. Ann. 
 
 6 C. P. 65; Merle v. Wells, 2 Campb. pt. 1, 737. 
 413.
 
 INDORSEES AND GUARANTORS. 337 
 
 same should be given to the guarantor, and that advances 
 will be made on the faith of it. Such notice is essential in 
 order to bind the guarantor. 1 Notice, however, is not 
 required where the contract of guaranty is founded upon 
 some independent consideration from the guarantee, whether 
 for an antecedent debt, or for a present or further advance.* 
 Nor where the agreement to accept is contemporaneous with 
 the guaranty.* The notice, when required, need not be in 
 writing necessarily, but may be inferred from facts and cir- 
 cumstances. 4 
 
 260. GUARANTIES OF CONTRACTS, VOID OR ULTRA 
 VIRES. The consideration for a guaranty need not be, in 
 the absence of fraud, for any but a nominal sum, so long 
 as it comes within the technical definition of a " valuable 
 consideration."* It must, however, be valid, for if the 
 principal contract be void, or there is an absolute want of 
 power to enter into the same, so that t\\e contract can 
 have no validity, no rights can be acquired under a guaranty 
 given for its peiformance.* A defense of ultra vires made 
 by a borrower of money from a corporation, in cases where 
 the funds obtained, or the benefits thereof, are still re- 
 tained, is not approved by courts of equity. The enforce- 
 ment of penalties affixed by statutory enactments for 
 violations of charter limitations belongs especially to the 
 
 1 Adams v. Jones, 12 Pet. 207, 213; 159 ; Dutchman v. Tooth, 5 Bing. N. 
 
 Edmonston v. Drake, 5 Ib. 624; Cas. 577. 
 
 Douglass 0. Reynolds, 7 Ib. 113; Lee * Farmer's Bank v. Lang, 87 N. Y. 
 
 t>. Dick, 10 Ib. 483; Reynolds v. 209; Heidenheimer v. Meyer, 42 N. 
 
 Douglass, 12 Ib. 497; Russell . Y. Supr. Ct. 506 ; s. c. 74 NY. 609; 
 
 Clarke, 7 Cranch, 69; Davis V. Wells, Joslyn t>. Dow, 19 Hun. 494; Bank- 
 
 104 U. S. 159; Louisville Manuf. Co. ing Company t>. Rautenberg. 103 111. 
 
 . Welch. 10 How. 461. 475. 460; Penn v. Borman, 102 Ib. 523; 
 
 * Davis e. Wells, 104 U. S. 159. Worden . Salter, 90 Ib. 160; Neus- 
 
 1 Wildest). Savage, 1 Story, 22. ladt v. Hall, 58 Ib. 572; Starr t>. 
 
 4 Reynolds v. Douglass, 12 Pet. Earle, 43 Ind. 478 ; McGregor v. 
 497; Davis v. Wells, supra. Railway Co. 18 Q. B. 618; Colman 
 
 5 Lawrence v. McCalmut, 2 How. t>. Eastern Counties Ry Co., 10 Beav. 
 426, 453; Davis . Wells, 104 U. S. 1. 
 
 22
 
 338 THE PARTIES TO THE INSTRUMENT. 
 
 government. This rule is applied in cases where attempts 
 are made to defeat guaranties upon which money has 
 been innocently advanced. The lender may recover 
 thereon at least to the extent of his advances. 1 A guaranty 
 of coupons was enforced, although the bonds were voida- 
 ble 2 and usurious interest paid by indorsers upon securing 
 discount of notes will not defeat an absolute guaranty 
 thereof. 1 Where a guaranty has passed into the hands of 
 a holder for value, without notice, it ceases to be affected 
 by equities existing between the original parties. 4 
 
 261. ENFORCEMENT OF THE LIABILITY OF GUARAN- 
 TORS. Generally, in the absence of contract, express or 
 implied, to sue the principal upon default, the liability of 
 the guarantor becomes fixed at that time without any pro- 
 ceeding by the creditor to collect the debt from the principal 
 debtor. His agreement is, that the principal shall pay the 
 debt at maturity; upon his default, the liability of the 
 guarantor at once begins. 5 Where such guaranty of pay- 
 ment is absolute, mere delay on the part of the creditor to 
 enforce payment from the principal debtor and to give 
 notice of non-payment, is no defense for the guarantor when 
 sued upon his undertaking. 6 A contract of guaranty of 
 collection merely requires the creditor to pursue his reme- 
 dies against the principal debtor with reasonable diligence 
 
 1 Macon Railroad Co. . Georgia * Lazear v. National Bank. 52 Md. 
 
 Railroad Co.. 63 Ga. 103 ; Argenti 78. 
 
 v. San Francisco Co., 16 Cal. 255; 4 Jackson n. Foote. 12 Fed. Rep. 
 
 Baird v. Bradley.55 111. 413; McCluer 37 ; Stone v. Bond, 2 Heisk. 425. 
 v. Railroad Co. 13 Gray, 124 ; Cary Singer Manfg. Co. v. Hester, 71 
 
 v. Railroad Co., 29 Barb. 35 ; Bissell Mo. 91 ; Davis etc. Co. v. Jones, 61 
 
 v. Railroad Co., 22 N. Y. 258 ; Za- Ib. 409 ; Forbes v. Rowc, 48 Conn, 
 
 briskie . Railroad Co.. 23 How. 381; 413 ; Penny v. Crane Bros. Man. Co. 
 
 Railroad Co. v. Howard, 7 Wall. 80 111. 244 ; Stowell v. Raymond, 83 
 
 413. Ib. 120; Hunter v. Moul, 98 Pa. St. 
 
 * Connecticut Mu. Life Ins. Co. 9. 18. 
 
 Railroad Co., 41 Barb. 9; Mann v. Hooker v. Gooding, 86 111. 60. 
 Eckford, 15 Wend. 503.
 
 INDORSEES AND GUARANTORS. 339 
 
 to judgment and execution and sale, and is applied in* 
 cases of ordinary guaranty of payment of a debt. The un- 
 dertaking of the guarantor in such cases is to pay only 
 after a judgment and execution against the princi- 
 pal debtor have proved fruitless. 1 The failure of a creditor 
 to use due diligence to recover the debt from the principal 
 debtor will defeat any right he may have upon even an 
 absolute guaranty of payment indorsed upon a bond.* 
 Where the maker of a promissory note is openly insolvent, 
 no suit is necessary to charge the guarantor ; 8 nor, upon 
 default of such insolvent debtor, is notice required to be 
 given by the creditor to the guarantor, as the latter can not 
 be prejudiced by want of notice, 4 especially where the name 
 of the guarantor does not appear upon the note. 5 The lia- 
 bility of the guarantor and of the principal being the same, 
 both must take notice at their peril of a default. 6 
 
 262. THE GUARANTOR'S LIABILITY WHERE CREDITOR 
 HOLDS COLLATERAL SECURITIES. A guarantor is not dis- 
 charged by the mere receipt of collateral security by the 
 holder of a promissory note, the payment of which is se- 
 cured by his guaranty. The giving of such security by the 
 maker is without effect upon the independent obligation of 
 
 1 Evans t>. Bell, 45 Tex. 553 ; Shep- 393 ; McDoal v. Yeomans, 8 Watts, 
 
 heard t>. Phears, 35 Ib. 763 ; Day t>. 361; Bull v. Bliss, 30 Vt. 127 ; Dana 
 
 Elmore. 4 Wis. 190 ; Moakley v. v. Conant, Ib. 246 ; Wclton v. Scott, 
 
 Riggs, 19 Johns. 69 ; Taylor v. Bui- 4 Conn. 533 ; Perkins v. Catlin, 11 
 
 len, 6 Cow. 624; Burt v. Fowler, 5 Ib. 213 ; Randolph v. Sherwood, 26 
 
 Barb. 501 ; Lovcland v. Sheppard, Ib. 437 ; Forbes v. Rowe, 48 Ib. 413; 
 
 2 Hill, 139 ; Manning v. Haight, 15 Gilliiighan v. Boardman, 29 Me. 79; 
 
 Barb. 76 ; Newell v. Fowler, 23 Ib. Sanford v. Allen, 1 Cush. 473 ; Wren 
 
 628; Cadyt;. Sheldon, 38 Ib. 102 ; v. Pierce, 4 8. & M. 91. 
 Griffith v. Robertson, 15 Hun, 344 : * Gibbs v. Cannon, 9 S. &, R. 198; 
 
 N. F. Ins. Co. v. Wright, 76 N. Y. Reynolds v. Douglass, 12 Pet. 497. 
 445. 6 Reynolds v. Douglass, supra. 
 
 * Seipple's App. 100 Pa. St. (14 C. 6 Gage v. Lewis, 68 111. 604; Doug- 
 
 L. J. 417.) lass v. Howland, 24 Wend. 35 ; Ham- 
 
 Crag . Parkis, 40 N. Y. (1 Hand) mond v. Gilmore, 14 Conn. 479; 
 
 181 ; McClerg v. Fryer, 15 Pa. St. Somersall t>. Barnaby, Cro. Jac. 287.
 
 340 THE PABTIES TO THE INSTRUMENT. 
 
 the guarantor. The creditor or holder of such note is not 
 required to resort to the securities of the maker as an ab- 
 solute preliminary to his action against the guarantor. The 
 only pre-requisite to such action is that the principal 
 shall have made default. 1 The guarantor is required first 
 to pay the debt before he can insist upon the enforcement 
 of such security ; or he must be so damnified that it would 
 be inequitable to refuse him subrogation thereto. 9 If the 
 contract of the guarantor be that of mere collection and not 
 of payment, the creditor holding securities from the princi- 
 pal debtor for the payment of the note is required to en- 
 force the same, if they can be realized, before resort is hud 
 as against the guarantor upon his personal obligation.* 
 
 1 Penny v. Crane Bro. Manuf. Co. Darst . Bates, 51 111. 439. 
 
 80 111. 244; Sigourney v. Wethcrell, Vanderbilt v. Schreyer, 2l Hun, 
 
 6 Met. 553 ; Forbes . Row, 48 Conn. 537; Borden v. Gilbert, 13 Wis. 670. 
 413; Weltonfl. Scott 4Ib.533.
 
 PAET IV. 
 
 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 Div I. CERTIFICATES OF STOCK. 
 CHAPTER XXVI. 
 
 THE CERTIFICATE OF STOCK. 
 
 263. Documents of title, under indorsement, ns collateral security. 
 
 264. The certificate of stock. 
 
 265. The certificate of stock quasi-negotiable. 
 
 266. And approximating to negotiable paper Bank v, Lanier. 
 
 267. Indorsements in blank of stock certificates. 
 
 268. Blank transfers of stock certificates in England. 
 
 26 3. DOCUMENTS OP TITLE, UNDER INDORSEMENT, AS 
 COLLATERAL SECURITY. It has become a very common 
 transaction in the commercial world to use documents and 
 indicia of title, quasi-negotiable under blank indorsement, 
 as certificates of stock, bills of lading, warehouse and cotton- 
 press receipts, and other like symbols of property, as collat- 
 eral security for the payment of loans and discounts of 
 commercial paper. Such collateral securities are readily 
 converted into funds, and the value thereof is easily deter- 
 mined by the quotations of the great exchanges. The rules 
 of estoppel in pais, or equitable estoppel, are invoked for the 
 protection of the pledgee for value, without notice, of such 
 
 (341)
 
 342 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 quasi-negotiable collateral securities. The representations 
 contained in such documents of title, under indorsement in 
 blank and delivery, are regarded as of equal weight as rep- 
 resentations contained in commercial paper, and the transfer 
 thereof carries some of the privileges enjoyed by the indorsee 
 for value of negotiable securities. An innocent pledgee for 
 value of certificates of stcck, thus indorsed in blank, with an 
 irrevocable power of attorney to transfer, is vested with an 
 unimpeachable title to the shares of stock. The presumption 
 arises by the possession of certificates of stock indorsed in 
 blank, that the pledger is the owner, although the certificate 
 and indorsement are in the name of another person. The 
 pledgee's title is protected as against the owner in cases of 
 fraud and misappropriation, where such owner through 
 his mistaken confidence has entrusted to a third person 
 documents or indicia of property, indorsed in blank, so that 
 he has the legal title and apparent ownership, and is 
 thus enabled to deceive an innocent pledgee advancing 
 his money upon the faith thereof. The rules of equitable 
 estoppel are also applied in favor of the bona fide pledgee 
 for value of bills of lading, warehouse receipts, cotton-press 
 notes, and other quasi-negotiable collateral securities. 1 
 
 'National Bank v. Watsontown 63 Ala. 243; Allen 0. Maury, 66 Ib. 
 
 Bank, 105 U. S. 17; Pollard v. Vin- 10; Smith v. Crescent City Transfer 
 
 ton, Ib. 5; Johnston t. Laflin, 103 Co. 30 La. Ann. 1378; State v. North 
 
 Ib. 800; Shaw v. Railroad Co. 101 L. Ry Co. 34 Ib. 947; Bank of Hoi- 
 
 Ib. 504; McAllister v. Kuhn, 96 Ib. ly Springs v. Pinson, 58 Miss. 421 ; 
 
 89; National Bank r>. Larier, 11 National Bank v. Dearborn, 115 
 
 Wall. 377; The Thames, 14 Ib. 98; Mass. 229 ; Stollenwerck v. That- 
 
 Matthews v. National Bank, Holmes, .cher, Ib. 224; Cornick v. Richards, 
 
 396; Continental Nat. Bank v. Elliot 3 Lea, 1; Cherry v. Frost, 7 Ib. 1 ; 
 
 Nat. Bank, 7 Fed. Rep 369; Winter First Nat. Bank v. Bryce, 78 Ky.42; 
 
 . Belmont Mining Co 53 Cal. 428; Prall v. Tilt. 28 N. J. Eq. 483; 
 
 Bridgeport Bank v. N. Y. & N.H. R. Wood's App. 92 Pa. St. 879 ; Burton 
 
 R Co. 30 Conn 270 ; N. Y. & N. H. v. Patterson, 12 Phila. 397 : Burton's 
 
 R R. Co. v. Schuylcr, 34 N. Y. 30; App. 93 Pa. St. 214; Fraser v. 
 
 Commercial Bank v. Kortright, 22 Charleston, 11 S. C. 486; Merchants' 
 
 Wend. 348; McNeil v. Tenth Nat. Bank v. Richards, 6 Mo. App 454; 
 
 Bank, 46 N. Y. 325; Locb o. Peters, Ross v. Southwestern Ry. Co. 58
 
 THE CERTIFICATE OF STOCK. 343 
 
 264. THE CERTIFICATE OF STOCK. A certificate of 
 stock is a muniment of title ; documentary evidence of the 
 ownership of shares of the capital stock of the corporation 
 issuing the same. By an indorsement in blank and delivery of 
 the certificate, the shares of stock represented thereby become 
 payable to bearer ; the certificates may pass from one person 
 to another like commercial paper so payable. The issue of 
 such certificates, properly authenticated, is all that a corpo- 
 ration can do to show the interest of any person in its shares 
 of stock. Such certificates are not shares of stock ; and a title 
 to shares may exist without a certificate. 1 Such certificates 
 are a solemn affirmation under the seal of the company that 
 a certain number of shares of the stock stand in the name 
 of the individual mentioned in the certificate.* A share of 
 stock itself is a species of incorporeal, intangible property, 
 in the nature of a chose in action, which can never be real- 
 ized except upon the dissolution and winding up of the cor- 
 poration, and in the meantime entitles the holder to profits 
 declared as dividends. 3 A certificate of stock may be the 
 subject of pledge, 4 and the expression loan or discount on a 
 
 Geo. 514 ; Tiedeman v. Knox, 53 Beecher v. Wells etc. Co. 1 McCrary, 
 
 Md. 6V2; Holmes t>. Bailey, 92 Pa. 62; Cornick v. Richards, 3 Lea, 1; 
 
 St. 57; Farmers' Bank v. Logan, 74 State v. North Louisiana & T. R. R. 
 
 N. Y. 568 ; Becker v. Hallgarten, 86 Co. 34 La. Ann. 947 ; White . Salis- 
 
 Ib. 167 ; First Nat. Bank . Northern bury, 33 Mo. 150 ; Agricultural Bank 
 
 R. R. Co. 58 N, H. 203; Security v. Burr, 11 Shepl. 263 ; Chester Glass 
 
 Bank v. Luttgren, 29 Minn. 363 ; Co. v. Dewey, 16 Mass. 94 ; Burrall 
 
 Emery's Sons, v. Irving Nat. Bank, v. Bushwick, 75 N. Y. 211, 216; 
 
 25 Ohio St. 360 ; Cheever v. Meyer, Cheever v. Meyer, 52 Vt. 66 ; Strange 
 
 52 Vt. 66 ; Shropshire Unions Ry. v. Houston & T. Ry. Co. 53 Tex. 162. 
 
 Co. v. Queen, L. R. 7 H. L. 496 ; Shropshire Unions Rys. Co v. 
 
 France v. Clark, L. R. 22 Ch. D. 830; Queen, L. R. 7 H. L. 496 (Cairns, 
 
 Grissell v. Bristowe, L. R. 3 C. P. L. C.) 
 
 112; Gurney v. Behrecd, 3 El. &B1. Neiler v. Kelly, 69 Pa. Si. 407; 
 
 633 ; Glyn, Mills & Co. v. East & W. Cherry v. Frost, 7 Lea, 1 ; Cheever . 
 
 India Docks Co. L. R. 7 App. 591. Meyer, 52 Vt. 66. 
 
 1 National Bank v. Watsontown * Dayton Nat. Bank v. Merchants' 
 
 Bank. 105 U. S. 17, 22 ; McAllister Nat. Bank, 37 Ohio St. 208 ; Pinker- 
 
 . Kuhn, 96 U. S. 89 ; Hubbell ton v. Railroad Co. 42 N. H. 424 ; 
 
 0. Drexel, 11 Fed. Rep. 115 ; Colt v. Ives, 31 Conn. 25 ; Wilson v.
 
 344 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 pledge of stock means that the stock of the person obtaining 
 the loan is expressly and specifically pledged at the time for 
 its repayment. 1 
 
 265. THE CERTIFICATE OP STOCK QUASI-NEGOTIABLE. 
 A certificate of stock, when indorsed with an irrevocable 
 power of attorney to transfer, signed in blank by the owner, 
 has a species of negotiability which is rather quasi-negotia- 
 ble than actually negotiable. Under the enforcement of 
 the rules of estoppel, such indorsements in blank render 
 certificates of stock almost negotiable. 9 Certificates of stock 
 bearing upon the face thereof the representation, under seal of 
 the corporation issuing the same, that no transferof the shares 
 of stock represented thereby will be made except upon the 
 surrender and cancellation of the certificate, is an intimation 
 to all the world that such certificates are intended for circu- 
 lation. Innocent persons advancing value upon such state- 
 ments have an equitable claim that any loss resulting from 
 
 Little, 2 N. Y. 443 ; Cornick . Rich- Nat. Bank, 7 Fed. Rep. 369, 372; 
 
 ards, 3 Lea. 1 ; Conyngham's App. Duke v. Cahawka Nav. Co. 10 Ala. 
 
 57 Pa St. 474; Otis v. Gardner, 105 82; Ross v. Southwestern Ry. Co. 
 
 111. 436; Brewster v. Hartley, 37 Cal. 53 Geo. 514; N. Y. & N. H. R.RCo. 
 
 15; Mechanics' Bldg. Assn. v. Con- t>. Schuyler, 34 N. Y. 30; McNeil . 
 
 over, 14 N. J. Eq. 219; Heaths Sil- Tenth Nat. Bank, 46 N. Y. 325; 
 
 verthorne Co. 39 Wis. 147; Nisbit. Fraser . Charleston. 11 8. C. 486; 
 
 Macon Bank etc. Co. 12 Fed. Rep. Broadway Bank v. McElrath, 13 N. 
 
 686. To an amount approximating J. Eq. 24; Prall v. Tilt, 28 Ib. 483; 
 
 their market value, with a reason- Mount Holly Turnpike Co. v. Ferree, 
 
 able margin for possible deprecm- 17 Ib. 117; Tome v. Parkersburgh 
 
 tion. Smith v. Crescent City Trans- Ry. Co. 39 Md. 36; Atkinson v. At- 
 
 fer Co. 30 La. Ann. 1378; Markham kinson, 8 Allen, 15; Merchants' 
 
 v. Jaudon, 41 N. Y. 235. Bank Richards, 6 Mo. App. 454; 
 
 1 Van Sands v. Middlesex County Smith v. Crescent City Transfer Co. 
 
 Bank, 26 Conn. 144, 157. 30 I.a. Ann. 1378; Thompson v. To- 
 
 * Wood's App. 92 Pa. St 379; Fin- land, 48 Cal. 99; Winter v Belmont 
 
 ney's App. 56 Ib. 398; Burton's App. Mining Co. 53 Ib 428; Black v. 
 
 93 Ib. 214; Biddle v. Bayard, 13 Ib. Zacharie, 3 How. 483; Bank . La- 
 
 150; Burton v. Patterson, 12 Phila. nier, 11 Wall. 369; Johnston c. 
 
 397, 400; Matthew t>. Bank, Holmes, Laflin, 103 U. S 800. 
 396; Continental Nat. Bank v. Eliot
 
 THE CERTIFICATE OF STOCK. 345 
 
 giving credit thereto should fall on the company rather than 
 on them. 1 Shares of stock or scrip made negotiable by 
 indorsement by the terms thereof, or " cost-book" mining 
 shares, are negotiable instruments.* In the absence, however, 
 of any application of the rules of equitable estoppel, a cer- 
 tificate of stock, although indorsed in blank, and in the 
 hands of an innocent indorsee for value advanced, is not a 
 negotiable instrument within the meaning of the law mer- 
 chant, and its indorsee is not charged with the duties and 
 responsibilities nor does he enjoy all the privileges of a 
 holder for value, without notice, of commercial paper. 8 
 
 266. AND APPROXIMATING TO NEGOTIABLE PAPER 
 BANK v. LANIER. In the leading case of the First National 
 Bank v. Lanier 4 decided by the Supreme Court of the 
 United States, the nature and characteristics of certificates 
 of stock were ably stated by the court (Davis, Jus.) The 
 court say : " The power to transfer their stock is one of 
 
 1 Willis v. Philadelphia Street Ry. which A was a member. The plcdg- 
 
 Co. 13 Phila 33. or, retaining the certificate, executed 
 
 9 Jarvis v. Rogers, 13 Mass. 105 ; a separate power of attorney author- 
 
 s. c. 15 Ib. 389; Walker v. Bartlett, izing his attorney in fact to sell and 
 
 18 C. B. 845; Thompson v. Tolland, transfer the stock in case the pledgee 
 
 48 Cal. 99. considered it necessary, and to ap- 
 
 s Mechanics' Bank v. N. Y. & N. propriate the proceeds in payment 
 
 H. Co. 13 N. Y. 599, 023; Weaver v. of any balance due. The pledger 
 
 Barden, 49 Ib. 286; Stebbins v. In- afterwards disposed of the certificate 
 
 surance Co. 3 Paige Ch. 350; Sewall to Lanier and Handy for the full 
 
 v. Boston Water Power Co 4 Allen, value thereof. Before the sale the 
 
 277, 282 ; Shaw v. Spencer, 100 Mass. bank had sold 5 > of the shares, and 
 
 382, 388; Campbell v. Morgan, 4 before notice thereof sold all the 
 
 Bradw. 100. shares, under the power of sale to 
 
 4 11 Wall. J377. A certificate of innocent purchasers for value, :o 
 
 stock for 150 shares, which stated whom it issued new certificates, 
 
 on its face that it was transferable Two years after their purchase La- 
 
 "only upon the surrender of the certi- nier and Handy demanded trans er 
 
 ficate," was issued by a bank to A, of the stock to their names, but the 
 
 who at the same time pledged the bank refused. The bank was mulcted 
 
 same to the bank as collateral secur- in the damages, 
 ity for deposits made with a firm of
 
 346 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 the most valuable franchises conferred by Congress on 
 banking associations. Without this power, it can readily 
 be seen the value of the stock would be greatly lessened, 
 and, obviously, whatever contributes to make the shares of 
 the stock a safe mode of investment, and easily convertible, 
 tends to enhance their value. It is no less the interest of 
 the shareholder, than the public, that the certificate repre- 
 senting his stock should be in a form to secure public con- 
 fidence, for without this he could not negotiate it to any 
 advantage. It is in obedience to this requirement, that 
 stock certificates of all kinds have been constructed in a 
 way to invite the confidence of business men, so that they 
 have become the basis of commercial transactions in all the 
 large cities of the country, and are sold in open market the 
 same as other securities. .Although neither in form or 
 character negotiable paper, they approximate to it as nearly 
 as practicable. If we assume that the certificates in ques- 
 tion are not different from those in general use by corpora- 
 tions, and the assumption is a safe one, it is easy to see why 
 investments of this character are sought after and relied 
 upon. No better form could be adopted to assure the pur- 
 chaser that he can buy with safety. He is told, under the 
 seal of the corporation, that the shareholder is entitled to so 
 much stock, which can be transferred on the books of the 
 corporation, in person or by attorney, when the certificates 
 are surrendered, but not otherwise. This is a notification 
 to all persons interested to know, that whoever in good 
 faith buys the stock, and produces to the corporation the 
 certificates, regularly assigned, with power to transfer, is 
 entitled to have the stock transferred to him. And the 
 notification goes further, for it assures the holder that the 
 corporation will not transfer the stock to any one not in 
 possession of the certificates." 
 
 267. INDORSEMENTS IN BLANK OP STOCK CERTIFI- 
 CATES. A transfer of shares of stock in a corporation by 
 the delivery of the certificate, with an irrevocable power of
 
 THE CERTIFICATE OF STOCK. 
 
 347 
 
 attorney to transfer in blank indorsed and signed by the 
 owner, vests the legal and equitable title thereto in the 
 innocent holder for value without notice, and such certifi- 
 cate may pass from hand to hand. 1 Nor is a seal necessary 
 to authorize a transfer, in the absence of some statutory 
 requirement for its use. 8 Even when the indorsement in 
 blank is made under seal, the blanks may be filled up in 
 accordance with the agreement of the parties at the time. 3 
 No constructive notice of any equities of third persons is 
 charged as against a pledgee for value of a certificate of 
 stock, from the fact that it shows upon its face that it was 
 issued to another person than the pledger and that the in- 
 dorsement thereof is in blank. 4 
 
 Considering the effect of negotiating a certificate of 
 stock indorsed in blank, in Johnston v. Laflin, 5 the United 
 
 1 Carroll v. Mullanphy Savings 
 Bank, 8 Mo. App. 249 ; Matthews v. 
 Bank, Holmes, 396; Mount Holly 
 Co. . Ferree, 17 N. J. Eq. 117 ; R. 
 R. Co. .Bank, 30 Conn. 273; Kort- 
 right v. Bank, 20 Wend. 91 ; s. c. 22 
 Ib. 348; Leavitt v. Fisher, 4 Duer, 1; 
 R. R. Co. v. Selinger, 34 N. Y. 45; 
 McNeil v. Bank, 46 Ib. 325 ; Cutting 
 v. Damerel, 88 Ib. 410; Leitch v. 
 Wells, 48 Ib. 613; German Union 
 Bldg. Assn. v. Sendmeyer, 50 Pa. St. 
 67; Otis v. Gardner, 105 111. 536; 
 Day v. Holmes, 103 Mass. 306 ; Cor- 
 nick v. Richards, 3 Lea, 1 ; Cherry v. 
 Frost, 7 Ib. 1. 
 
 9 Kortright v. Buffalo Bank, 20 
 Wend. 91 ; s. c. 22 Ib. 348. 
 
 * Matthews t>. National Bank, sup- 
 ra ; Bridgeport Bank v. N. Y. & N. 
 H. R. R. Co. 30 Conn. 274, 5. 
 
 4 Burton v. Peterson, 12 Phila 397. 
 
 5 103 U. S. 800. Laflin sold his 
 stock in a bank to a broker, indors- 
 ing the certificates in blank; the 
 
 broker sold them to B . who was the 
 president of the bank, issuing the 
 stock, receiving his individual 
 check, and delivering the certificate. 
 Immediately after the transaction 
 B. caused his check to be charged 
 against the bank, and entered his 
 name on the stock book as "trustee 
 of the bank." The bank subsequently 
 failed, and a receiver was appointed, 
 who sought unsuccessfully to compel 
 B. to re-convey the shares, and that 
 Laflin should repay the price, and be 
 declared to be a stockholder. Laflin 
 was free from fraud in the transac- 
 tion. The court add: " It would be 
 a perversion of justice and of the 
 ordinary rules governing men in 
 commercial transactions to hold the 
 sale, under such circumstances, 
 vitiated by the relation of the pur- 
 chaser to others, of which the seller 
 had no knowledge, or any grounds 
 to eutertain a suspicion. The valid- 
 ity of the sale of stock can not be
 
 848 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 States Supreme Court (Field, Jus.) say : ** The trans ferabil- 
 ity of shares in the national banks is not governed by different 
 rules from those which are ordinarily applied to the trans- 
 fer of shares in other corporate bodies. The power of at- 
 torney indorsed on the certificate is usually written or 
 printed, with a space in blank for the name of the attorney 
 to be inserted, for the accommodation of the purchaser. 
 The subsequent filling up of the blank by him with another 
 name, instead of his own, as it may suit his convenience, 
 does not so connect the vendor with the party named as to 
 charge him with the latter's knowledge and thus affect the 
 previous transaction. A different doctrine would put a 
 speedy end to the signing of powers of attorney in blank. 
 And instruments of that kind are of great convenience in 
 the sale of shares of incorporated companies, and are in 
 constant use. The name with which the blank may be sub- 
 sequently filled up by the purchaser is not, in practice, 
 regarded as affecting the previous sale in any respect, but 
 as a matter which concerns only the purchaser. It would 
 be a source of disturbance in business if any other result 
 were attached by the law to the proceeding." 
 
 268. BLANK TRANSFERS OF STOCK CERTIFICATES IN 
 ENGLAND. The validity of transfers of stock indorsed in 
 blank was recognized in England in an early case. 1 The 
 rule in that country is, that where an owner of shares of 
 stock obtains a loan of money depositing with the lender 
 certificates of his shares, together with transfers thereof 
 signed by him, but with the date and name of the trans- 
 feree in blank, an implied authority is given the pledgee 
 
 made to depend upon the accident with the secret interests of others in 
 
 of the immediate purchaser, or of the shares purchased. The validity 
 
 the party to whom he may transfer of a sale aud its completeness must 
 
 the certificate, in fill'rngup thcbltmk be determined by the relation which 
 
 in the power of attorney with the the contracting parties at the time 
 
 name of the person, to make the openly bear to each other." 
 
 formal transfer, who is acquainted ' Walker v. Bartlett, 15 C. B. 845.
 
 THE CERTIFICATE OP STOCK. 349 
 
 to fill up such blanks so that he may be able to make his 
 security effective. Such transfers in blank pass the legal 
 interest in the shares, if the articles of association do not 
 require a deed. 1 The availability of a blank indorsement 
 of a certificate of stock to pass the legal title thereto is not 
 restricted to the first pledge thereof. Under such blank 
 indorsement a sub-pledgee may fill in such blanks and obtain 
 new certificates.* Where, however, the transfer of the 
 certificates to a sub-pledgee, although with blank indorse- 
 ment, is not complete so as to vest the legal title until after 
 notice of the rights of the owner, the sub-pledgee is not en- 
 titled to a transfer, although his equitable interest is pro- 
 tected to the amount of the original loan. 8 
 
 1 Evans v. Wood, L. R. 5 Eq. 539 ; * In re Tahiti Cotton Co. L. R. 
 
 in re Tahiti Cotton Co. 17 Ib. 273 ; 17 Ib. 539. 
 
 Paine v. Hutchinson, L. It. 3 Eq. 'Prance v. Clark, L. R. 22 Ch. D. 
 
 557 ; s. c. 3 Ch. 388 ; Grissell . Bris- 830; aff. by the Court of Appeal (Earl 
 
 (owe, L. R. 8 C. P. 112 ; Hawkins v. Selborne, L. C.) 26 Ib. 257. 
 Mntly, L. R. 4 Ch. 200; Coles v. 
 Bristowe, Ib. 3, 13.
 
 350 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 CHAPTER XXVII. 
 
 THE PLEDGEE OF STOCK A HOLDER FOR VALUE. 
 
 269. The pledgee of certificates of stock indorsed a bolder for value. 
 
 270. Title of innocent bolder for value unimpeachable. 
 
 271. Tbe pledgee's demand for transfer by tbe corporation 
 
 272. The transfer of stock certificates, as between pledger and pledgee. 
 
 273. Transfer of stock on the books of tbe corporation. 
 
 274. Limitations of company's right to control transfer. 
 
 275. Transfer, as controlled by the terms of certificate. 
 
 276. The pledge of stock by delivery. 
 
 277. The pledge by delivery merely, subject to equities. 
 
 278. Pledgees of stock not affected by insolvency of pledger. 
 
 279. Pledges of stock for antecedent debt and future advances. 
 
 280. The pledgee of stock certificates entitled to dividends. 
 
 281. Pledgee of stock entitled to protect the corporation's property . 
 
 269. THE PLEDGEE OF CERTIFICATES OF STOCK IN- 
 DORSED, A HOLDER FOR VALUE. The pledgee of cer- 
 tificates of stock, receiving the same indorsed, with an irre- 
 vocable power of attorney to transfer, in good faith, without 
 notice, and for value advanced thereon, is entitled to the 
 privileges of a bona fide purchaser for value, in the usual 
 course of business. Such indorsement and delivery of cer- 
 tificates of stock as collateral security vests the legal and 
 equitable title in the pledgee and he holds the absolute own- 
 ership of the shares of stock represented thereby. His title, 
 when he has advanced value in good faith, without notice, 
 cannot be impeached, although the act of pledge be a fraud 
 and misappropriation of such certificates of stock by persons 
 entrusted therewith so as to have the apparent ownership. 1 
 
 1 Otis v. Gardner, 105 111. 486 ; Carroll v. Mullanphy Banking Co. 8 
 Baldwin t>. Canfield, 26 Minn. 43; Mo. App. 249; First Nat. Bank v.
 
 THE PLEDGEE A HOLDER FOR VALUE. 351 
 
 The title thus acquired by an innocent pledgee for value of 
 stock collaterals is sustained as between the parties, and (in 
 the absence of restrictive statutory or charter provisions) as 
 against the company and third parties seeking by legal process 
 to subject such shares of stock to the payments of debts or 
 other liabilities of the pledger, although no transfer thereof 
 has been made on the books of the company issuing the 
 same, or notice given. 1 
 
 270. TITLE OP INNOCENT HOLDER FOR VALUE UN- 
 IMPEACHABLE. It is established by commercial usage that a 
 certificate of stock indorsed with an irrevocable power of attor- 
 ney in blank or filled up, is, in the hands of a third person, 
 presumptive evidence of ownership of the holder. The 
 title of an innocent holder for value, and in the usual 
 course of business, having possession of the certificate, 
 indorsed to himself or in blank, is good against the world. 
 Subsequent purchasers of such certificates, although paying 
 value, but not receiving the certificates ; the company issuing 
 the stock, when a transfer is demanded by such holder for 
 value without notice ; and creditors of the pledgor and trans- 
 ferrer, are not allowed to impeach the title of such innocent 
 holder for value.* The transfer of certificates of stock, iu- 
 
 Hartford Ins. Co. 45 Conn. 22 ; Cor- 454 ; Cornick v. Richards, 3 Lea, 
 
 nick v. Richards, 3 Lea, 1; Cherry 1. 
 
 p. Frost, 7 Ib. 1 ; Frascr v. Charles- 'Johnston v. Laflin, 103 U. S. 
 
 ton, 11 S. C. 486; ex parte Bank of 800; Webster v. Upton, 91 U. S. 65 ; 
 
 Manchester, L. R. 12 Eq. 354; Frascr Bank v. Lanier, 11 Wall.369; Dovey's 
 
 v. Charleston, 11 S. C.486: Checver App. 97 Pa. St. 53; Wood's App. 93, 
 
 v. Meyer, 52 Vt. 66; ex parte Sar- Ib. 379; Kortright v. Commercial 
 
 geaiit, L. R: 17 Eq. 273; ex parte Bank, 20 Wend. 91 ; Fatnian v. Lo- 
 
 Agra Bank, L. R. 3 Ch. 555. back, 1 Duer, 354, 361 ; McNeil v. 
 
 'National Bank v. Watsontown Tenth Nat. Bank, 46 N. Y. 325; 
 
 Bank, 105 U. S. 217, 222 ; Johnston Bank of Utica v Smalley, 3 Cowcn, 
 
 v. Laflin, 103 U. S. 800; Hasbrouck. 770; Mount Holly Turnpike Co. . 
 
 Vandervoort, 4 Sandf. 74; Fiuney's Ferree, 17 N. J. Eq. 117; Prall v. 
 
 App. 59 Pa. St. 398; Fraser v. Tilt, 28 Ib. 480; Bridgeport Bank v. 
 
 Charleston, 11 S. C. 486; Merchants' N. Y. & N. H. Ry. Co. 30 Conn. 275, 
 
 Nat. Bank v. Richards, 6 Mo. App. Sergeant v. Franklin Ins. Co. 8 Pick,
 
 352 QUASI-NEGOTIABI E COLLATERAL SECURITIES. 
 
 dorsed, under the general usage of dealers in securities and 
 on exchanges, vests in the holder for value, without notice, 
 more than the mere equitable title obtained upon the assign- 
 ment and delivery of a non-negotiable chose in action. The 
 legal ownership vests in the indorsee of a stock certificate, 
 indorsed in blank, as in the case of the favored instruments 
 of commerce. Nor will the transfer be " burdened with the 
 shackles imposed by a lis pendens." ' 
 
 271. THE TRANSFER OF STOCK CERTIFICATES, AS BE- 
 TWEEN PLEDGOR AND PLEDGEE. As between the parties to 
 the contract of pledge, the delivery of a certificate of stock, 
 indorsed by the owner with an irrevocable power of attorney 
 to transfer in blank, vests in the pledgee, upon a bor.a fide 
 advance, the legal title to the shares of stock represented by 
 the certificate, although no notice is given to the corpora- 
 tion issuing the certificate, nor transfer obtained upon its 
 books. It is enough, as between the parties, that the cer- 
 tificate is delivered with authority to the holder, or any one 
 he may name, to transfer it upon the books of the company, 
 the consideration for the indorsement and delivery of the 
 certificate being advanced in good faith.* The rule is not 
 
 90; Moodie *. Nat. Bank, 11 Phila. B. & C. M. Co. 59 Ib. 96, 101 ; Mc- 
 
 866; Fraser v. Charleston, 11 8. C. Neil t>. Tenth Nat. Bank, 40 Ib. 831; 
 
 486; Bank v. Campbell. 2 Rich. Eq. Leitch . Wells, 48 Ib. 592; N. Y. & 
 
 179; Continental Bank v. Bank, 7 N. H. R. R. Co. v Schuylcr, 34 Ib. 
 
 Fed Rep. 369. 30 ; Johnson v. Underbill, 52 Ib. 503; 
 
 1 Culling . Damerel, 88 N. Y. 410; Cushman v. Tbayer Manuf. Co. 76 Ib. 
 
 Leilch v. Wells, 48 Ib. 585. In 365 ; Cutting v. Damerel, 88 Ib. 410; 
 
 Dovcy's App., 97 Pa St. 153, the Commercial Bank v. Kortright, 20 
 
 Pennsylvania court cite the New Wend. 91 ; s. c. 22 Ib 362; Smith*. 
 
 York cases as to lis pendens apply- Crescent City Transfer Co. 30 La. 
 
 ing to the transfer of stock, but de- Ann. 1378; Sibley v. Quinsigamond 
 
 cidc the case upon other grounds. Bank, 133 Mass. 515; Cornick v. 
 
 * Johnston v. Laflin, 103 U. 8. 800; Richards, 3 Lea, 1 ; Cherry . Frost. 
 
 Bank t>. Bank, 105 Ib. 217; McAl- 7 Ib. 1; Broadway Bank v. McEl- 
 
 lister . Kuhns, 96 Ib. 87; Webster v. rath, 13 N. J. Eq. 26 ; Turnpike Co. 
 
 Upton, 91 Ib.65; Bank v. Lanier, 11 . Ferree, 17 Ib. 118; Hunterdon . 
 
 Wall. 369; Holbrooke. New Jersey Nassau Bank, Ib. 496; Rogers v. 
 
 Zinc Co. 57 N.Y. 616; Driscoll v. W, Stevens, 8 Ib. 167; Moore v. Bank,
 
 THE PLKDGEE A HOLDER FOR VALUE. 353 
 
 questioned in any jurisdiction that, as between the parties 
 to the contract of pledge, when made upon a bona fide 
 advance actually paid, the indorsement and delivery of cer- 
 tificates of stock convey to the pledgee if not the legal 
 yet an equitable title to the property in the shares represented 
 thereby. Under this latter view, however, the pledgee 
 receiving only an equitable title, although advancing money 
 upon the credit of the certificates, is subject, where no 
 transfer of the stock has been obtained upon the books of 
 the company, to the claims of creditors levying upon the 
 stock, although they may have received some of the funds 
 advanced by the pledgee, and probably allowed the debts 
 of the pledgor to be incurred in ignorance of the ownership 
 of the stock. The limited rule should be restricted to cases 
 where the statutory or charter enactments make transfer 
 upon the books of the company essential, and are supple- 
 mented by other legislation giving to creditors such right of 
 levy upon shares of stock of debtors. 1 
 
 In Johnston v. Laflin, 1 the court (Field, Jus.), con. 
 sidering the effects of transfer of stock certificates indorsed in 
 
 52 Mo. 377; Carroll v. Mullanphy Gas Co, 12 Ib. 213; Pinkerton . R. 
 Savings Bank, 8 Mo. App. 249;s.c. R. Co. 42 N. H. 424; Skowhegan 
 atf. 74 Mo. 77; Sergeants. Franklin Bank v. Cutter, 49 Me. 315; Agri- 
 Ins. Co. 8 Pick. 90; Strange v. cultural Bank v. Burr, 24 Ib. 256; 
 Houston & T. C. Ry. Co. 53 Tex. Lightner's App. 82 Pa. St. 301 ; 
 162 ; Railroad Co. v. Thomasson, 40 Pittsburgh etc. Ry. Co. v. Clarke, 
 Ga. 411; Dovey's App. 97 Pa. St. 29 Ib.146 ; Bank of Commerce's App. 
 153; Lightner's App. 82 Pa St. 301 ; 73 Ib 59; Beecher v. Wells etc. Co. 
 German etc. Bank . Sendmeyer, 50 1 McCrary C. C. 62 ; Union Bank v. 
 Ib. 67; Commonwealth of Pennsyl- Laird, 2 Wheat. 390 ; Black v. Zach- 
 vania v. Watmough, 6 Whart. 138; arie, 3 How. 483 ; People's Bank u. 
 Duke v. Cahawba' Nav. Co. 10 Ala. Gridley, 91 III. 459; Kellogg v. Stock- 
 82; Bank of Commerce's App. 73 well, 75Ib.68; Laing v. Burley, 101 
 Pa. St. 59 ; Pittsburgh Ry. Co. v. 111. 591 ; Otis v. Gardner, 105 Ib. 436; 
 Clarke, 29 Ib. 146 ; Gilbert v. Man- Lockwood v. Mechanics' Nat. Bank, 
 Chester Iron Co. 11 Wend. 628 ; Bank 9 R. I. 3C8 ; Conant v. Seneca Coun- 
 of Utica v. Smalley, 2 Cowen, 777. ty Bank, 1 Ohio St. 298 ; Cheever . 
 1 Sibley v. Quinsigamond Bank, Meyer. 52 Vt. 66 ; Sabin v. Bank, 
 133 Mass. 515 ; Fishers. Essex Bank, 21 Ib 353. 
 5 Gray, 373 ; Blanchard v. Dedham * 103 U. S. 800, 803. 
 23
 
 354 QUASI-NEGOTIABLE COLLATERAL SECURITIES, 
 
 blank, as between the parties, say : " The sale was consum- 
 mated, so far as Laflin was concerned, when he delivered the 
 certificate, with the power to transfer it, to the broker. The 
 hitter did not mention the name of the principal for whom 
 lie was acting. He declined to give it. Laflin had a right, 
 therefore, to treat him as the principal, and if he was compe- 
 tent to make the purchase the sale was valid. Shares in the 
 capital stock' of associations, under the national banking 
 law, are salable and transferable at the will of the owner. 
 They are, in .that respect, like other personal property. 
 The statute recognizes this transferability, although it 
 authorizes every association to prescribe the manner of their 
 transfer. * * As between Laflin and the broker, 
 
 the transaction was consummated when the certificate was 
 delivered to the latter, with the blank power of attorney in- 
 dorsed, and the money was received from him. As between 
 them, the title to the shares then passed; whether that be 
 deemed a legal or equitable one matters not; the right to 
 the shares then vested in the purchaser." In the case of 
 National Bank v. Watsontown Bank, the court, again describ- 
 ing the effect of a transfer of stock, as between the parties to 
 a contract of pledge, say (Matthews, Jus.): "As between 
 Powell & Co. [the pledgors], and Tome, representing the 
 appellants [the pledgees], the property in the shares of 
 stock, undoubtedly, passed to the latter without the formal- 
 ity of a transfer on the books of the Watsontown Bank. As 
 collateral security for the payment of their notes, discounted 
 and held by the Cecil National bank, and with Hie power to 
 sell for the purpose of payment, the title passed by the 
 delivery of the certificate, with the accompanying power of 
 attorney." * 
 
 272. THE PLEDGEE'S DEMAND FOR TRANSFER BY THE 
 CORPORATION. The delivery of certificates of stock as col- 
 lateral security with a power of attorney to transfer them to 
 
 1 105 U. S. 217, 220. Citing Johnston c. Lftflin, 103 U. 
 
 S. 800.
 
 THE PLEDGEE A HOLDER FOB VALUE. 355 
 
 another person, confers a power coupled with an interest, 
 and gives to any one claiming under an execution of the 
 power a right to demand of the company new certificates of 
 stock. The power thus given can only be revoked by pay- 
 ment of the debt, for which the stock has been transferred 
 as collateral security. 1 The pledgee of a certificate of stock 
 in Massachusetts, while restricted by statute in his rights 
 under a contract of pledge, so that he can not sell, lend, or 
 pledge the stock certificates held by him as collateral secur- 
 ity, is still entitled to require a new certificate to be issued 
 to himself or a third person. The title of the stock thus 
 obtained is held subject to the agreement of pledge, but is 
 permitted in order to render the collateral securities more 
 available to the pledgee.* Upon the refusal of a corporation 
 to make such transfer, upon demand and presentation of a 
 certificate, with irrevocable power of attorney to transfer 
 indorsed thereon, the holder for value may bring an action at 
 law against the corporation for damages, recovering the actual 
 value of the stock at the time of the refusal to transfer, or 
 resort may be had to equity to require a transfer to be made, 
 or to afford other suitable relief. 3 A petition for a writ of 
 mandamus to compel the corporation to make the transfer 
 is, it seems, appropriate. 4 
 
 1 Dickinson v. Cent. Nat. Bank, meyer, 50 Pa. St. 67; Hill v. Pine 
 129 Mass. 279; Rich v. Noble, 39 River Bank, 45 N. H. 300; Railroad 
 Md. 314 ; Hunt v. Ronsmanier, 8 Co. 0. Sewall, 35 Md. 239 ; Fraser v. 
 Wheat. 174 ; Gill v. Continental Gas Charleston, 11 S. C. 486 ; Bond v. 
 Co. L. R 7 Ex. 382; Simm v. Anglo- Mount Hope Co. 99 Mass. 506 ; Bar- 
 American Tel. Co., L. R. 5 Q. B. D. gent v. Franklin Ins. Co. 8 Pick. 100; 
 188, 215. Gray v. Portland Bank, 3 Mass. 364; 
 
 Fay v. Gray, 124 Mass. 500. Kortright v. Buffalo Bank. 20 Wend. 
 
 3 Case v. Bank, 100 U. S. 446; 91 ; Bank of Attica v. Bank, 20 N.Y. 
 
 Johnston . Laflin, 103 Ib. 800; Me- 505; Gill v. Continental Gas Co. L. 
 
 Allister v. Kuhn, 96 Ib. 87 ; National R. 7 Ex. 332. 
 
 Bank v. Bank, 10 Bush, 367 ; Bank 4 Campbell v. Morgan, 4 Bradw. 
 
 . McNeil, Ib. 56; Dayton Nat. 100, 105 ; Shropshire Unions Ry. Co. 
 
 Bank v. Bank, 37 Ohio St. 208, 215; v. Queen, L. R. 7 H. L. 420. 
 German Union Bldg Assn. . Send-
 
 356 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 273. TRANSFER OF STOCK ON THE BOOKS OF THE 
 COUPORATION. In cases where a pledgee for value of stock 
 certificates has neglected to obtain, in compliance with stat- 
 utory or charter provisions, a transfer of the shares upon 
 the books of the company and the issue of new certificates, 
 he receives an equitable title only and is subject to the 
 equities of third parties. 1 Under such statutory or charter 
 enactments, no person can acquire a legal title to the shares 
 of stock, except upon a regular transfer thereof into his 
 name upon the books of the company, and the issue of new 
 certificates. The- equities to which he is subject, while 
 holding what is regarded as an equitable title simply, include 
 any liens of the corporation itself, of which he is presump- 
 tively chargeable with notice.* All that is necessary where 
 the transfer is required by law to be made upon the books 
 of a corporation, is that the fact itself should be appropri- 
 ate^ recorded in some one or other of such books. An 
 entry in a stock ledger, showing a debit and credit charge 
 
 1 Fisher v. Essex Bank, 5 Gray, dorsed with a power of attorney to 
 373 ; Rock v. Nicholls, 3 Allen, 343; the purchaser to make the necessary 
 Union Bank t. Laird, 2 Wheat. 890 ; transfer on the books of the corpora- 
 Oxford Bank v. Bunnel, 6 Conn. 558; tion, transfers to the purchaser the 
 Dalton T. Connecticut Bank, 13 Ib. equitable interest and legal right of 
 493; Shipman v. Etna Ins. Co. 29 the vendor in the property evidenced 
 Ib. 245 ; Weston v. Bear River etc. by the certificate assigned. It corn- 
 Co. 5 Cal. 186 ; Straut v. Natoma Co. pletes the transaction between the 
 9 Ib. 78 ; Naglee v. Pacific Wharf vendor and the purchaser. But as 
 Co., 20 Ib. 529 ; Winter v. Belmonl regards the corporation and those 
 Mining Co. 53 Ib. 431 ; People's who have a right to look to its 
 Bank v. Gridley, 91 111. 467 ; Fiske records for the owners of the stock, 
 . Carr, 20Me.301 ; Skowhegan Bank the transaction is incomplete. The 
 . Cutler, 49 Ib. 315 ; Pinkerton v. purchaser does not become vested 
 Railroad Co. 42 N. H. 424 ; Bank of with the absolute title to the stock- 
 Commerce's App. 73 Pa. St. 59; does not become a stockholder in 
 Robert's App. 85 Ib. 84 ; Cheevcr v. the corporation until the purchased 
 Meyer, 52 Vt. 66 ; Sabin v. Bank, stock is transferred to him on the 
 21 Ib. 353 ; in re Murphy, 51 Wis. books of the corporation." 
 519. In Cheevcr v. Meyer, supra, * Union Bank v. Laird, 2 Wheat, 
 the court say: "A sale of the stock, 390; Bank of Commerce's App. 73 
 with a transfer of the certificate in- Pa. St. 59.
 
 THE PLEDGEE A HOLDER FOR VALUE. 357 
 
 between the two parties, pledger and pledgee, is a sufficient 
 compliance with such statute, and vests the transferee with 
 a complete and absolute title, and, so far as the corporation 
 is concerned, the act is irrevocable. 1 Or a notice at a 
 meeting of the board of directors of the company is suffi- 
 cient. 2 Statutory provisions, requiring transfer on the 
 books of the company, are intended chiefly for the benefit 
 of the company. 8 The single consideration that a creditor 
 of a shareholder in a national bank has no right of access to 
 the. books of the bank, and no means of obtaining knowl- 
 edge of transfers upon them, shows that such record is not 
 intended for his benefit. 4 Possession of the certificate, with 
 authority to transfer, is prima facie sufficient to require the 
 corporation issuing the same to extend to the holder the 
 privileges and benefits to which the person in whose name 
 such certificate was originally issued, was entitled. 5 Appli- 
 cation for transfer, however, without production of the cer- 
 tificate, is per se notice to a company, through its officers, 
 that the legal title to the shares of stock represented there- 
 by may be in a third person, a holder for value, without 
 notice. 6 
 
 Transfer of the shares into the name of the transferee is 
 necessary, in England, to pass the legal title, and perhaps 
 such transfer should be registered, which is generally done. 1 
 
 1 National Bank v. Watsontown 4 Sibloy . Quinsigamond Bank, 
 
 Bank 105 U. S. 217. 133 Mass. 515. 
 
 * Ex parte Agra Bank, L. R. 3 Cli. * Strange v. Houston & T. Ry. Co. 
 
 555. 53 Tex. 162. 
 
 1 Strange . Houston etc. Ry. Co. ' Strange v. Houston & T. Ry. 
 
 53 Tex. 1.J2; Serge-ant v. Essex Ma- Co 53 Tex. 162; New York & N.H. 
 
 Hue Ry. 9 Pick. 201; Bank v. Kort- R. R. Co. e. Schuyk-r, 34 N. Y. 81; 
 
 right, 23 Wend. 362; Bank of Utica Brisbane v. Railroad Co. 25 Hun, 
 
 T. Smalley, 2 Cow. 770; Ins. Co. v. 438; Bayard v. Bank, 52 Pa. St. 235; 
 
 Goodfellow. 9 Mo. 150; Chouteau Holbrooke. New Jersey Zinc Works, 
 
 Springs Co. . Harris, 20 Ib. 382; 57 N. Y. 616. 
 
 Kellogg v. Stockwcll, 75 111. 68; * Shropshire Unions Ry. Co. v. 
 
 Broadway Bank v. McElrath, 13 N. Queen, L. R. 7 H. L. 496. 
 J. Eq. 26; Continental Bank . Eliot 
 Bank, 7 Fed.Rep. 369.
 
 358 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 The legal title to shares of stock can only be obtained by 
 an instrument executed in the manner required by the 
 articles of association. 1 A mere delivery of certificates of 
 stock without the legal title thereto, is not sufficient to pro- 
 tect the interests of the pledgee as against third parties. 1 
 Where, however, the legal title to shares of stock is vested 
 in a mortgagee or pledgee, an equity of redemption merely 
 remaining in the mortgagor or pledgor, the right to a transfer 
 of the stock as against the mortgagor or pledgor, and to 
 compel the company to register such transfer, is enforced by 
 courts of equity.* 
 
 274. LIMITATIONS OF COMPANY'S RIGHT TO CONTROL 
 TRANSFER. The directors of a company, however, have no 
 discretionary power independently of authority given by the 
 charter or articles of association, to refuse the registry of a 
 transfer which has been propeily made and in good faith. 4 
 And the terms of transfer prescribed under statutory or 
 charter powers are required to be reasonable. As said by 
 the United States Supreme Court, (Field, Jus.) in a recent 
 case: 5 The power of corporations "in that respect, how- 
 ever, can only go to the extent of prescribing conditions 
 essential to the protection of the association against fraud- 
 ulent transfers, or such as may be designed to evade the just 
 responsibility of the stockholder. It is to be exercised 
 reasonably. Under the pretence of prescribing the manner 
 
 1 Simm v. Anglo-Am. Tel. Co. L. they are partnerships from which 
 
 R. 5 Q. B. D. 216. members can retire at once, and f reo 
 
 * Shropshire Unions Ry. Co. v. themselves from responsibility at 
 Queen, supra. any time they please, by going into 
 
 * Gill v. Continental Gas Co. L. R. the market and disposing of and 
 7 Ex. 332. transferring their shares without the 
 
 4 Weston's case, L. R. 4 Ch. 20. consent of the directors or share- 
 Sir W. Page Wood (L. J.) in deliver- holders, or anybody, provided it is n 
 ing judgment, said (p. 27): "Many bona fide transaction, and out aud 
 persons enter these companies for out." 
 
 the very reason that they are not ' Johnston o. Laflin, 103 U. S. 800, 
 
 like ordinary partnerships, but that 804.
 
 THE PLEDGEE A HOLDER FOR VALUE. 359 
 
 of the transfer, the association cannot clog the transfer with 
 useless restrictions, or make it dependent upon the consent 
 of the directors or other stockholders. It is not necessary, 
 however, to consider what restrictions would be within its 
 power, for it had imposed none. The entry of the trans- 
 action on the books of the bank, where stock is sold, is re- 
 quired, not for the translation of the title, but for the pro- 
 tection of the parties and others dealing with the bank, and 
 to enable it to know who are its stockholders, entitled to 
 vote at their meetings and receive dividends when declared. 
 It is necessary to protect the seller against subsequent 
 liability as a stockholder, and perhaps also to protect the 
 purchaser against proceedings of the seller's creditors. Pur- 
 chasers and creditors, in the absence of other knowledge, are 
 only bound to look to the books of registry of the bank." 
 
 275. TRANSFER, AS CONTROLLED BY TERMS OF CERTI- 
 FICATE. The terms in which certificates of stock are issued 
 by a corporation is a material consideration upon the ques- 
 tion of transfer. A company is bound by the representa- 
 tions it makes, generally under seal, on the face of its cer- 
 tificates, and third persons advancing money upon the credit 
 of such statements, are entitled to rely thereon. Where 
 they set forth the manner of transfer of such stock, they con- 
 stitute the regulations thereof. 1 Nor is the holder for value, 
 without notice, of such certificate required to examine and 
 ascertain at his peril whether previous transfers thereof were 
 valid. 2 Nor, in the absence of any requirement upon the 
 certificate itself, is the holder thereof for value, without 
 
 1 Bank of Holly Springs . Pinson, discussed in Fisher v. Essex Bank, 5 
 
 58 Miss. 421, 437; Bank v. Lanier, Gray. 373, by Gray, C. J. ; in Cheever 
 
 11 Wall. 369; Van Sands . Middle- v. Meyer, 52 Vt. 66; Williams v. 
 
 sex Bank, 26 Conn. 144; Townsend Mechanics' Bank, 5 Blatchf. 59, and 
 
 t>. Mclver, 2 Rich. 43; Williams v. a strict construction given thereto. 
 Mechanics' Bank, 5 Blatchf. 50; Peo- 5 Lowry v. Bank, Taney, 310; 
 
 pie's Bank v. Gridley, 91 111. 457. Salisbury Mills v. Townsend, 109 
 
 As to the clause '' transferable only Mass. 115. 
 ou the books of the company," it is
 
 3GO QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 notice, required to give notice to the company of its indorse- 
 ment and delivery, where the certificate declares that 
 transfer will be made only upon the surrender thereof. 1 
 The title of a holder for value, without notice, of a certifi- 
 cate of stock making such representations, is not affected by 
 a by-law of the corporation providing for the assignment of 
 such shares by a separate instrument. The company is 
 estopped as against an innocent holder for value of a certifi- 
 cate, indorsed with irrevocable authority to transfer, to deny 
 that it has the stock when transfer thereof is demanded. It 
 is no defense for the company that other certificates have 
 been issued upon an assignment executed separately, the 
 certificates not having been produced and surrendered. 8 
 
 The rule was enforced where a pledge of certificates of 
 stock, transferable " only upon the surrender of this certifi- 
 cate," was made to a bank to secure deposits made with 
 another bank, by a separate, independent instrument, 
 authorising the sale thereof upon default, the certificates 
 not being delivered. The stock certificates were subse- 
 quently negotiated by the pledger to a bona fide holder for 
 value without notice, the certificates being indorsed and 
 delivered. Notice was given to the bank, but prior thereto, 
 all the shares had been sold under the power of attorney. 
 Transfer having been refused, the bona fide holder for value, 
 without notice, advancing his money upon the faith of the 
 representations contained in such certificates, was allowed 
 to recover his damages from the bank.* 
 
 1 Bank v. Lanier, 11 Wall. 869. without knowledge of any adverse 
 
 * Strange v. Houston etc. Ry. Co. claim, in full faith that the bank 
 53 Tex. 162; Holbrook v. Zinc Co. would observe its engagements, and 
 57 N. Y. 616; McNeil v. Tenth pursued in all respects the directions 
 Nat. Bank, 46 Ib. 331 ; in re Bahia given in the certificates. They were 
 & 8. F. Ry. Co. L. R. 8 Q. B. 584. not told to give notice to the bank 
 
 * First National Bank n. Lanier, 11 of their purchase, nor was there any 
 Wall. 369. The court (Davis, Jus.) necessity for notice, because, by the 
 say: "la this case Lanier and rules of the bank, Culver could not 
 Handy made their purchase of transfer the stock in the absence of 
 Culver. They bought for value, the certificates, and these they had
 
 THE PLEDGEE A HOLDER FOB VALUE. 361 
 
 276. THE PLEDGE OF CERTIFICATES OF STOCK B? 
 DELIVERY. The use of certificates of stock as collateral 
 security where made by a mere delivery of the certificates 
 without any power of transfer propeily signed, vests in the 
 pledgee an equitable title only. The pledgee is unable to 
 enforce his security, upon default, by the ordinary processes 
 of sale ; but he may obtain relief in equity, where the perfor- 
 mance of the necessary acts to render the security available 
 may be decreed. 1 Relief was given in equity where certifi- 
 cates of stock had been pledged, and it was not discovered 
 until after maturity of the principal note and default, that 
 the power of attorney to transfer such certificates had not 
 been signed by the pledger.' The pledgee was allowed, 
 either to have the necessary indorsement made or to sell the 
 certificates and apply the proceeds to the discharge of the 
 note. 9 A mere executory contract for the transfer of stock 
 as collateral security is not enforced in equity to the 
 prejudice of third persons who have acquit ed lights there- 
 in bona fide. 3 Nor to the injury of a pledgee of the same 
 shares of stock, advancing money in good faith, without 
 notice, of the previous pledge, who has obtained an actual 
 transfer of the bhares to his own name on the books of the 
 company. 4 Under the Louisiana code and judicial decisions 
 
 in their possession. It is therefore R. R. Co, 30 Conn 270; N. Y. & N. 
 
 clear, iu making their purchase of H. R.R. Co. . Schuyler, "4 N. Y. 30. 
 
 Culver, that they had a right to rely ' Nesbit v. Maoon Bank etc. Co. 
 
 on the certificates as securing to 12 Fed. Rep 686; Johnstons. Dexter, 
 
 them the st; ck which they repre- 2 MacAv. 530; Allen v. Dykers, 3 
 
 sented. And it is equally clear that Hill, 593; s. c. 7 Ib. 497; Wilson v. 
 
 the bank in allowing this stock to Little, 2 N. Y. 443; Newton v. Fay, 
 
 be transferred to other parties, while 10 Allen, 505; ex parte Boulton, 1 
 
 the certificates were outstanding in DeG. & J. 163. 
 
 the hands of bona fide holders, was 3 Johnson v. Dexter, 2 MacAr. 530. 
 
 guilty of a breach of corporate duty, 8 State Fire Ins. Co. v. Olmstead, 
 
 and as its conduct operated to the 33 Conn. 480. 
 
 injury of Lariier and Handy, an ac- 4 Platt v. Hawkins, 43 Conn. 139; 
 
 tion will lie in their behalf to obtain Platt v. Birmingham Axle Co. 41 Ib. 
 
 satisfaction for the injury." Citing 255. 
 Bridgeport Eank v. N. Y. & N. H.
 
 362 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 shares of stock may be pledged by contract and delivery of 
 the certificates. Such certificates are taken by the pledgee 
 subject to all the liens and privileges which the law places 
 upon them. 1 Possession of the stock certificates, however, 
 may be held by one occupying ad hoc the position of a 
 trustee. The debtor himself may in some cases be considered 
 as such trustee, and be given possession, pi ovided his tenure 
 is precarious and clearly for account of the creditoj. 9 
 
 277. TTTE PLEDGEE BY DELIVERY MERELY, SUBJECT 
 TO EQUITIES. A pledgee of certificates of stock, by mere 
 delivery or an equitable mortgage thereof, is subject to the 
 equities of third persons and cestuis que trust, although he 
 may have a written agreement from the pledgor to execute 
 a legal transfer of the shares. The rule thus limiting the 
 rights of a pledgee by deliver}' was enforced in a case where 
 the act of pledge of the stock was a fraudulent misap- 
 propriation The pledgee's only way, in the opinion of tho 
 English House of Lords, of making himself safe was by 
 finding out if the person whose name was on the register 
 was a trustee, and if so, by getting from the person for 
 whom he was a trustee a declaration that his interest had 
 ceased, or else by acquiring the legal title, and so placing 
 himself in a better position than those who were trying to 
 rest upon an equitable title. 1 Although the trustee held the 
 legal title and the right to transfer the stock and to give a 
 valid receipt for the purchase-money to any innocent person 
 
 1 Smith v. Shnighter-house, 80 La. Blouin v. ITart, 30 Il>. 714 ; Smith v. 
 
 Ann. 1378; N O. Banking Assn. v. Slaughter-house, Ib 1378; Hanking 
 
 Wiltz. 10 Fed. Hep. 330; Blouin v. Assn. . Wilts., 10 Fid. Hep 3;X); 
 
 Hurt, 30 La. Ann. 714; Factor's Ins. La. Rev. C. Code, 8158. And the 
 
 Co. v. Drydock. 31 Ib. 145 ; Succ. same rule prevails und< r the Roman 
 
 Rosseau, 23 La Ann. 3 ; IIo.-s v. and French law. Pothicr. Paml. 
 
 Williams, 24 Ib. 568. v. vii, p. 860 ; Pothier, Nant. 8; 
 
 * Conger v. City of New Orleans, Troplong. Nant. Nos. 97-99; 809 312. 
 32 La. Ann 1250; James T. Pike, 'Shropshire Unions Ry. Co v. 
 
 23 Ib. 478; Lntlande v. Ingram, 19 Queen, L. U 7 II. L. 496, 513 
 
 Ib. 364 ; Succ. D'.Meza, 26 Ib. 35 ; (Hatherly, Lord).
 
 THE PLEDGEE A HOLDER FOR VALUE. 363 
 
 without knowledge of the trust, yet where the title acquired 
 was only equitable, it was necessarily imperfect, and would 
 not bind the real beneficial owner. The pledgee should 
 have taken the pledger at his word, for all he had to do was 
 by the most simple means, to take the pledger, or a written 
 authority from him, to the company, and demand a transfer 
 of the shares. If the company (the cestui que trust in the 
 case) had made the transfer, the pledgee would have had an 
 unimpeachable legal title to the shares, as a pre-existing 
 equitable title may be defeated by a superveninglegal title ob- 
 tained by transfer; and such cestuis que trust may be estopped 
 by conduct, representations or mis-statements. J <> have this 
 result, that which is relied upon for such a purpose must be 
 shown and proved l3 r those upon whom the burden to show 
 and prove it lies, and it must amount to something tangible 
 and distinct, something which can have the grave and strong 
 effect to accomplish the purpose for which it is said to have 
 been produced. 1 
 
 278. PLEDGEES OF STOCK NOT AFFECTED BY INSOL- 
 VENCY CF PLEDGOR. The subsequent insolvency or bank- 
 ruptcy of the pledger, where the certificates of shares of stock 
 pledged as collateral security have passed with full title to 
 the pledgee, and with transier on the books of the company 
 where required by stat 111017 enactment or charter, does not 
 affect the rights of the pledgee. Bankruptcy or insolvency 
 laws take away none of the rights of the creditor to collateral 
 securities held by him, under proper indorsement. 8 The 
 receiver of an insolvent corporation occupies no better 
 position in this respect, and has no greater right to a sur- 
 render of the collaterals as against a pledgee of stock for 
 value advanced in good faith, without notice, than the cor- 
 
 1 Shropshire Unions Ry. Co. v. 95 Ib. 764; Bank of Louisville v, 
 
 Queen, L. R. 7 H. L. 496, 506 (Earl State Bank. 10 Bush, 367; Dayton 
 
 Cairns, Lord Chancellor). Nat. Bank v. Nat. Bank, 37 Ohio, 
 
 8 Jerome v. McCarter, 94 TJ. 8. 734, St. 208, 215 ; Dickinson v. Central 
 
 739 ; Yeatman v. Savings Institution, Nat. Bank, 129 Mass. 279.
 
 364 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 poration itself had. 1 In cases where, under statutory enact- 
 ments, transfer of shares of stock upon the books of the 
 company is required befoie a pledgee thereof can obtain the 
 legal title, and there is a failure to comply therewith, the 
 equitable title of the pledgee is defeated by an assignment 
 of all his property by the pledger. 1 An equitable mortgage 
 of shares by deposit, where in order to secure the legal title 
 under the charter, registry on the books of the company is 
 required, and the pledgee has failed to make any transfer 
 thereon, is not supported, as against an assignee in bank- 
 ruptcy of the pledger.* A pledge of stock certificates is not 
 supported as against an assignment under insolvency laws, 
 where the delivery of such certificates as collateral security 
 was merely nominal, until in view of impending insolvency 
 transfers of the legal title were executed and registered on 
 the books of the company. 4 Shares of stock were deposited 
 as collateral security with a bank for value, and were trans- 
 ferred by the pledgee to the names of its officers. Subse- 
 quently being indebted to a third person, the pledgor agreed 
 in writing to hold his remaining interest in the shares as 
 trustee for his benefit, and then became bankrupt. The 
 second pledge was supported as against his assignee, subject 
 to the claims of the bank. 8 Shares of stock standing on the 
 books of a corporation in the name of a bare trustee, the 
 certificate properly indorsed being in the possession of the 
 true owner, do not pass in Massachusetts upon an assign- 
 ment for the benefit of creditors of the trustee, as they are 
 not "property" of the debtor under such insolvent laws.' 
 
 1 Cutting v. Damerel, 88 N.Y. 410. Ex parte Barry. L. R. 17 Eq. 113. 
 
 1 Shipmnn . Etna Ins. Co. 29 Holmes v. Winchester, 183 Mass. 
 
 Conn. 245; City Fire Ins. Co. . 140; Sibley v. Quiusigamond Bank, 
 
 Olmstcnd, 33 Ib. 480; Button v. Ib. 515; Cbace . Chapin. 130 Ib. 
 
 Connecticut Bank, 13 Ib.493. 128 ; Hunnewell v. Lane, 1 Met. 163. 
 
 8 Ex parte Boulton, 1 DeG. & J. But see Button v. Connecticut Bank. 
 
 163. 18 Conn. 493; Sbipman v. Etna Ins. 
 
 4 Nesbit v. Macomb Banking Assn. Co. 29 Ib. 245. 
 12 Fed. Rep. 686.
 
 THE PLEDGEE A HOLDER FOR VALUE. 3G5 
 
 279. PLEDGES OF STOCK FOR ANTECEDENT DEBT AND 
 FUTURE ADVANCES. The rule prevailing in certain states 
 that the holder of negotiable securities, receiving the same 
 as collateral security for a pre-existing debt, without further 
 consideration, is not a holder for value, in the usual course 
 of business, is applied in cases where certificates of stock 
 have been used as collateral security. The rule is enforced 
 although the certificate itself has been delivered, properly 
 indorsed, with full power to transfer the same on the books 
 of the company. 1 Where, however, new and valuable con- 
 sideration is given for such transfer as collateral security, 
 the claims of the pledgee are supported to the extent of such 
 new consideration, as being a present advance.* Upon a 
 pledge of certificates of stock for an antecedent debt, new 
 notes being given as evidence thereof, the pledgee is regarded 
 as a holder for value within the rule, as the transaction 
 amounts to a valid extension of the time for payment. 3 
 Pledges of stock are also sustained when made to secure 
 future advances or proposed liabilities. 4 
 
 280. THE PLEDGEE OF STOCK CERTIFICATES ENTITLED 
 TO DIVIDENDS. The holder of certificates of stock as col- 
 lateral security, receiving the same indorsed with a power 
 of attorney in blank, is entitled upon notice to the company, 
 to collect the dividends accruing on such stock while such 
 certificate remains in his possession. Nor is transfer upon 
 the books of the company material as to this right. Such 
 collections are applied on the debt at maturity. The title 
 
 1 Moodie v. Seventh Nat. Bank, 11 was supported in ex parte Barry, L. 
 
 Phila. 366; Barton v. Peterson, 12 Ib. R. 17 Eq. 113. 
 
 397 ; Root v. French, 13 Wend. 570 ; * Weaver v. Barden, Cherry v. 
 
 Weaver v. Barden, 49 N. Y. 286 ; Frost, and Moodie v. Nat. Bank, 
 
 Gould v. Farmers' Loan and Trust supra. 
 
 Co. 23 Hun, 322 ; Roxborough v. * Dayton Nat. Bank v. Merchants' 
 
 Messick, 6 Ohio St. 448 ; Cleveland Nat. Bank, 37 Ohio St. 208, 217. 
 
 . State Bank, 16 Ib. 236 ; Cherry v. * National Bank v. Hall, 18 Hun, 
 
 Frost, 7 Lea, 1. A pledge of stock 176 ; Eichelberger v. Murdock, 10 
 
 certificates for an antecedent debt Md. 373.
 
 3HG QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 to such dividends is in the pledgee, the increase of pledged 
 property going with the debt. 1 The pledgee, indeed, is an 
 owner; his special ownership imposes upon him the duties 
 of a trustee. As such, he is bound to collect dividends, and 
 may sue in his own name. It is not necessary that he should 
 become absolute owner by foreclosure before suing for divi- 
 dends on the stock.* And where stock is purchased by a 
 broker for a customer, and held by him with his margins as 
 security for the fulfilment by the customer of his engage- 
 ments, interest or dividends accruing thereon will be credited 
 to the latter. 8 Stock owned by C was pledged by B to A, 
 but A had no notice of the ownership until after default in 
 payment of the loan, when C requested him to delay the 
 sale. C, having collected dividends on the stock during the 
 delay, and the title to them being in the pledgee, C, as 
 trustee for A, was required to pay them over. 4 Where divi- 
 dends are collected by a pledger, an action for money had 
 and received for his use may be brought by the pledgee, 
 where the latter has received the certificates of stock so as 
 to vest the legal title in him. 5 But a mere delivery 
 of certificates, without indorsement, or of a special property 
 therein only, the pledger remaining owner at the time 
 of declaring the dividends, will not entitle the pledgee 
 to collect them. 6 
 
 1 Gaty v. Holliday. 8Mo. App. 118; certificates. Chamberlain* Green- 
 Merchants' Nat. Bank v. Richards, leaf, 4 Abb. N. Cas. 178; but they 
 6 Ib. 454 ; aff. 70 Mo. 77 ; Herman must be accounted for. Ib. 
 t>. Maxwell, 47 N.Y. Super. Ct. 347; 'Merchants' Nat. Bank v. Rich- 
 Hill v. Newichawanick Co. 48 How. ards. 6 Mo. App. 454; aff. 70 Mo. 77. 
 Pr. 429 ; Kellogg . Stockwcll. 75 111. Markham v Jaudon, 41 N. Y. 
 71 : March v. Railroad Co. 43 N.H. 235; Chamberlain v. Grecnlcaf, 4 
 520 ; Conant t>. Seneca County Bank, Abb. N. C. 178. 
 1 Ohio 8t. 298 ; Hasbrouck t>. Van- Herman v. Maxwell, 47 N. Y. 
 dervoort, 4 Sanclf . 74 ; Buttenvorth Super. Ct. 347. 
 . Kennedy, 5 Bosw. 143; Isaac v. * Hill v. Newickhawanick Co, 48 
 Clark. 2 Bulst. 306. The ri^ht to How. Pr. 429; Gaty v. Holliday, 8 
 collect dividends is recognized as to Mo. App. 118. 
 sub-pledgees, holding the title to the Dow v. Gould etc. Co , 31 Cal. 
 stock by proper indorsement of the 649.
 
 THE PLEDGEE A HOLDER FOR VALUE. 807 
 
 281. THE PLEDGEE OF STOCK ENTITLED TO PROTECT 
 PROPERTY OF COMPANY. Equity will aid the pledgee of 
 stock certificates, holding the same for value, with title, in 
 cases where the pledger is wasting the property and assets 
 of the company, and destroying the value of the stock. The 
 owner of the controlling interest in a company, having 
 secured loans upon pledges of its stock, procured the con- 
 veyance by the company to third parties of almost all of its 
 property. The pledgees brought suit to set aside the deeds, 
 and for other relief. No transfer on the books being required 
 to constitute a valid title to the stock, the pledgees possessed 
 a right under their special ownership, to defend the property 
 of the corporation paramount to the right of the pledger, or 
 of any subsequent purchaser of the same stock from the 
 legal owner while the certificates remained in their posses- 
 sion. Nor would they be required to bring an action in the 
 name of the corporation having no control over its proceed- 
 ings. 1 Pledgees of stock, having the legal title, and regis- 
 tration on the books of the company, were given equitable aid 
 in protecting the property represented by the shares from 
 diversions or liens improperly created, notwithstanding the 
 pledger's right of redemption, and equitable reversionary 
 interest in the stock. 1 
 
 1 Baldwin v. Canfleld, 26 Minn. Vail . Hamilton, 85 N. Y. 453. 
 43.
 
 308 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 CHAPTER XXVIII. 
 
 THE PLEDGEE, UPON TRANSFER, A STOCKHOLDER 
 
 282. The pledgee, upon transfer, a stockholder. 
 
 283. Or by his acts, in relation to the stock, voting, receiving dividends, 
 
 etc. 
 
 284. The rule as controlled by statutory provisions. 
 
 285. The pledgee of stock not released until re transfer. 
 
 286. Transfer so as to protect pledgees from liabilities. 
 
 287. Equitable relief of pledgor as against transfer. 
 
 288. The transfer of title by pledgee not a conversion of the stock. 
 
 282. THE PLEDGEE, UPON TRANSFER, A STOCK- 
 HOLDER. The pledgee of certificates of stock, indorsed 
 with power of attorney to transfer, who has obtained 
 transfer on the books of the company and received new 
 certificates, becomes by his voluntary act, a stockholder in 
 such company, with all the rights and liabilities of that 
 position. By means of such transfer and the issue of such 
 new certificates, the pledgee acquires a complete and ab- 
 solute title to the shares of stock deposited as collateral 
 security, and is enabled to render his security available by 
 sale, upon default of the pledgor upon the principal debt, 
 and notice of sale. In the absence of statutory restriction, 
 no stockholder can have greater rights, or be subject to 
 other liabilities, than the pledgee thus transferring his 
 stock collaterals upon the books of the company issuing the 
 same, and receiving new certificates. 1 Any secret trust 
 
 1 National Bank c. "Wntsontown Griswold, 18 Blatch, 555; Wheelock 
 
 Bank, 105 U. 8. 217; National Bank v. Kost, 77 111. 296; Adams . Stur- 
 
 v. Case, 99 U. 8. 628; Pullman v. gess. 55 Ib. 468; Adderley v. Storm, 
 
 Upton, 96 Ib. 328; Bowden c. Farm- 3 Hill, 634; Roosevelt v. Brown, 11 
 
 era' Bank, 1 Hughes, 307; Heath t>. N. Y. 18; In re Empire City Bank,
 
 THE PLEDGEE A STOCKHOLDER. 
 
 3G9 
 
 existing as between the pledgor and pledgee of stock col- 
 laterals, under such transfer and issue of new certificates, 
 will afford no defense to the pledgee as against third 
 parties who have acted upon the statements as to ownership 
 of stock appearing upon the books of the company. He 
 assumes the liabilities as well as enjoys the rights and 
 privileges of being a stockholder. 1 Such transfer by the 
 pledgee upon the books of the company severing the rela- 
 tion theretofore existing between the pledger and the 
 company, the liens or claims existing upon such stock as to 
 the latter no longer have any vitality. The transfer by the 
 corporation is an abandonment of any such lien, the 
 pledgee, as a new stockholder, entering into his relations with 
 the company entirely untrammeled by any antecedent claims.* 
 
 18 Ib. 199; Johnson . Underbill, 52 
 Ib. 203; Viiil v. Hamilton, 85 Ib. 
 453; Brcwstcr v. Sime, 42 Cal. 139; 
 Hale v. Walker, 31 Iowa. 344; Al- 
 bert v. Savings Bank. 1 Md. Cli. 407; 
 Magruder v. Colston, 44 Md. 349; 
 Holyoke Bank v. Burham, 11 Cash. 
 183; Bank v. Goodman, 9 Cush. 576; 
 Crease v. Babcock, 10 Mete. 525; 
 Barre Nat. Bank v. Hingham Man. 
 Co., 127 Mass. 563, 571 ; JHcCalla n. 
 Clark, 55 Geo. 53; Aultman's App. 
 98 Pa. St. 516; Pailroad Go.v. Stew- 
 art, 41 Ib 54; Griswold v. Iseligman, 
 72 Mo. 110; Fisher . Seligman, 75 
 Ib. 13; see Burgess v. Seligman, 
 107 U. S. Rep. 20; Franklin Bauk v. 
 Commercial Bank, 36 Ohio St. 350; 
 In re Tahiti Cotton Co., L. R. 17 
 Eq. 273; In re Northern Assam Tea 
 Co.,L. R. 10 Eq. 458. But a pledgee 
 of shares, although receiving them 
 with full power of attorney to trans- 
 fer, can only become the owner 
 thereof by a bona fide sale upon de- 
 fault, and purchase, no transfer hav- 
 ing been made upon the books of 
 the company. Until such sale and 
 24 
 
 purchase, the pledgee is not entitled 
 to the rights nor subject to the li- 
 abilities of an owner of shares. 
 Bceeher v. Wells Flouring Mills Co. 
 1 McCrary, 62. 
 
 1 Aultman's App. 98 Pa. St. 516. 
 
 1 National Bank v. Watsontown 
 Bank, 105 U. S. 217. A pledge of 
 a certificate of stock in the Walson- 
 lown Bank was made to the Cecil 
 National I'ank upon a discount of 
 two notes, with power of sale of the 
 collaterals upon non-payment. De- 
 fault occurring, the pledgee forward- 
 ed the certificate to the bank for 
 transfer, which was done by the en- 
 try in a stock ledger of debtor and 
 credit items, but no certificate was 
 forwarded, the pledgee requesting the 
 cashier to sell the stock, which was 
 done with a few shares. The pledgor 
 became insolvent, whereupon the 
 bank refused to transfer, claiming a 
 statutory lien on the stock. The 
 court (Matthews, Jus.) say: "A 
 complete transfer of the title to the 
 stock upon the books of the bank, 
 it is not doubted, would have the
 
 370 
 
 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 283. OR BY HIS ACTS IN RELATION TO THE STOCK, 
 VOTING, RECEIVING DIVIDENDS, ETC. A person may by his 
 acts or conduct in respect to the stock of a corporation, 
 render himself liable to the responsibilities of a stockholder, 
 and will be estopped to deny such liability as against third 
 persons, creditors, and others who have been deceived 
 
 effect to vest it in the transferee, 
 free from any claim or lieu of the 
 bank. The consent of the bank, 
 made necessary to such transfer, is 
 the waiver of its right, as its refusal 
 would be the assertion of it. The 
 transfer, when thus consummated, 
 destroys the relation of membership 
 between the corporation and the old 
 stockholder, with all its incidents, 
 and creates an original relation with 
 the new member, free from all ante- 
 cedent obligations. This legal rela- 
 tion and proprietary interest, on 
 which it is based, are quite independ- 
 ent of the certificate of ownership, 
 which is mere evidence of title. 
 The complete fact of title may very 
 well exist without it. All that is 
 necessary, when the transfer is re- 
 quired by law to be made upon the 
 books of the corporation, is that the 
 fact should be appropriately record- 
 ed in some suitable register or stock 
 list, or otherwise formally entered 
 upon its books. For this purpose 
 the account in a stock ledger, show- 
 ing the names of the stockholders, 
 the 'number and amount of the 
 shares belonging to each, and the 
 sources of their title, whether by 
 original subscription and payment 
 or by derivation from others, is 
 quite suitable, and fully meets the 
 requirements of the law. Accord- 
 ingly, when the cashier of the Wat- 
 
 sontown Bank received from Tome 
 the certificate with the authority 
 for its transfer to him duly executed 
 by Powell & Co., and, in pursuance 
 of the request to make the transfer, 
 charged it in the account against the 
 former owner, and gave to Tome 
 the corresponding credit, the latter 
 became a stockholder in the bank, 
 invested with the legal title to the 
 stock, and with all the rights, powers, 
 and privileges belonging to that char- 
 acter. Nothing more remained to be 
 done to make the conve3 r ance of 
 title complete and absolute, and, so 
 far as the bank was concerned, it 
 was irrevocable. It had consented 
 to the transfer, and the transfer had 
 been made. Thence-forward the 
 rights of Tome in respect to the 
 stock in question were all that they 
 could have been if it had be- 
 longed to him by virtue of an orig- 
 inal subscription. The claim of the 
 bank upon it, based upon the exist- 
 ing relation with the former owner, 
 ceased when, with its consent and 
 through its act, that relation ceased. 
 The Cecil National Bank, then, 
 had become the owner of the legal 
 title to the stock which Powell & 
 Co. transferred, and was entitled to 
 demand recognition from the bank 
 of its rights as a stockholder, and 
 to the customary certificate, as evi- 
 dence of its ownership."
 
 THE PLEDGEE A STOCKHOLDER. 
 
 371 
 
 thereby to their loss. 1 In the absence of restrictive statutes, 
 the pledgee of certificates of stock, indorsed and transferred 
 on the books of the company, has a right to vote at its meet- 
 ings. His name appearing as stockholder upon the records 
 of the corporation, he becomes for all purposes a stockholder. 
 The right to vote is an incident of the pledge, and according 
 to the presumed intentions of the parties.* Where such 
 stock remains in the name of the pledger on the books of 
 the company, the right to vote remains with him. 1 A 
 pledgee holding certificates of stock as security, who, after 
 transfer thereof and issue of new certificates, votes at meet- 
 ings of the company, is not liable to an action of trover for 
 the conversion of such certificates. 4 Nor will a court of 
 equity grant its restraining power in aid of a pledger of 
 stock against a trustee who is holding the same as collateral 
 
 1 Webster v. Upton, 91 U. S. 65 ; 
 Upton v. Trebilick, Ib. 45; National 
 Bank t>. Case, 99 Ib. 628; Farrar v. 
 Walker, 3 Dill. 506; Bank t>. Good- 
 man, 9 Gush. 576; American Ry. 
 Frog Co. 0. Haven, 111 Mass. 398; 
 State v. Leete, 16 Nev. 242; Whee- 
 lock v. Kost, 77111. 296; Griswoldv. 
 Seligman, 72 Mo. 110; Fisher v. 
 Seligman, 75 Ib. 13; in re Strafforn's 
 Exec. 3 DeG. & S. 31; Davidson's 
 case, 3 DeG. & S. 21 ; Tracy v. Yates, 
 18 Barb. 152; Spear v. Crawford, 14 
 Wend. 20 ; Burr . Wilcox, 22 N.Y. 
 551 : Wheeler t>. Miller, 90 N Y. 353. 
 
 * Ex partc Wilcocks, 7 Cow. 410 ; 
 in re Barker, 6 Wend. 509 ; in re 
 Long Island R. R. Co. 19 Ib. 37; 
 Adderly v. Storm, 6 Hill, 624; Rose- 
 veil v. Brown, 11 N. Y. 149; in re 
 Empire City Bank, 18 Ib 199 ; Vail 
 v. Hamilton, 85 Ib. 453 ; Chase v. 
 Bank, 19 Pick. 584 ; Griswold v. Sel- 
 igman, 72 Mo. 110; Fisher v. Selig- 
 man, 75 Ib. 13; Railroad Co. v. 
 Stewart, 41 Pa. St. 54; Hoppin v. 
 
 Buff urn, 9 R. I. 513; see Burgess v. 
 Seligman, 107 U. S. Rep. 20. "A 
 person in whose name the stock of 
 the corporation stands on the books 
 of the corporation is, as to the cor- 
 poration, a stockholder, and has the 
 right to vote upon the stock. * * 
 Nor would this result follow any the 
 less certainly if the shares of stock 
 were received in pledge only to se- 
 cure the payment of a debt, provid- 
 ing the shares were transferred on 
 the books of the company to the 
 name of the pledgee," Franklin 
 Bank v. Commercial Bank, 36 Ohio 
 St. 10. 
 
 1 McDaniels v. Flower Brock 
 Manuf. Co. 22 Vt. 274; Merchants' 
 Bank . Cook, 4 Pick. 205 ; Strong 
 . Smith, 15 Hun, 222 ; in re Barker, 
 6 Wend. 509 ; in re Cecil, 36 How. 
 Pr. 477 ; ex parte Wilcocks, 7 Cow. 
 410. 
 
 4 Heath v. Silverthorn Co. 39 Wis. 
 146.
 
 3"2 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 security for the benefit'of a third person, the same having been 
 transferred to the name of the trustee to prevent the pledgor 
 from voting thereon. Relief will not be given although by 
 the allegations of the bill the pledger would suffer irrepara- 
 ble injury if the trustee should be permitted to vote, but 
 presenting no facts in support; nor a writ of injunction 
 issued to restrain the violation of a mere legal right of prop- 
 erty. 1 The receipt of dividends on stock is sufficient to make 
 a man a stockholder, as the responsibilities of the position 
 go with the advantages.* 
 
 284. THE RULE, AS CONTROLLED BY STATUTORY PRO- 
 VISIONS. The liabilities of a holder of certificates of stock as 
 collateral security as a stockholder, are the subject of statu- 
 tory regulation. The provisions of such statutes generally 
 relieve the pledgee of stock from any personal liability as 
 stockholder, although he has received the full title to the 
 stock, and has the better to render his security more avail- 
 able procured the transfer of such stock to his own name 
 on the books of the company and received new certifi- 
 cates. The responsibilities of a stockholder are placed by 
 such statutes upon the pledger. In a Maryland case, in 
 which state, under statutory provisions, the holders of stock 
 as collateral security are exempted from liability as stock- 
 holders, an advance of money was made for the benefit of a 
 corporation, and as collateral security a certificate of stock 
 was issued to the pledgee, and subsequently indorsed by the 
 president of the company as being issued as "collateral 
 security." Creditors of the company were not allowed, in a 
 suit in equity, to enforce the pledgee's alleged liability as 
 stockholder. 3 And in a New York case, under a like stat- 
 ute, and imposing the liabilities of stockholders upon the 
 pledger, the pledgee was permitted to show that the trans- 
 
 1 McHenry v. Jewell, 90 N. Y. 58; JInlcc. Walker, 31 Iowa, 344; Whcc- 
 
 rcv. s. c. 20 Hun, 453. ler v. Kosl, 77 111. 296. 
 
 Pullman v. Upton, 96 U. S. 328 : Matthews v. Albert, 24 Md. 527. 
 National Bunk v. Case, 99 Ib. 62S;
 
 THE PLEDGEE A STOCKHOLDER. 373 
 
 fer of the legal title of the stock on the books of the com- 
 pany, and the issue of certificates, were onl} r for the purpose 
 of collateral security. 1 
 
 In Missouri it is provided by statutes that no person 
 holding stock as collateral security shall be personally liable 
 as a stockholder, but the pledger is considered as holding the 
 stock, and liable ; and that upon the dissolution of corpora- 
 tions, stockholders may be sued directly upon their 
 liability by judgment creditors of the company. The Su- 
 preme Court of Missouri,* construing these provisions, 
 refused to apply such exemption in a case where a corpora- 
 tion had pledged its own unissued and unsubscribed stock 
 to New York bankers as collateral security for advances, 
 and to secure the payment of bonds to be negotiated by 
 them for the benefit of the company, as in such case there 
 could be no pledger to whom creditors could resort, as pro- 
 vided in the statute. The banking firm having received 
 the legal title to the stock, although the transfer was 
 described in the original agreement as being "intrust," 
 and the stock certificates were entered upon the stock 
 ledger as being " held in escrow," and voted by proxy at 
 an annual meeting of the stockholders, and obtained control 
 of the organization, was estopped to deny it was a stock- 
 holder, and under statutory liability to judgment creditors 
 for debts of the company after its legal dissolution. The 
 United States Supreme Court, considering the statutes, 
 upon a claim of another judgment creditor arising out of 
 the same transactions, 3 found the transfer to be clearly 
 one of collateral security, the stock being held by the bankers 
 for their own security and that of the purchasers of bonds 
 issued in connection therewith ; that as the Missouri statute 
 recognized the holding of stock as collateral security 
 without a pledgee incurring liability as a stockholder, no 
 
 1 McMahon v. Macy, 51 N. Y. Wagner's Stats. Mo. c. 27, Art. 1, 
 
 155. 22 ; c. 27, Art 1, 9. 
 
 ! Griswold . Seligman, 72 Mo. 110; 3 Burgess v. Scligman, 107 U. S. 
 
 Fisher v. Seligman, 75 Ib. 13 ; 1 Rep. 20.
 
 374 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 one could complain except the other stockholders of the 
 fact of voting by the pledgees, or of their obtaining control 
 of the company under a previous understanding, the 
 transaction resulting in no injury, but rather a benefit to 
 creditors. The stock stood as security for large advances 
 mude in good i'<iiili by the pledgees, the money being used 
 for the benefit of the company, which was itself primarily 
 liable for its debts. 
 
 285. THE PLEDGEE OF STOCK NOT RELEASED, UNTIL 
 RE-TRANSFER. The liability of the pledgee of stock who 
 has caused transfer of the same upon the books of the com- 
 pany is continued as to the company and creditors, notwith- 
 standing the payment of the debt or obligation for which 
 the stock was indorsed as collateral. The liability ceases 
 only upon a re-transfer of the stock to the name of the 
 pledger. 1 Such liability cannot be avoided by a colorable 
 transfer to an irresponsible person. In such case the 
 transaction will be decreed to be a fraud on the creditors of 
 the corporation, and the transferrer held to the same lia- 
 bility as before.* As said, in a late Missouri case, in- 
 volving the liability of a pledgee of stock, who had taken 
 legal title thereto, " Courts will be sedulous in their 
 endeavors to defeat all schemes and contrivances whereby 
 parties may seek to receive and enjoy the benefits and priv- 
 ileges incident to the position of stockholders, and at the 
 same time be exonerated from the burdens imposed by law." 
 The necessity of a re-transfer to avoid liability is illustrated 
 in a case where a pledgee having transferred certificates of 
 stock held as collateral security to his own name, retained 
 the title to the stock at the request of the pledgor, after 
 payment of the debt, in order to sell the same for the hitter's 
 
 'Adderly v. Storm, 6 Hill, 624; Bowden t>. Johnson, 107 U. 8. 
 
 Johnson v. Underhill, 52 N. Y. 203 ; Rep. 251 ; National Bank v. Case, 99 
 
 Commercial Bank . Kortright, 20 U. S. 628 ; Davis v. Stevens, 17 
 
 Wend. 91; Walker *. Bennett, 18 C. Blatchf. 259. 
 
 B. 845. Fisher v. Seligman, 75 Mo. 13.
 
 THE PLEDGEE A STOCKHOLDER. 875 
 
 benefit. The company became insolvent, and the pledgee 
 returned the stock to the pledgor indorsed in blank. While 
 holding the stock as collateral security the pledgee was, 
 under a statutory provision, relieved from liability as a 
 stockholder; but after the debt was paid, the relation of 
 of pledgee and pledgor ceased, and as to creditors of the 
 company the pledgee became a stockholder with all the 
 accompanying liabilities. 1 
 
 286. TRANSFER so AS TO PROTECT PLEDGEE FROM 
 LIABILITIES. The transfer of certificates of stock as collat- 
 eral security for an independent debt may be made so as to 
 show the restricted interest of the pledgee therein, and at 
 the same time protect him from liability as a stockholder. 
 Such notice may be given by the terms of the indorsement 
 on the certificate itself, and will charge subsequent trans- 
 ferees. The transfer should show that it is made as and for 
 collateral security, and should sufficiently describe the debt 
 to secure the payment of which it is delivered in pledge.* 
 Upon a transfer of certificates of stock in pledge, an indorse- 
 ment showing the delivery to be " as collateral security " 
 was sufficient notice of the pledgee's limited interest to 
 entitle him to the benefit of statutory exemptions from 
 liability. 3 But in another case, \\here a certificate of stock 
 had been originally pledged showing that it wtis transferred 
 "as collateral," and upon payment the certificate was 
 indorsed in blank by the pledgee to the pledgor, who again 
 pledged the same for value, it was held the second pledgee 
 was not put upon inquiry by the words " as collateral " 
 upon the certificate, the name of the pledgor not appearing 
 thereon, and the possession of the pledgor of itself not being 
 sufficient to .show that he was the person for whom the 
 stock had formerly been held as collateral. Notwithstand- 
 
 1 Erskine . Lowenstein, 11 Mo. * Matthews v. Albert, 24 Md. 
 App. 595. 527. 
 
 8 Barre Nat. Bank v. Hingham 
 Manuf. Co. 127 Mass. 563, 571.
 
 376 QUASI-?'EGOTIABLE COLLATERAL SECURITIES. 
 
 ing the certificate was grossly tainted with forgery commit- 
 ted by the pledgor, who was bankrupt, the second pledgee 
 was allowed to recover on the indorsement made by the 
 first pledgee. 1 The holder of a certificate of stock may also 
 show by evidence outside of the certificate, although its 
 statements are absolute as to his ownership thereof, that 
 such certificate does not belong to him as owner ; and the 
 same rule applies as to statements as to who are stockhold- 
 ers, contained in the books of a corporation.* 
 
 287. EQUITABLE RELIEF TO PLEDGOR AS AGAINST TRANS- 
 FER. Where certificates of stock have been pledged as col- 
 lateral security by delivery, together with a power of attorney 
 to transfer, and the pledgee has elected to make such transfer 
 on the books of the company and to receive a new certifi- 
 cate in his own name, so as to become vested with the legal 
 title and ownership of the stock, a court of equity, upon a 
 proper case, will entertain a bill for the purpose of establish- 
 ing the trust existing in such shares, and if entitled thereto, 
 relief will be given the pledgor, generally by a decree re- 
 quiring the certificates of stock to be surrendered properly 
 indorsed to the pledgor upon the equitable terms of payment 
 of the loan with interest, and such assessments as have been 
 rightfully paid by the pledgee, and subject to proper credits 
 for dividends received by him.' Parol testimony is received 
 to establish the fact that the transfer of such certificates 
 was intended as collateral security only, although absolute 
 in terms. 4 This principle was applied to a stock transac- 
 
 1 Matthews v. Mass. Nat. Bank, ton . Manchester II. "R Co. 42 N.II. 
 
 Holmes, 410. 424 ; MeCalla . Clark, 55 Ga. 
 
 McMahon v. Macey, 51 N.Y. 155; 53. 
 
 Tonica etc. Ry. Co. v. Stein, 21 111. Ibid McMnlion v. Macy, 51 N.Y. 
 
 90; Jon^s v. Portsmouth Ry. Co. 32 155; Burgess v. SHignvm, 107 U. S. 
 
 N. H. 544; Pittsburgh Ry. Co. v. Rep. 20; Latlirop v. Kneelund, 46 
 
 Stewart, 41 Pa. St. 54; Lathrop v. Burl). 433, Jones v. Portsmouth H.R. 
 
 Kneeland, 40 Barb. 432. Co. 82 N II. 544 ; Pittsburgh Ii.It.Co. 
 
 Brick v. Brick, 98 U. S. 514; . Stewart, 41 Pn St. 54; Tunica U. 
 
 Newton v. Fay, 10 Allen. 505; Gil- R. Co. t. Stein, 21 111. 90. 
 pin t. Howell, 5 Pa. St 41; Pink*>-
 
 THE PLEDGEE A STOCKHOLDER. 377 
 
 tion, where the assignment of title was absolute, the rule 
 excluding parol testimony to vary or contradict a written 
 instrument having reference only to the language used 
 therein and not forbidding inquiry into the object of the 
 parties in executing and receiving the same. A deed may 
 be shown by parol evidence to have been made to defraud 
 creditors, to give a preference, or to secure a loan ; and the 
 rule applies with equal force to instruments purporting to 
 transfer personal property. 1 
 
 288. THE TRANSFER OF TITLE BY PLEDGEE NOT A 
 CONVERSION OF STOCK. The purpose of indoising certifi- 
 cates of stock with an irrevocable power . of attorney 
 to transfer and generally of substitution, is to enable the 
 pledgee upon default in the principal debt, to lender his 
 securities available. In the absent of such indorsement of 
 the power of attorney to transfer certificates of stock, the 
 pledgee takes a doubtful security, as his title is but equi- 
 table, and subject to prior equities, whether known or not. 9 
 The pledgee, holding the legal title to the certificates as 
 between the parties to the contract of pledge it is essential 
 in certain states, under statutory enactments, in order to 
 protect his collateral securities against the claims of third 
 persons, and of the corporation, that transfer should be 
 made upon the books of the company, and new certificates 
 issued. A transfer and the issue of new certificates is not 
 a conversion of the stock. 3 The same right of transfer for 
 better security as against the pledger, may be exercised by 
 
 'Brick v. Brick, 98 U.S. 514; whore stock was held as collateral to 
 
 Burgess v. Seligman, 107 U. S. Rep. secure a debt, and transfened on the 
 
 20. books of the company to relatives to 
 
 * Rich v. Boyce. 89 Md. 314, 327. avoid liability as stockholder, the 
 
 1 Rich v Boyce, supra; Heath v. certificates being indorsed with 
 
 Griswold. 18 Blatchf. 5">5; Adams. power of attorney to transfer to the 
 
 Btur^es. 55 111. 468; Heath v. Silver- pledgee. Heath v. Griswold, 18 
 
 thorn Co. 39 Wis. 146. The pledgee Blatchf. 555. 
 was uot charged with a conversion
 
 378 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 a sub-pledgee holding certificates of stock with full title. 1 
 A transfer of certificates of stock held in pledge to third 
 persons with a view of avoiding injury to the credit of the 
 pledgee, he retaining the control and possession of the new 
 certificates, indorsed, ready to be returned to the pledger, 
 will not amount to a conversion of the stock, in the absence 
 of tender or payment of the debt, demand of the stock, and 
 refusal to transfer.* Nor is it a conversion, as against a 
 partnership, where shares of stock were transferred by 
 one of its members, holding them for the benefit of a third 
 person, with power of sale, and subsequent transfers were 
 made to and from the firm, with all of which it had nothing 
 to do, the individual partner keeping the certificates in l)is 
 possession. 1 
 
 1 In re Tahiti Cottou Co. L. R. 17 * Day v. Holmes, 103 Mass 306. 
 Eq. 273. Adams . Sturges, 55 111. 468.
 
 THE PLEDGEE'S RIGHTS. 379 
 
 CHAPTER XXIX. 
 
 THE PLEDGEE'S RIGHTS, AS AGAINST LIENS. 
 
 289. The pledgee of stocks, \vhcn not subject to liens of company. 
 
 290. The company's lien, by statute or charter. 
 
 291. Limitations and loss of company's lien. 
 
 292. The enforcement of company's lien, as against pledgee. 
 
 293. The pledgee of stocks a holder for value against creditors. 
 
 294. Pledges with transfer supported as against creditors. 
 
 295. The creditor's lien, as against pledgee, under statutoiy enactments. 
 
 289. PLEDGEES OF STOCK, WHEN NOT SUBJECT TO 
 LIENS OF COMPANY. A pledgee for value, without notice 
 of equities, of certificates of stock receiving the same with 
 a power of attorney to transfer indorsed thereon, so as to 
 convey the legal title and ownership, in the usual course of 
 business, is protected as against secret liens of the company 
 equally with purchasers for value in good faith of such cer- 
 tificates of stock. Such pledgees, holding the legal title 
 and possession of the certificate, are not subject to liens or 
 claims of the company issuing the same, based upon any 
 rule or by-law restricting the transfer of stock until 
 payment of the indebtedness of the pledgor, where the lien 
 is not given by statutory enactment or by provisions of the 
 charter of the corporation. 1 Such secret liens are not favored 
 
 1 Case v. National Bank, 100 U. Smith v. Slaughter House Assn. 30 
 
 S. 446; National Bank V. Watson- Ib. 1478; Moore v. Bank, 52 Mo. 
 
 town Bank, 105 Ib. 217; Carroll v. 379; Carroll v. Mullanphy Savings 
 
 Mullanphy Co., 8 Mo. App. 249; Bank, 8 Mo. App. 249; Union Bank 
 
 Driscoll . Bradley Manf . Co. 59 N. v. Laird, 2 Wheat. 390 ; Bank v. 
 
 Y. 96; New Orleans Nat. Bkg. Lanier, 11 Wall. 369; Bullard v. 
 
 Assn. v. Wiltz, 10 Fed. Rep. 330; Bank, 18 Wall. 598; Bank of Attica 
 
 Bryon v. Carter, 22 La. Ann. 98; v. Manufacturers' Bank, 20 N. Y.
 
 380 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 as against bona fide holders for value of certificates of stock 
 indorsed with a power of attorney to transfer, thus holding 
 the title to the shares of stock. No presumption arises 
 in favor of the company refusing to transfer such 
 shares, by reason of any claim of which such holder 
 for value is not chargeable with notice. 1 A power 
 given by charter provisions to pass by-laws for the 
 regulation of transfers of stock certificates will not en- 
 title a company to create a secret lien upon the shares of 
 stocks in the hands of a bona fide holder for value, without 
 notice of the by-law ;* nor to pass a by-law claiming a lien 
 
 505; Rosenback v. Bank, 53 Barb. 
 495; Massachusetts Iron Co. . 
 Hooper, 7 Cush. 183; Sargcant v Ins. 
 Co. 8 Pick. 90; Nesmkh v. Wash- 
 ington Bank, 6 Ib. 329; Steamship 
 Dock Co. e. Heron, 52 Pn. St. 280; 
 Geyer v. Insurance Co. 3 Pittsb. 41; 
 Bank of Holly Springs v. Pinson, 
 58 Miss. 421, 435. A general assig- 
 nee of the stockholder was held to 
 take subject to the lien of the cor- 
 poration. Wain v. Bank, 8 S. & H. 
 73. And where the face of the 
 stock contained a statement of the 
 liability. Van Sands v. Middlesex 
 County Bank, 26 Conn. 144. In 
 Cornick v. Richards, 3 Lea, 23, the 
 court (Freeman, J.) say: " Stocks 
 are used every day in the transac- 
 tions of our business men as col- 
 laterals as well as sold, and the uni- 
 versal practice is to transfer or as- 
 sign the certificate of the stock, with 
 a power of attorney in blank, to be 
 filled up, authorizing the transfer 
 by the corporation on its books to 
 the purchaser, on the presentation 
 of which power properly authenti- 
 cated, the corporation transfers the 
 stock to the purchaser or holder; 
 uud when the sale is absolute, it is 
 
 usual to issue new certificates to the 
 party taking up the old. Such a 
 practice facilitates the easy use of 
 this property in commercial transac- 
 tions. The rule requiring transfer 
 on the books of the corporation can 
 only serve to give the creditor who 
 has a judgment or execution, a legal 
 advantage, who has never given 
 credit on the faith of the stocks over 
 the other who has advanced his 
 money on them, and taken the evi- 
 dence of his security by a transfer 
 of his certificate. In such case, the 
 equities are altogether in favor of 
 the assignee who has advanced hit 
 money on the faith ef the collater- 
 als. " 
 
 1 Bullard . Bank, 18 Wall. 589; 
 Bank . Lanicr, 11 Wall. 369; Car- 
 roll v. Mullanphy Savings Bank, 
 8 Mo. A pp. 249; Driscoll v. West 
 Bradley Manf. Co. 59 N. Y. 96; 
 Mass. Iron Co. v. Hooper, 7 Cush. 
 183; Steamship Dock Co. v. Heron, 
 52 Pa. St. 280; Sargeant v. Franklin 
 Ins. Co. 8 Pick. 90. 
 
 * Anglo-Californian Bank v. Bank, 
 61 Cal. (16 C. L. N. 313); Dris- 
 coll 0. West Bradley Manf. Co. 59 
 N. Y. 96; State Ins. Co. v. Gennett,
 
 THE PLEDGEE'S RIGHTS. 381 
 
 that all debts due to the corporation shall be discharged 
 before permitting a transfer of stock as against such bona 
 fide holder for value, and without notice. 1 In Louisiana, a 
 pledge of shares of stock, by delivery of the certificate, is 
 supported, although at the time the pledgor be indebted to 
 the corporation, and such transfers were prohibited by the 
 charter of the corporation, shares of stock not being 
 ** credits," within the meaning of the Louisiana code. 7 
 
 As no statutory lien upon the shares of their stock- 
 holders for indebtedness is given to national banks, the 
 delivery of certificates of stock of such banks as collateral 
 security, with an irrevocable power of attorney to transfer 
 indorsed thereon, to a pledgee for value, without notice, 
 defeats any claim of a lien on the stock against the pledgor, 
 although the latter has become insolvent. The title to 
 the shares, as against such lien, passes upon a transfer for 
 value, in good faith, of the certificate. 1 And an innocent 
 pledgee for value of shares of stock of a national bank, 
 holding them under indorsement, with irrevocable power to 
 transfer, will be entitled to recover, as against the bank re- 
 fusing a transfer, after notice that the pledgor, who 
 was indebted to it, had been adjudicated a bankrupt, the 
 value of the stock (having first been paid the accrued divi- 
 dends) less taxes, to the amount of his advance, the stock 
 to be sold at public sale/ 
 
 290. THE COMPANY'S LIEN, BY STATUTE OR CHARTER. 
 Under general statutes giving authority to regulate the 
 transfer of stock, it maybe provided that no transfer shall be 
 made upon the books of the company until after payment 
 
 2 Md. Ch. 100; Billiard v. Bank. 18 * National Bank v. National Bank, 
 Wall. 589; United States v. Vaughan, 10 Bush. 867; Koscnbuck v. Sail 
 
 3 Binn. 394. Springs Nat. Bank 53 Barb. 495. 
 
 1 Anglo-Californian Bank v. Bank, * Dayton Nat. Bank v. Bank, 37 
 supra. Ohio St. 217 
 
 9 Pilot v. Jackson, 32 La. Ann. 
 1286.
 
 382 
 
 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 of all indebtedness to the company by the person who 
 appears to be the owner, and to whose name the stock is 
 credited on its books. 1 Such lien extends to all the stock 
 of the debtor, although it greatly exceeds the amount of 
 the debt ; nor will the lien be barred by the running of the 
 statute of limitations against the debt. 1 Where a by-law 
 required the special consent of the directors to a transfer of 
 
 1 Pendergast v. Bank, 2 Sawy. 108; 
 McDowell v. Bank of Wilmington, 
 1 Harr. (Del.) 27; Lock-wood v. The 
 Banks, 9 It. I. 308; Wain v. Bank 
 of North America, 8 S. & R. 86; 
 McDowell v. Phoenix Fire Ins. Co. 
 3 Paige's Ch. 350; McCready v. 
 Rumsey, - G Duer, 574; Leggett . 
 Bank, 24 N. Y. 283; Tuttle v. Wal- 
 ton 1 Kelly (Geo.) 43; Sabin v. Bank 
 of Woodstock,* 21 Vt. 253. In Na- 
 tional Bank v. Watsontown Bank, 
 105 U. S. 202, -the last named bank 
 claimed a lien upon the stock of the 
 pledgor as against the other bank, 
 holding it through its president, as 
 collateral security. The Pennsyl- 
 vania statute regulating banks, sect. 
 10, art. 10, approved April 10, 1850, 
 provided that "the stock of the 
 bank shall be assignable and trans- 
 ferable on the books of the corpora- 
 tion only, in such manner as the by- 
 laws shall ordain ; but no stockholder 
 indebted to the bank for a debt actu- 
 ally clue and unpaid shall be author- 
 ized to make a transfer or receive a 
 dividend until such debt is dis- 
 charged or security to the satisfac- 
 tion of the directors given for the 
 same." The court (Matthews, Jus.) 
 say: "The title [of the pledgee] was 
 unquestionably subject to the lien 
 given by its charter to the Watson- 
 town Bank. That provision when 
 insisted on and enforced, would be 
 
 effectual to subject the beneficial in- 
 terest in the stock to the payment of 
 any indebtedness from the stock- 
 holder, making the tiansfcr, to the 
 bank for the debt which, at the 
 time of the proposed transfer, was 
 actually due and unpaid. Accord- 
 ing to the terms of this provision the 
 bank was properly represented, in 
 the act of transfer, by its cashier; 
 and he was authorized to bind the 
 bauk, in consummating the transac- 
 tion, by virtue of his office, in the 
 absence of any by-law, according to 
 the usage of the business and the 
 practice of the particular bank, pre- 
 sumed to be known to and approved 
 by the directors. Case v. Rank, 100 
 U. S. 446." The pledgee of stock, 
 by delivery of the certificate and 
 possession, is subject, under the 
 Louisiana Code, to all the liens and 
 privileges which the law puts upon 
 it. Succ. of Rosseau, 23 La. Ann. 
 3; Hoss v. Williams, 24 Ib. 568; N. 
 0. Banking Assn. v. Wiltz, 30 Ib. 
 1378. A lien on stock given to a 
 corporation by its articles of associa- 
 tion under a general law, was sup- 
 ported as against a ccstui que trust, 
 in New London Bank v. Brockle- 
 bank, L. R. 21 Ch. D. 302; Childs v. 
 Hudson's Bay Co. 2 P. Wins. 207. 
 
 * Geyer v. Insurance Co. 3 Pittsb. 
 41.
 
 THE PLEDGEE'S RIGHTS. 3S3 
 
 stock while the transferrer was indebted to the company, a 
 lien was given on the stock of one partner for a debt owinij 
 by the firm. 1 The lien is not defeated by the taking of 
 collateral security for the payment of any particular debt of 
 the stockholder. 9 And upon the equitable principle of 
 subrogation, a surety or accommodation maker or indorser, 
 upon paying the debt, the creditor corporation having a 
 lien under a statute or its charter upon the stock owned 
 by the principal debtor, may enforce such lien. 3 A 
 statutory lien in favor of a corporation extending to " all 
 debts due " from the stockholder, covers an old indebted- 
 ness upon stock previously pledged to a third person, by 
 delivery of the certificate with power of attorney to 
 transfer, but of which no notice was given to the corpora- 
 tion. And it is immaterial, as against the claim of such 
 statutory lien, that the certificate of stock itself contains no 
 notice of any lien of the company. 4 In another case, the 
 trustees of an estate had invested its funds in the capital 
 stock of a company, which was entitled to a lien on shares 
 for all moneys owing to it, individually or jointly, and as 
 against all the holders of a share. One of the trustees was 
 a member of a partnership, which being in debt to the com- 
 pany, became bankrupt. The lien of the bank prevailed 
 over the cestuis que trust, although as between the latter 
 and the trustees, quaere whether such an investment was 
 authorized. 5 
 
 291. LIMITATIONS AND LOSS OF COMPANY'S LIEN. 
 A company is not allowed to enforce even a statutory lien 
 for an indebtedness incurred by the assignor of the certifi- 
 cate of stock, after notice of the transfer of the stock. 6 Nor 
 
 1 Mechanics' Bank v. Earp, 4 4 First Nat. Bank v. Hartford Ins. 
 
 Rawle, 384; Geyer v. Ins. Co. supra. Co. 45 Conn. 22. 
 
 * Union Bank v. Laird, 2 Wheat. B New London Bank v. Brockle- 
 
 390. bank, L. R 21 Ch. D. 302. 
 
 8 Ibid. ; Klopp v. Lebanon Bank, 6 Conant v. Seneca Co. Bank, 1 
 
 46 Pa. St. 88. Ohio St. 298.
 
 384 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 will the lien extend to an indebtedness represented by a 
 bill of exchange held by a corporation not then arrived at 
 maturity, of which the stockholder was the drawer. 1 And 
 being a mere right of detention on the part of the company 
 to make such lien available for the actual recovery of the 
 debt, a judgment must be levied upon the shares, and the 
 same sold under execution.* A power to fix the mode of 
 transfer of stock in charter or articles of association ex- 
 cludes any attempt to do it by way of by-law. 1 A mere 
 right under a general statute authorizing the adoption of 
 by-laws regulating the transfer of stocks, will not support 
 a by-law adopted at a meeting of the board of directors 
 only. 4 Nor will such a by-law or rule, so adopted, be 
 allowed to affect the rights of bona fide holders of stock, 
 advancing money thereon, without notice. 6 
 
 The right of a corporation to assert a statutory lien on 
 the stock of its shareholders to secure the paj'ment of their 
 liabilities to it, are subject to waiver, and to be defeated and 
 lost by the laches of the corporation in asserting the same, 
 where such enforcement would operate as a fraud upon 
 innocent third parties, holding for value, and mi.-lead by 
 assurances equivalent to a renunciation of the statutory 
 claims of the corporation. The rule is applied in cases 
 where, by reason of delay in the assertion of its lien, a 
 pledgee holding certificates of stock which he is seeking to 
 transfer into his own name, has lost an opportunity of ob- 
 taining other security, or of availing himself of other 
 means of enforcing his claims against the pledger.' And 
 a corporation, where it has sold out the stock of one of its 
 
 1 In re Stockton etc. Co. L. R. 2 Snvinos Bank, 8 Mo. App. 249; Hex 
 
 Cb. D. 101. v. Wcstwood, 2 Dow. & C. 21. 
 
 1 West Branch Bank*. Armstrong, Bank of Holly Springs v. Pinson, 
 
 40 Pa. St. 278. 58 Miss. 421; Carroll v. Mullanphy 
 
 8 Bank of Utica t. Bank, 20 N. Y. Banking Co., supra. 
 
 501. National Bank v. Watsontown 
 
 4 Morton etc. Co. t>. Wysong. 51 Bank, 105 U. S.17, 23; Case v. Bank, 
 
 Ind. 4: Union Bank t>. Ridgeley, 1 100 U. S. 446. 
 . & G. 324; Carroll t>. Mullanphy
 
 THE PLEDGEE'S RIGHTS. 385 
 
 shareholders, under a power claimed by it, but which 
 authority was not exercised in accordance with the provi- 
 sions of its charter, is liable to the stockholder for the 
 damages sustained by such wrongful sale. Nor is the stock- 
 holder required to make the transferee of the stock, so 
 sold, a party to his bill seeking relief. 1 
 
 i92. THE ENFORCEMENT OF COMPANY'S LIEN AS 
 AGAINST PLEDGEE. The provision in the charter of a com- 
 pany that a stockholder, before he can obtain a transfer of 
 his shares on the books of the company, shall be required to 
 pay all moneys due from him to the company, creates no 
 lien or charge upon such shares of stock, as no enforcement 
 thereof by the company, even by suit in equity, is possible 
 until the stockholder himself desires to make such transfer. 
 A stockholder in a banking company having such charter 
 provision, made an equitable mortgage to the company of 
 certain title deeds as security for specific loans, and shortly 
 afterwards died, devising the estates, the title deeds of 
 which had been pledged, to certain legatees. The claim of 
 the latter that the company should be required by a court 
 of equity to enforce payment of its loan by availing itself of 
 its charter provisions relative to the stock as well as by the 
 sale of the estates covered by the equitable mortgage, was 
 not approved. The provision as to stock not being in any 
 sense a security, no claim for contribution could arise rel- 
 ative thereto.* And that if such claim for contribution had 
 arisen, the title deeds having been equitably mortgaged for 
 the specific debt, would have to be exhausted before any 
 resort was had to the stock. 1 
 
 293. THE PLEDGEE OF STOCKS A HOLDEE* FOR VALUE, 
 AS AGAINST CREDITORS. In the absence of statutory enact- 
 ments or charter provisions requiring transfer upon the 
 
 'Duncan v. Hinckley, 2 McN. & 'Ibid; Bute v. Conyngham, 2 
 
 G. 30. Russ. 275, 299; Averal v. Wade, 
 
 3 In re Dunlop, L. R. 21 Cli. D. 583. Lloyd & G. 252. 
 25
 
 380 
 
 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 books of the corporation issuing certificates of stock, the 
 owner may transfer the legal title and ownership of 
 the shares of stock represented thereby, by delivery of the 
 certificates indorsed with a power of attorney to transfer in 
 blank, or filled with the name of the person advancing value 
 thereon. The title acquired by a bona fide pledgee for 
 value, without notice, is not subject to be divested or de- 
 feated by the subsequent issue of legal process by creditors 
 of the pledgor against such stocks, although no transfer of 
 the stock has been made upon the books of the company. 
 The equity of the pledgee advancing money upon the repre- 
 sentations of the certificates is preferred. 1 Protection is 
 especially afforded to an innocent pledgee for value, in 
 cases where by reason of the fraudulent delay and refusal 
 of the officers of a corporation to make upon demand the 
 necessary transfer of shares of stock" upon its books, a 
 creditor is enabled to issue legal process against the stock as 
 belonging to the pledgor.* 
 
 1 Merchants' Nat. Bank t>. Rich- 
 ards, 6 Mo. App. 454; s. c. 74 Mo. 
 77 ; Moore t>.Bank, 52 Mo.379 ; Siblcy 
 V. Quinsigamond Nat. Bank 133 
 Mass. 515 ; Sargent v Essex Marine 
 Ry. Co. 9 Pick. 201 ; Sergeant v. 
 Franklin Ins. Co. 8 Ib. 90; Dickin- 
 son v. Central Nat. Bank, 129 Mass. 
 279; Boston Music Hall Associa- 
 tion v. Cory. 129 Ib. 435; Fisher . 
 Essex Bank, 5 Gray, 373; German 
 Union Building Assn. v. Semlmeyer, 
 50 Pa. St. 67; Strange *. Houstrn 
 & T. R.R.Co 53 Tex. 1G2; .Manns v. 
 Brockville Nat. Bank, 73 Ind. 243; 
 Continental Nat. Bank v. Eliot Nat. 
 Bank, 7 Fed. Rep. 369; N. O. Nat. 
 Banking Assn.u. Wiltz, 10 Fed. Hep. 
 830; Driscoll v. West Bradley Manuf. 
 Co. 59 N. Y. 96; Nahringfl. Hank of 
 Mobile, 58 Ala. 204; Broadway Bank 
 . McElrath, 13 N. J. Eq. 24: United 
 States v. Vaughan, 3 Binn. 394; 
 
 Commonwealth v. "VVatmough, 6 
 Whart. 138; Finney's App. 59 Pa. 
 St. 308; Lane's App. 89 Ib. 411; 
 Eby v. Guest, 94 Ib. 160; Fraser 
 0. Charleston, 11 S. C. 519; Cornick 
 v. Richards, 3 Lea, 1 ; Becku ith v. 
 Burrough, 13 R. I. 294. Although 
 under Gen. Stats. Mass. 1882, c. 133, 
 43, it is provided that the interest 
 of any stockholder in any corpora- 
 tion organized .under the authority 
 of the State, may be taken on exc-- 
 cutiou and sold, yet the Legislature 
 has not defined what shall be an at- 
 tachable interest in stock, but leaves 
 it to be determined by the common 
 law or some other statute. Boston 
 Music Hall Assn. v. Cory, 12!) Mass. 
 435; Sibley v. Quinsigamond Nat. 
 Bank. 13311). 515, 
 
 * Merchants' Nat. Bank v. Rich- 
 ards, 74 Mo. 77 ; s. c. 6 Mo. App. 454.
 
 THE PLEDGEE'S RIGHTS. 387 
 
 The holder for value, without notice, of certificates of 
 stock, by indorsement of the power of attorney to transfer 
 und delivery, and with notice to the company, possesses a 
 right superior to that of a subsequent attaching creditor, 
 although a valid by-law be embodied in the certificate that 
 the stock is only transferable on the books of the company 
 at its office upon surrender of the certificate, there being no 
 provision in the charter. 1 Even with such provision in the 
 charier, the equity of the bona fide holder advancing money 
 thereon is preferred to that of a subsequent attaching cred- 
 itor, whether with or without notice.* Stock of a national 
 bank was held in trust, the certificate being indorsed abso- 
 lutely to the real owner. The trustee continued to collect 
 the dividends, paying them over to the real owner, and no 
 transfer was made on the books of the company. An at- 
 tempt was made to subject the stock to execution by a 
 judgment creditor of the bare trustee, but was not supported, 
 although the bank and the creditor were without notice of 
 the trust.* 
 
 294. PLEDGES OF STOCK, WITHOUT TRANSFER, SUP- 
 PORTED AS AGAINST CREDITORS. A certificate of stock 
 transferable according to its terms only by appearance in 
 person or by attorney at the place mentioned therein, was 
 indorsed in blank by the legal owner, and delivered to a 
 third person who pledged the same to a bank as collateral 
 security for a loan. The owner having deceased, a transfer 
 of such certificate was made upon a subsequent filling up of 
 the blank indorsement by the pledgee. As against an attach- 
 ment of the shares by a creditor of the estate, the claims of 
 the pledgee were preferred. 4 Notice of a pledgee's rights 
 
 1 State Ins. Co. v. Gcnnctt, 2 Md. supra; Farmers' Bank v. Iglehart, 
 
 Ch. 100; Stebbins v. Phoenix Fire 6 Gill, 50. 
 
 Ins. Co. 3 Paige, 361 ; United States * Sibley v, Quinsigamond Nat. 
 
 c. Vaughan, 8 Binii. 394. Bank, 133 Mass. 515. 
 
 * Duke . Cahawba Navigation Co. * Fraser . Charleston, 11 S. C. 486. 
 10 Ala. 82; State Ins. Co. v. Geunett,
 
 388 QUASI -NEGOTIABLE COLLATERAL SECURITIES. 
 
 will defeat a levy by a creditor. A certificate of stock was 
 pledged to an accommodation indorse! as collateral with a 
 blank power of attorney for making u the proper transfer on 
 the books of the company." The indorser was obliged to 
 pa} T the note. Another creditor of the accommodated 
 part}* levied upon ilie btoik before transfer upon the books 
 of the company, but being chargeable with notice of the 
 pledge, acquired no rights as against the pledgee. 1 So, 
 where a creditor, upon his levy and execution, obtained a' 
 sale of shares of stock, the purchaser at the execution sale 
 being chargeable with notice that the certificates were held 
 by a pledgee for value, in good faith, properly indorsed, a 
 court of equity protected the hitter's title to the stock. 
 The company had issued a new certificate to the purchaser 
 at the execution sale, but the rights of the pledgee-4;o a trans- 
 fer could not be affected by an unauthorized act of the com- 
 pany. 9 
 
 The pledgee of shares of stock in a corporation having 
 the legal title and possession by indorsement of the 
 certificates, has a lien superior to that of a levy under an 
 execution ; and a purchaser at a sheriff's sale, under such 
 levy, acquires no title, to the shares. 3 Nor can executions 
 and attachments be levied on shares of stock in cases where 
 the debtor has only an equitable right, or is not the legal 
 possessor of the legal title, or has regularly indorsed his 
 interest therein. 4 In Connecticut, where transfer of shares 
 
 1 Cbeever n. Meyer. 52 Vt 66. One as to the ninety shares were sustained 
 
 hundred shares of st<,ck were against botli the company and crcd- 
 
 pledged as collateral security, with itor. Warren v. Brandon Manuf. 
 
 full power of transfer indorsed, but Co. reported in note to Cheevcr v. 
 
 before transfer ten of the shares were Meyer, supra. 
 
 attached by a creditor of the J Rogers v Stevens, 8 N.J.Eq. 167. 
 plcdgor. The company then refused 3 Manns 0.1'rockvillc Nnt.Bank,78 
 to transfer any of the shares to the Ind. 24:J; Nahring v. Bank of Mo- 
 name of the pledgee. Subsequently bile, 58 Ala. 204. 
 the same creditor, with notice of the 4 Van Norman r.Jackson, 45 Mich, 
 pledge, attached the remaining 204. 
 ninety shares. The pledgee's rights
 
 THE PLEDGEE'S EIGHTS. 389 
 
 of stock upon the books of the company is required by stat- 
 ute in order to pass the legal title as against third persons, 
 so that, until transfer, the pledgee holds but an equitable 
 title to the collateral stocks, the rule is modified so that the 
 same considerations which excuse a failure to take possession 
 of personal property excuse a failure to perfect the transfer 
 of stock. The equity of the assignee of such certificates of 
 stock if prior in time to that of the attaching creditor, pre- 
 vails, where he has done all that the law required, and all 
 that it is possible for him to do in taking possession of the 
 property. 1 
 
 295. THE CREDITOR'S LIEN, AS AGAINST PLEDGEE, 
 UNDER STATUTORY ENACTMENTS. In states where statutory 
 provisions requiring transfer on the books of the company 
 to complete the legal title to shares of stock are supple- 
 mented by other enactments authorizing the issue of legal 
 process against such stock, as being the property of the 
 person in whose name it stands on the books of the company, 
 the lien of the creditor is enforced. The failure of the 
 pledgee, receiving the certificate with power of attorney, to 
 make such transfer, defeats his claim as against such creditor, 
 although the act of pledge be prior in point of time to the 
 service of process. The creditor is authorized to rely upon 
 the statements of ownership found in the stock books of the 
 company. 2 Under this view it is insisted that if the indorse- 
 ment and delivery of a certificate of stock to the pledgee be 
 alone sufficient to defeat the claims of creditors of the 
 
 1 Colt v. Ives, 31 Conn. 25. People's Bank t. Gridley, 91 Ib. 457; 
 
 8 Fisher v. Essex Bank, 5 Gray, Pir.kerton v. Manchester Railroad 
 
 373; Blanchard v. Dedham Gas Co. Co. 42 N. H. 424; Pittsburgh Rail- 
 
 12 Gray, 213; Oxford Turnpike Co. road Co. v. Clarke, 29 Pa. St. 146; 
 
 v. Bunnell, 6 Conn. 558; Buttons. Brown v. Kneeland, 5 Biss. 181; 
 
 Connecticut Bank, 13 Ib. 498; Ship- Williams v. Mechanics' Bank, 5 
 
 man v. Etna Ins. Co. 29 Ib. 251; Blatchf. 59; Heath v. Erie Railroad 
 
 Agricultural Bank n. Burr, 24 Me. Co. 8 Ib. 347; Bowden v. Farmers' 
 
 256; Skohegan Bank v. Cutter, 49 & M. Bank, 1 Hughes, 307. 
 Me. 315; People t>. Devin, 17 111. 86;
 
 390 
 
 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 pledger, the provisions of such statutes would be deprived 
 of much of their practical utility, and the new certificate, 
 the issuance of which to the purchaser at the judicial sale, 
 is generally provided for in such statutes, would be ;i 
 nullity and of no avail. 1 The bona fide purchaser at a 
 sale made under such legal process, takes the legal title to 
 such shares of stock as against the pledgee, holding the 
 certificate by indorsement and delivery, but without a 
 transfer on the books of the company as required by such 
 statutory provisions.* Nor will a court of equity restrain a 
 sale of the remaining interest of a pledger of shares of stock 
 levied upon under attachment process instituted by a creditor, 
 where a pledgee of certificates representing such shares 
 although holding them under indorsement of the power of 
 attorney to transfer, had neglected to comply with statutory 
 provisions. The duty of the pledgor was to attend at the 
 sale and give notice of his interest therein. 8 
 
 1 People's Bank . Gridley, 91 111. 
 457. 
 
 1 Agricultural Bank e. Burr. 24 
 Maine, 263 ; Slripman v. Etna Ins. Co. 
 29 Conn. 253; Strout v. Natoma Co. 9 
 Cal. 78; Fisher . Essex Bank, 5 
 Gray, 373; Cady v. Potter, 55 Barb. 
 467; Sabin v. Bank of Woodstock, 
 
 21 Vt. 353; Winter v. Belmont Min- 
 ing Co. 53 Cal. 431 ; People v. El- 
 more, 35 Ib. 655; Naglee v. Pacific 
 Wharf Co. 20 Ib. 533; Weston v. 
 Bear Ridge etc. Co. 6 Ib. 425. 
 
 8 Farmers' Bank v. Wilson, 58 Cal. 
 600.
 
 STOCK CERTIFICATES AS COLLATERAL. 391 
 
 CHAPTER XXX. 
 
 STOCK CERTIFICATES AS COLLATERAL. 
 
 296. The use of stock certificates as collateral security. 
 
 297. The pledge of stock certificates, by trustees. 
 
 298. The pledge of stock certificates showing a trust. 
 
 299. The rule as to notice of trust. 
 
 300. The use of "trustee" in mining stock certificates. 
 
 801. The executor's right to pledge stock. 
 
 302. The executor's pledge of stock for his own debts. 
 
 303. Pledges of stock by and to banks and other corporations. 
 
 304. National banks as pledgees of stocks. 
 
 305. Pledges of stock by married women and minors. 
 
 306. The stockbroker, holding stocks, margins, and securities, a pledgee. 
 
 307. The stockbroker, holding stocks and margins, not a pledgee in 
 
 Massachusetts. 
 
 296. THE USE OF STOCK CERTIFICATES AS COL- 
 LATERAL SECURITY. The use of certificates of stock as 
 collateral security by persons holding the same in a fidu- 
 ciary character, for advances or discounts of paper 
 obtained at banks, is generally approved, where the trans- 
 action of loan upon the part of the lender is bona fide, 
 without notice of any trust or other equities, and the 
 certificates are received indorsed so as to pass the legal 
 title. No rights can be acquired under such pledges of 
 stock certificates where a trust is shown upon the face 
 thereof, nor where from the circumstances the lender is 
 chargeable with knowledge that the act of pledge is a mis- 
 appropriation of securities of a trust estate for the indi- 
 vidual use and benefit of the person holding the title to 
 such securities upon trust. Under such circumstances, the 
 certificates of stock may be recovered by the cestuis que
 
 892 QUASI-NEGOTIABI E COLLATERAL SECURITIES. 
 
 trust, or others in their behalf, or the proceeds thereof may 
 he followed and reclaimed. Sub-pledgees of slock certifi- 
 cates held by a pledgee from trustees or other like persons, 
 indorsed in blank, receiving them in good faith, upon a 
 valuable advance made in the belief that the pledgee is the 
 owner thereof, and without notice, may acquire a good 
 title as against the cestui que trust, although the pledgee 
 himself be chargeable with notice of fraud. The loan of 
 money and discount of commercial paper, upon the security 
 of certificates of stock of other corporations, is a common 
 transaction among national and other banks and undoubt- 
 edly valid. 1 
 
 297. THE PLEDGE OF STOCK CERTIFICATES BY TRUS- 
 TEES. A pledge by a trustee of an estate of certificates of 
 stock belonging thereto, the certificates showing a trust 
 upon their face, or where the pledgee is, in any other way, 
 informed or charged with notice that the stock is subject to 
 a trust, as collateral security for money loaned for his 
 individual use, is a breach of trust. The cestuis que trust 
 are entitled to follow the certificates of stock, and reclaim 
 the same or the proceeds thereof where they have been 
 converted into money, under the powers given by such 
 invalid pledge. 5 Laches on the part of cestuis que trust in 
 seeking relief from fraudulent transactions of trustees relative 
 to stocks belonging to the trust estate, will not defeat their 
 claims, although it has extended over forty-four }-ears. 8 A 
 
 J First Nat. Bank r. Stewart, U.S. S. Persch v. Consolidation Nat. Bank, 
 
 C. 1883 (15 C.L.N.429); Bank t>. Case, 13 Phila. 157; Prall v. Tilt, 28 N. J 
 
 99 U. S. 628; Duncan v. Jaudon, 15 Eq. 479; Gass v. Hampton, 10 Ncv. 
 
 Wall. 165; Jaudon v. National City 185; Shropshire Unions Ily. Co v. 
 
 Bank, 8 Blatchf. 430; Goodwin v. Queen, L. R 7 App. 496; Pearson v. 
 
 American Nat. Bank, 48 Conn. 530; Scott, L. R. 9 Ch. D. 198; McLeod 
 
 Winter . Belmont Mining Co. 53 v. Drummond, 17 Ves. 154. 
 
 Cal. 428; Carter. National Bank, * Jaudon v. Nat. City Bank, 8 
 
 71 Me. 448; Baldwin v. Canfielcl, 20 Blatrhf. 430. 
 
 Minn. 43; Leitch . Wells, 48 N. Y. Butler 9. Carter, L. R. 5 Eq. 276; 
 
 685; Wood's App. 92 Pa, St. 379; Burrows v. Gore, 6 H. L. Cas 9U7.
 
 STOCK CERTIFICATES AS COLLATERAL. 893 
 
 pledge of stocks of the estate by a trustee is not within the 
 ordinary course of business, as a trustee presumptively 
 holds the property for administration ; and although the 
 consideration be a present loan, and the pledgee acts in 
 good faith, he receives such certificates of stock as collateral 
 security at his peril. 1 As does also a pledgee where such 
 certificates of stock are delivered to secure the payment of 
 an indebtedness arising from an independent transaction 
 not connected with the trust, and of which the pledgee is 
 chargeable with notice. 8 
 
 No presumption as against such cestuis que trust arises 
 from the fact that the trustees have been entrusted with 
 muniments of title, such as certificates of stock. Such 
 possession is within ordinary and permitted usage. The 
 cestuis que trust, by such delivery, do not forfeit their title 
 and interest in such certificates. 3 Certificates of stock in- 
 dorsed with full power to transfer and delivered to A as 
 trustee, were fraudulently loaned to B, a broker, upon cer- 
 tain compensation, to be used as collateral. A pledgee of 
 the stocks sold them upon default, but could not complete 
 the legal transfer by reason of a notice not to transfer, and 
 an indemnity given by the cestui que trust to the corporation. 
 The pledgee recovered from the corporation the value of 
 the stock at the time of refusal to transfer, a sum which 
 with the proceeds of other collateral securities held for the 
 same loan, exceeded the amount of the principal loan. As 
 both the broker and trustee were parties to tl:e fraud, the 
 surplus was equitably appropriated in mitigation of the 
 damages paid by the corporation. 4 
 
 298. THE PLEDGE OF STOCK CERTIFICATES SHOWING A 
 TRUST. The word " trustee," without more, in a certificate 
 of stock has the same effect as to charging persons dealing 
 
 1 Duncan v. Jaudon. 15 Wall. 165, s Shropshire Unions Ry. Co. V. 
 
 175. Queen, L. R. 7 App. 496, 516. 
 
 I Prall v. Tilt, 28 N. J. Eq. 479; * Persch v. Consolidation Nat. 
 
 Duncan t. Jaudon, supra. Bank, 13 Phila. 157.
 
 394 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 therewith with notice as if it were specifically stated " trustee 
 for X," designating some certain person or persons. It 
 means trustee for some one whose name is undisclosed. No 
 presumption arises in such case of an unnamed cestui que 
 trust that a trustee is authorized to pledge for his own debt 
 the certificates of stock of the beneficiary any more than in 
 the case of pledge of the like property of a cestui que trust 
 whose name is known. In either case an implication arises 
 charging the pledgee with notice of the trust. Should a 
 pledgee receive such certificates as collateral security without 
 inquiry as to the purpose of the loan his negligence will in 
 cases of breach of trust, defeat his title. 1 The pledgee acts 
 especially at his peril where he advances money without 
 inquiry upon a certificate of stock which shows_ upon its 
 face the name of a cestui que trust. In such cases the trans- 
 fer agent of the company, upon a transfer being sought by 
 the pledgee, should require an authority to transfer inde- 
 pendent of the warrant of attorney indorsed upon the cer- 
 tificate itself.* Where a corporation transfers such stock 
 upon its books, issuing a new certificate to a bona lide 
 person advancing value, without notice, although there be 
 no right to make the transfer, the title of such innocent 
 person is protected, the defrauded cestuis que trust being 
 entitled to damages as against the corporation for its wrong- 
 
 1 Shaw . Spencer, 100 Mass. 382; v. Hilton, 1 Curtis, 390; Lowiy t>. 
 Fisher v. Brown, 104 Ib. 259; Fowlo Commercial Bank, Campbell, 310; 
 v. Ward, 113 Ib. 548; Atkinson?) At- Duncan v. Jaudon, 15 Wall. 165; 
 kinson. 90 Ib. 15; Ashton v. Atlantic Bank of Metropolis v. New England 
 Bank, 8 Allen. 217; Field v. Schief- Bank, 6 How. 212; McLeod v. Drum- 
 felin, 7 Johns. (!h. 150; Pendleton v. mond, 17 Ves. 152; Fish v. Kemp- 
 Fay, 2 Paige, 202; Budd v. Monroe, ton, 7 C. B. 687; Brandao v. Barnett. 
 18 Hun, 316; Swan v. Proi luce Bank, 1 M. & G. 908; 6 M. & G. 630; 12 
 24 Ib. 277; Crocker v. Crocker, 31 Cl & Fin. 787. 
 N. Y. 507; Baker v. Bliss, 39 N. Y. * Duncan v. Jaudon, 15 Wall. 165; 
 70; Gaston v. American Bank, 29 N. Jaiulou v. National City Bank, 8 
 J. Eq 98; Bayard v. Farmers' Bank, Blatchf. 430; Bayard v. Farmers' 
 52 Pa. St. 232; Sprague v. C>checo Bank, 52 Pa. St. 232; Maygood v. 
 Manf. Co. 10 Blatchf. 173; Carr Railroad Bank, 5 S. C. 379.
 
 STOCK CERTIFICATES AS COLLATERAL. 30o 
 
 ful transfer. 1 A loan by a bank void by reason of statutory 
 provisions, is not sufficient to support a pledge of stock, 
 standing on the books of the corporation in the name of a 
 " trustee, " and used by such trustee as collateral security. 
 The invalidity of the principal debt destroys the claim 
 of the lender, if any, upon the collateral securities given for 
 its payment. 9 
 
 299. THE RULE AS TO NOTICE OF TRUST. The rule as 
 to the implied notice resulting from the use of the word 
 " trustee," was applied where an owner of shares employed 
 a stockbroker to borrow money upon a pledge thereof. The 
 broker pledged the shares as collateral to another broker for 
 a loan of the sum required and for an old debt of his own, 
 giving a borrowed and received memorandum payable on 
 demand, and signing himself " trustee." The owner, learn- 
 ing of the transaction, tendered the amount of the loan, and 
 demanded a return of the certificate. The pledgee refused 
 to recognize his claim, but subsequently returned sixty out 
 of the eighty shares upon a proportionate payment, the 
 other shares having been sold. A bill in equity to redeem 
 the remaining shares was brought by the owner. The nature 
 of the transaction being sufficient of itself to charge the 
 pledgee with knowledge that the borrower was acting as 
 the agent of an undisclosed principal, no claim could arise 
 as to any sum beyond the amount actually authorized and 
 advanced, the rule of damages, the sale of the shares being 
 unauthorized, being the value thereof at the time of the com- 
 mencement of the suit. 3 A broker on the London Stock 
 Exchange employed to sell securities and invest the pro- 
 ceeds in stocks, but chargeable with notice that such secur- 
 ities belonged to a trust fund, sold the same, paying the 
 
 1 Maygood v. Bank and Bayard v. Gass v. Hampton, 16 Ncv. 185; Win- 
 Bank, supra. ter v. Belmont Mining Co. 53 Cal. 
 
 * Albert v. Savings Bank, 2 Md. 428. 
 
 159; Brewster. Simes, 42 Cal. 189; * Fowle v. Ward, 113 Mass. 548. 
 Thompson v. Tolland, 48 Ib. 99;
 
 390 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 proceeds into his own account, and then bought the stock 
 as ordered. Before settling day, the broker became insolv- 
 ent, and the stocks were never delivered. The trustee was 
 allowed to recover so much of the broker's balance as repre- 
 sented the value of the securities. 1 A stockbroker, em- 
 ployed by a solicitor of trustees to sell stocks on the ex- 
 change, and having notice that such stocks belonged to a 
 trust estate, is not allowed to apply part of the proceeds 
 thereof to the credit of the solicitor upon a personal account. 5 
 A banker of a railway company, and one of its directors, 
 was entrusted, under a business arrangement, with certifi- 
 cates of stock as trustee. Some of the certificates were 
 used as collateral security by him, but no transfer was made 
 by the pledgee. After his death, the pledgee's representatives 
 sought by a mandamus to compel registration by the com- 
 pany, but the issue of the writ was refused upon the ground 
 that it was the ordinary case of a trustee abusing his trust, 
 and that, receiving only an equitable mortgage of the shares, 
 the pledgee should have inquired as to the title of the 
 pledger, and failing so to do, his claim would not be pre- 
 ferred to that of the original cestuis que trust, although no 
 trust was shown upon the face of the certificates. 8 
 
 800. THE USE OF " TRUSTEE " IN MINING STOCK 
 CERTIFICATES. A custom prevails in California, Nevada, 
 and other mining states, in connection with mining stocks 
 certificates, to issue the same in the names of persons "as 
 trustees," without any trust in fact existing. The title to 
 such stocks pass by delivery merely. No presumption arises, 
 by reason of the use of the words as " trustee " on the face 
 of the certificate that the person using the same as collateral 
 has not the legal title thereto, nor is not entitled to dispose 
 
 1 Ex parte Cook, L. R. 4 Ch. D. 8 Shropshire Unions Ry. Co. . 
 123; Taylor v. Plummer, 3 M. & S. Queen, L. R. 7 H. L. 496. 
 562. 
 
 * Pearson c. Scott, L. R. 9 Ch. D. 
 198.
 
 STOCK CERTIFICATES AS COLLATERAL. 397 
 
 of the same as his own individual property. Such certifi- 
 cates, so worded, do not sustain a charge of notice of any 
 actual trusteeship, nor of the rights of an unknown cestui 
 que trust, as against a pledgee for value in good faith. 1 An 
 innocent holder advancing value without notice, upon the 
 faith of a certificate of stock of a mining company 
 made to A. " as trustee," which had Leen returned to the 
 true owner by A, and was subsequently stolen from him by 
 A, and negotiated for value, was protected as against the 
 real owner, notice not being presumed by the wording of 
 the certificate, nor the title of such holder for value affected 
 thereby.* 
 
 301. THE EXECUTOR'S RIGHT TO PLEDGE STOCKS OF 
 THE KSTATE. The right of an executor, in the absence of 
 restrictive provisions in the will and testament of the testator, 
 to deal with the personal assets of the estate in his charge, 
 either by way of sale, mortgage, or pledge, for purposes 
 connected therewith, is unquestioned. The right includes 
 the use as collateral security of certificates of stock standing 
 in the name of the testator for loans obtained to pay legacies 
 under the will. 3 The rights of the pledgee, receiving stock 
 so pledged in good faith, are not affected by knowledge that 
 the executor is dealing with such assets in a fiduciary 
 character, since such fact is not of itself enough to put him 
 upon inquiry, nor to raise a suspicion of fraudulent conduct 
 on the part of the executor. 4 Knowledge of the pledgee of 
 
 1 Brewstcr v. Simes, 43 Cal. 139; McLcod v. Drummond 17 Ves. 154; 
 
 Thompson v. Tolland, 48 Ib. 99; Scott v. Tyler, 2 Dick, 712, 725; An- 
 
 Gass v. Hampton, 16 Nev. 185. drew v. Wrigley, 4 Br. Oh. Cas. 125; 
 
 * Winter . Behnont Mining Co. Russell v. Plaice, 18 Beav. 21 ; 
 
 53 Cal. 428. Cruikshank v. Duffln, L. R. 13 Eq. 
 
 8 Carter v. National Bank, 71 Me. 555; Earl Vane v. Rigden, L. R. 5 
 
 448; Hutching v. State Bank, 12 Met. Cli. 663. A contrary view is an- 
 
 423; Ashton v. Atlantic Bank, 3 nounced in Ford v. Russell, 1 Freem. 
 
 Allen, 217; Field . Schieffelin, 7 Eq. (Miss.) 42. 
 
 Johns. Ch. 150, 160; Jaudou t. City * Prall v. Tilt, 28 K J. Eq. 479; 
 
 Bank, 8 Blatchf. 430; Goodwin . Bayard v. Farmers' Bank. 52 Pa. St. 
 
 American Nat. Bank, 48 Conn. 550; 232; Jaudon v. Bank, 8 Blatchf. 430.
 
 398 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 the existence of valid claims upon the funds and securities 
 of the estate, will not discharge his claims. 1 Nor is the 
 pledgee required to see to the application of funds loaned, 
 nor responsible for the misappropriation thereof, where he 
 has acted in good faith.* But such pledge of stocks is not 
 supported where made so long a time after the death of the 
 testator that a presumption arises that all debts have been 
 paid and that funds to be raised on collateral security can- 
 not be required for the use of the estate. 1 
 
 302. THE EXECUTOR'S PLEDGE OF STOCKS FOR HIS 
 OWN DEBTS. An executor, however, can not make a valid 
 transfer of stocks belonging to the estate as collateral se- 
 curity for his own debts or obligations, or to procure the 
 discount of his own notes at a bank or broker's office. In 
 such cases the money being procured for his private use, 
 and the pledgee chargeable with notice thereof, the trans- 
 fer of the stock is a devastavit, and no rights can be ac- 
 quired thereunder. 4 A pledgee who is chargeable with 
 knowledge or has reasonable grounds for believing that 
 an executor intends to misapply the funds loaned, or that 
 an executor is in the very transaction applying such funds 
 to his own private use, is chargeable to the persons injured 
 for any loss thus sustained.' Where such misappropria- 
 
 1 Leitch v. Wells. 48 N Y. 585. shaw, 11 Hare, 93; Wilson . Moore. 
 
 * Slinson v. Thornton, 56 Ga. 377; 1 M. & K. 337; Miles . Dumford, 
 
 Leitch v. Wells, 48 N. Y. 585; Wood 2 Sim. N. S. 233. 
 
 e. Smith, 92 Pa. St. 379; Goodwins. Lowry v. Commercial Bank, 
 
 Bank, 48 Conn. 5.">0. Campbell, 310 330; Yerger. Jones, 
 
 liellas r>. McCarty, 10 Watts. 73; 16 How. 30, 37; Collinson v. Lister. 
 
 Miller . Egc, 8 Pa. St 352; Lowry 7 DeG. M. & G. 633. Certificates 
 
 t>. Commercial Bank, Campbell. 310; showing upon their face that they 
 
 Collinson v. Lister, 7 DeG. M. & J. were the property of an estate, were 
 
 634. received by the pledgees directly 
 
 4 Wood's App. 92 Pa. St. 379, 391; from executors, but as security fora 
 
 Duncan v. Jaudon, 15 Wall. 176; debt owing by a son of the testator, 
 
 Carter . Nat. Bank, 71 Me. 448; who made no claim to own the stock. 
 
 Davis v. French, 20 Ib. 21; Hill v. It was the duty of the pledgee 
 
 Simpson, 7 Vcs. 152; Haines . For- to ascertain whether there was any
 
 STOCK CERTIFICATES AS COLLATERAL. 399 
 
 tion w"as rendered possible by the negligence of a corpora- 
 tion permitting a transfer of stock by executors, and 
 new certificates subsequently passed into the hands of 
 pledgees for value, without notice, for a private debt of the 
 executors, and were sold, under a power of sale, the com- 
 pany, by reason of its gross negligence, became liable for 
 the loss to the estate resulting therefrom. 1 
 
 The rules of equitable estoppel are invoked in favor of 
 sub-pledgees of certificates of stock, although the same 
 were originally fraudulently pledged by an executor for 
 his own debt. The delivery of such certificates indorsed in 
 blank, so as to vest the legal title and apparent ownership 
 in the pledgee, enables the latter, although chargeable with 
 notice of equities, to convey an unimpeachable title to a 
 sub-pledgee, receiving the same in good faith, for value, 
 without notice of equities. The latter is entitled to retain 
 such collateral securities, even as against the defrauded 
 cestuis que trust, until the payment of his bona fide ad- 
 vances. 9 
 
 303. PLEDGES OF STOCK BY AND TO BANKS AND 
 OTHER CORPORATIONS. In the absence of any restriction 
 by statutory enactment, or by its charter, a banking com- 
 pany may loan money, or discount commercial paper, or 
 secure an antecedent debt, upon a deposit as collateral se- 
 
 right so to transfer the stock. Their torney to transfer, and sold the ccr- 
 negligence defeated their claim. tificate, under a right of sale given 
 Prall v. Hamill, 28 N. J. Eq. 66. by the contract of 'pledge, without 
 1 Hodges v. Planters' Bank, 7 G. knowing at any time that the slock 
 & J. ,506; Stewart v. Farmers' Ins. had belonged to the testator or had 
 Co. n:> Md. 564; Lowry v. Commcr- been transferred to the executor, 
 cial Bank, supra; Davis 0. Bank of The title of both pledgee and. pur- 
 England, 2 Biug. 393. The like rule chaser were supported, as against 
 was applied where a certificate of equities arising under the will, 
 stock was wrongfully issued to exe- Lowry v. Commercial Bank, Camp- 
 cutors by the corporation sought to bell, 310. 
 
 be charged in the action, and a bank s Wood's App. 92 Pa. St. 379; 
 
 loaned money thereon as collateral Prall v. Tilt, 28 N. J. Eq. 480. 
 security, receiving full power of at-
 
 400 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 curity of certificates of stock issued by other corporations. 
 It is in fact an ordinary mode of loaning money, the security 
 being easily available upon default in the principal prom- 
 ise. 1 A banking company, holding such certificates of 
 stock, with power of attorney to transfer indorsed, obtain- 
 ing for its better protection transfer upon the books of the 
 company, and receiving a new certificate in its own name, 
 becomes a stockholder thereof, subject to like liabilities as 
 any other stockholder. Where this has been done, and 
 dividends accruing upon such stock also received, a bank- 
 ing company or any other corporation is estopped as against 
 third persons, to deny its liability as stockholder, the com- 
 pany issuing the shares having gone into liquidation. 1 
 The defense of ultra vires is not permitted to a corporation 
 as -against an innocent holder for value of negotiable instru- 
 ments, receiving the same before maturity, without notice, 
 issued in payment of shares of stock of another company. 
 The note being an independent transaction, recovery may 
 be had thereon. 8 Even where a corporation is prohibited 
 by charter or statutory provisions, from loaning money on 
 such collaterals, a pledge of certificates of stock of another 
 corporation is rather voidable than vcid. The rights and 
 interests of third persons accruing thereunder are not de- 
 feated by any inequitable defense of ultra vires. 4 The 
 pledger himself, having received the loan, is not allowed to 
 set up the alleged invalid character thereof to defeat an 
 action upon the note given for the advance.* The title of 
 the pledgee of stocks is not defeated where he holds the 
 
 1 National Bank v. Case, 99 U. S. Penn St. 204. The same rule was 
 
 628; Shoemaker v. National Me- applied in Oil Creek etc. Hy Co. v. 
 
 chanics' Bank, 2 Abbott, 416; Day- Penu. Transportation Co. 83 Pa. 
 
 ton Nat. Bank v. National Bank, 37 bt. 160; Northampton Co.'s App. 30 
 
 Ohio St. 208; National Bank a. Hall, Ib. 605; Lcatapies v. Ingraham, 5 Ib. 
 
 18 Hun, 176; Baldwin v. Canfield, 81. 
 
 26 Minn. 43. 4 Sistarc n. Best, 88 N. Y. 527. 
 
 In re Asiatic Bank Co. L. R. 7 ' Mott v. United States Trust Co. 
 
 Eq. 91; s. c. 4 Ch 22. 19 Barb. 568. 
 
 Wright v. Antwerp Pipe Co. 101
 
 STOCK CERTIFICATES AS COLLATERAL. 401 
 
 same under a contract containing a stipulation of the 
 invalidity of which he has no knowledge or notice. 1 
 
 A corporation may issue its own unsubscribed and unis- 
 sued shares of stock as collateral security for advances 
 already made and made at the time, or they may be held by 
 a third person in trust for that purpose. Where statutes 
 have been enacted relieving pledgees of stock from respon- 
 sibility as stockholders, the fact that such shares of stock 
 are held as collateral security is sufficient to bring the 
 pledgees thereof within the rule. 9 Pledges to a bank of 
 its own stock were sustained as against a statutory provision 
 that no bank should make any loan or discount on a pledge 
 of its own stock, where the loans were made on the personal 
 security of the stockholder, who had previously pledged his 
 stock to the bank for his "future indebtedness and liabil- 
 ity."' 
 
 304. NATIONAL BANKS AS PLEDGEES OP STOCKS. 
 A national bank may take certificates of stock issued by 
 another corporation, with a power of attorney indorsed 
 thereon, as collateral security for a loan or discount of com- 
 mercial paper. No provision of the National Bank Act pro- 
 hibits such transactions. 4 Nor is the rule affected by the 
 fact that real estate constitutes the whole property of a 
 corporation issuing such shares of stock used as collateral 
 security. 4 The National Bank Act, however, directly pro- 
 hibits the making of present loans or discount of commercial 
 paper, upon a pledge of certificates of stock issued by itself, 
 although where the receipt of such securities is to prevent 
 loss on a debt previously contracted, the act of pledge is 
 
 1 Curtis v. Leavitt, 15 N. Y. 9. 3 VanSands v. Middlesex Co. Bank, 
 
 s Burgess v. Seligman, 107 U. 8. 26 Conn. 144, 159 ; Conant v. Se- 
 
 Rep. 20; Matthews v. Albert, 24 Md. neca Bank, 1 Ohio St. 298. 
 
 527. Such a pledge, the shares being * National Bank v. Case, 99 U. S. 
 
 placed in the name of a trustee, was 628. 
 
 supported in re City Terminus Hotel 6 Baldwin v. Canfleld, 26 Minn. 
 
 Co. L. R. 14 Eq. 10. Contra: Brew- 43,62. 
 
 ster v. Hartley, 37 Cal. 15. 
 26
 
 402 
 
 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 valid. 1 A borrower of money from a national bank who 
 deposits certificates of shares of stock issued by such bank 
 as collateral security, is chargeable with knowledge of the 
 provisions of the National Bank Act. His claim to recover 
 the stock, or the proceeds of its sale, while still retaining the 
 avails of the loan, is not favored. Both parties being equally 
 affected by the illegality of the transaction, under the pro- 
 hibitions of the Bank Act, the aid of courts will not be given 
 10 either, especially where the contract of pledge has been 
 executed, the stock sold, and the proceeds applied in pay- 
 ment of the debt. 8 
 
 'Bank. Lanier, 11 Wall. 369; 
 Johnston v. Laflin, 103 U. S. 800. U. 
 S. Rev. Stats. 1878, 5201, provides 
 that " no association shall make any 
 loan or discount on tl.c security of 
 the shares of its own capital stock, 
 nor be the purchaser or holder of any 
 such shares, unless such security or 
 purchase shall be necessary to pre- 
 vent loss upon a debt previously con- 
 tracted in good faith, and stock so 
 purchased or acquired shall, within 
 six months from the time of its pur- 
 chase, be sold or disposed of at pub- 
 lic or private sale, or in default 
 thereof a receiver may be appointed 
 to close up the business of the asso- 
 ciation." The rule is applied to 
 other banking corporations. State 
 of Ohio t>. Franklin Bank, 10 Ohio, 
 91; Taylor . Miami Exp. Co. 6 Ham. 
 176; Farmers' Bank . Champlain 
 Trans. Co. 18 Vt. 131; Marine Bank 
 v. Biays, 4 H. & J. 338; Franklin 
 Bank v. Commercial Bank, 36 Ohio 
 St. 350. A pledge to a corporation 
 of its own shares of stock was sus- 
 tained in Middlesex Bank v. Minot, 
 4 Met. 325; ex parte Holmes, 5 
 Cow. 426; Butterworth v. Kennedy, 
 SBosw. 143. 
 
 'First National Bank of Zenia v. 
 Stewart, 107 U. S. (17 Otto) 676. 
 The Supreme Court considering 
 5-201 of Rev. Stats. 1878, say 
 (Field, Jus.): "While this section 
 in terms prohibits a banking asso- 
 ciation from making a loan upon 
 the security of shares of its own 
 stock, it imposes no penalty, either 
 upon the bank or borrower, if a loan 
 upon such security be made. If, 
 therefore, the prohibition can be 
 urged against the validity of the 
 transaction by any one except the 
 Government, it can only be done be- 
 fore the contract is executed, while 
 the security is still subsisting in the 
 hands of the bank. It can then, if 
 at all, be invoked to restrain or de- 
 feat the enforcement of the security. 
 When the contract has been executed, 
 the security sold, and the proceeds 
 applied to the payment of the debt, 
 the courts will not interfere with the 
 matter. Both bank and borrower 
 are in such case equally the subjects 
 of legal censure, and they will be left 
 by the courts where they have 
 placed themselves. 
 
 There is another view of this case. 
 The deceased authorized the bank,
 
 STOCK CERTIFICATES AS COLLATERAL. 
 
 305. PLEDGES OF STOCK BY MARRIED WOMEN AND 
 MINORS. Pledges of stock by indorsement and delivery of 
 the certificate, made by married women are supported, 
 although the loan to secure which such shares have been 
 deposited as collateral security, be for the benefit of the 
 husband, and not applied for necessaries, nor the improve- 
 ment of the separate estate of the wife.' A pledge of cer- 
 tificates of stock by a married woman, as " security for the 
 payment of any demands you may from time to time have 
 or hold against " her husband, will cover future advances 
 made bona fide." A pledgee for value, upon default, was 
 proceeding to sell certificates of stock pledged by a married 
 woman, who filed a bill in equity to restrain the sale and 
 compel return of the certificate, but made no payment or 
 tender of the debt. She was in fact unable to restore the 
 consideration for which the pledge was given. The fraud 
 of permitting her, under such circumstances, to recover 
 from a bona fide pledgee the substantial security on which 
 he had parted with his money, is not permitted or tolerated 
 in a court of equity. 1 
 
 The disabilities attaching to persons under age, renders 
 pledges of stocks as collateral security for illegal specula- 
 tions upon margins by stockbrokers absolutely void. Such 
 deposits of stocks and margins by a minor to secure a stock- 
 broker against losses on account of proposed options and 
 
 in a certain contingency, to sell his was an offset to the proceeds. In 
 
 shares. Supposing it was unlawful either view the administrators can 
 
 for the bank to take those shares as not recover." 
 
 security for a loan, it was not unlaw- ' Merchants' National Bank v. 
 
 ful to authorize the bank to sell Hall, 83 N. Y. 333; Dando's App. 
 
 them when the contingency oc- 94 Pa. St. 76. 
 
 curred. The shares being sold pur- * Merchants' National Bank v. 
 
 suant to the authority, the proceeds Hall, supra. 
 
 would be in the bank as his property. 3 Dando's App. 94 Pa. St. 76; Sel- 
 
 The administrators, indeed, affirm den v. National Bank, 69 Ib. 424' 
 
 the validity of that sale by suing for Fryer v. Rishcll, 84 Ib. 521; Iliiiney 
 
 the proceeds. As against the de- v. Phillips,. 50 Ib. 382. 
 
 ceased, however, the money loaned
 
 404 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 purchases and sales, are not supported, although the broker 
 be unaware of the minority of his customer. A minor is 
 allowed upon coming of age, to avoid such contracts, and 
 may recover his stock securities and money advanced 
 as margins, even without returning the consideration 
 received, if any. 1 The same rule applies to contracts made 
 by minors under which deposits of money are made with a 
 broker for the purchase of stocks upon illegal contracts. 
 Where such stocks are never delivered, and a pretended 
 sale is made without notice or demand of payment, under a 
 power to sell at public or private sale, the minor may repu- 
 diate the contract and recover his deposit of collaterals. 9 
 
 306. THE STOCKBROKER, HOLDING STOCKS, MARGINS, 
 AND SECURITIES, A PLEDGEE. The contract of the stock- 
 broker and his customer where, upon an order from the cus- 
 tomer, and the deposit of collateral securities and margins, or 
 margins alone, the broker purchases stocks for the customer, 
 advancing a large proportion of the funds necessary there- 
 for, upon an agreement to carry the same, the customer 
 having the right at any time during the option, upon 
 payment of the advances of the broker, interest and 
 commissions, to demand a delivery of the stock, or to 
 require its sale, and the broker having a power of sale 
 upon default in furnishing margins as agreed, and rea- 
 sonable notice of sale, or upon failure, at the expiration 
 of the option, to pay the funds advanced to purchase 
 such stocks held as security, is within the definition of a 
 pledge. If the purchase of stock by a broker for a cus- 
 tomer were completed by an immediate delivery of the 
 stock to the latter, to be followed by a re-delivery thereof 
 to the broker as collateral to secure the payment of his 
 advances, commissions, and interest, there would be a com- 
 pliance with the technicalities of an act of pledge. The 
 
 1 Ruchizky t>. DcHaven, 97 Pa. St. * Heatli . Mabonc, 24 Hun, 341. 
 202.
 
 STOCK CERTIFICATES AS COLLATERAL. 405 
 
 intention of the parties to the contract may, however, be 
 presumed from the retention of the shares by the broker in 
 his character as pledgee, as showing a waiver of the form of 
 delivery and re-delivery. 1 
 
 This view of the relations of the broker and customer is 
 supported by the terms of the usual contract between the 
 parties. The broker agrees: 1. At once to buy for the 
 customer the stocks he desires. 2. To advance all the 
 money required for the purchase beyond the ten per cent., 
 or other margin furnished by the customer. 3. To carry or 
 hold such stocks for the benefit of the customer so long as 
 the margin of ten per cent., or other margin, is kept good, 
 or until notice is given by either party that the transaction 
 must be closed an appreciation in the value of the stocks 
 being the gain of the customer and not of the broker. 4. At 
 all times to have in his name, or under his control and ready 
 for delivery the shares purchased, or an equal amount of 
 other shares of the same stock. 5. To deliver such shares 
 to the customer when required by him, upon the receipt of 
 the advance and commissions accruing to the broker. 6. To 
 sell such shares upon the order of the customer upon the 
 payment of the like sums to him, and account to the cus- 
 tomer for the proceeds of such sale. The undertaking of 
 the customer is: 1. To pay a certain margin on the current 
 market value of the shares. 2. To keep good such margin 
 according to the fluctuations of the market. 3. To take the 
 shaves so purchased on his order whenever required by the 
 broker, and to pay the diffierence between the percentage 
 
 1 Baker v. Drake, 53 N. Y. 211; Prune, 4 Johns. Ch. 490; s. c. 7 Ib. 
 
 8. c. 66 Ib. 518; Stenlon t>. Jerome, 69; Wynkoop v. Leal, 64 Pa. St. 361; 
 
 54 Ib. 480; Lawrence o. Maxwell, 53 Esser v. Linderman, 71 Ib. 76; 
 
 Ib. 19; Hortoa . Morgan, 19 Ib. Diller e. Brubaker, 52 Ib. 498; Gil- 
 
 170; Markham. Jaudon, 41 Ib. 235; pin v. Ho well, 5 Ib. 41; Child v. 
 
 Morgan v. Jaudon, 40 How. Pr. 366; Hogg, 41 Cal. 519; Hatch v. Doug- 
 
 Gruman c. Smith, 81 N. Y. 25; Me- lass, 48 Conn. 116; Maryland Fire 
 
 Neil v. Tenth Nat. Bank. 40 Barb. Ins. Co. . Dalrymplc, 25 Md. 242; 
 
 59; s. c. 46 N. Y. 325; Capron 0. Baltimore Marine Ins. Co. v. Dal- 
 
 Thompsou, 86 N. Y. 418; Nourse v. rymple, 25 Ib. 269.
 
 406 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 advanced by him and the amount paid therefor !>v the 
 broker. 1 
 
 307. THE STOCKBROKER HOLDING MARGINS NOT A 
 PLEDGEE, IN MASSACHUSETTS. In Massachusetts, the 
 transaction in which a broker advances money to purchase 
 certificates of stock for a customer, the rule being the same 
 where the customer advances money as a margin upon 
 giving an order to buy, and to hold and carry such stocks 
 for the customer, upon an agreement that the latter shall 
 pay interest on the sums advanced, and in case the value of 
 the stock depreciates, keep his margins good to a n-rtam 
 percentage of the current market value, is regarded as an 
 executory or conditional contract, to deliver so many shares 
 on the payment of so much money. The broker mainly 
 furnishing the funds to purchase the stock is entitled, 
 where he holds, as is generally the custom, such certificate 
 of stock in his own name, having the legal title and posses- 
 sion, so long as no payment or tender of his advances, 
 interest and charges is made, to use such stock as collateral 
 for his own obligation. Nor does he become by such pledge 
 liable to an action by his customer for conversion, as the 
 latter has no right to its possession until payment.* The 
 broker may sell the stock, without notice to his customer, 
 where purchased chiefly with his own money, and while 
 carrying the same a depreciation occurs in its value, and 
 the customer fails to furnish further margins upon 
 demand. 8 
 
 1 Marklmm v. Jaudon, 41 N. Y. Covell v. Loud, 135 Mass. 41. 
 239 (Hunt, C. J.) 
 Wood v. Hayes, 15 Gray, 375.
 
 ILLEGAL AND TORTIOU3 PLEDGES. 407 
 
 CHPTER XXXI. 
 
 PLEDGE OF FORGED, FICTITIOUS, AND MISAPPROPRIATED 
 
 STOCKS. 
 
 308. The transfer of certificates of stock, under forged indorsements. 
 
 309. The rights and remedies of the real owner. 
 
 310. Rights of innocent holder, for value, of new certificate. 
 
 311. The title acquired under fraudulent issues of fictitious stock. 
 
 312. Estoppel in pais, as applied against corporations. 
 
 313 Equitable estoppel, as enforced in National Bank v. Watsontown 
 Bank. 
 
 314. Equitable estoppel, as applied to the terms of certificates. 
 
 315. Estoppel of real owner, by blank indorsement of certificates. 
 
 316. The misappropriation of stock certificates by brokers and agents. 
 
 317. Essential conditions of pledge under misappropriation and fraud. 
 
 318. Measure of damages in cases of forgery and spurious stock. 
 
 308. THE TRANSFER OF CERTIFICATES OF STOCK 
 UNDER FORGED INDORSEMENTS. No rights can be acquired 
 directly under an act of forgery. Where a valid certificate 
 of stock has been transferred by one not its owner, but 
 having possession thereof, by the forgery of the name of the 
 owner to the blank power of attorney to transfer, the per- 
 son receiving such transfer, or acquiring any claim upon 
 such stock, by or through such forgery, acquires no title or 
 right therein as against any one lawfully claiming the same. 
 It is immaterial that the corporation has assumed in good 
 faith to issue anew certificate upon the -forged indorsement 
 of the old, so long as the new certificate remains in the 
 hands of the person obtaining the transfer. The rule is 
 different, however, where such new certificate of stock has 
 passed into the hands of a bona fide holder, advancing 
 value upon the credit of the representations contained
 
 408 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 therein, without notice of equities. The rules of equitable 
 estoppel are invoked in favor of such innocent liohler for 
 value, as against the corporation issuing such certificate, 
 although it may be required to issue other shares of stock 
 to the real owner, or pay him the value of the stock wrong- 
 fully transferred. Iso estoppel arises as against the com- 
 pany, to show the facts, so long as the new certificate 
 remains in the hands of a pledgee of it, holding the same; 
 as a bare trustee, the debt for which the stock was given as 
 collateral security having been paid. Nor will the fact that 
 the person so holding may have sustained a loss or missed a 
 benefit thereby, affect the refusal to apply tlie rules of es- 
 toppel in such case. 1 A holder for value of the new certi- 
 ficate chargeable with knowledge of the forgery or 
 invalidity, can acquire no valid title as against the 
 company.* Where a compan}' is estopped to set up the facts 
 as against a bona fide pledgee for value, without notice, 
 holding new certificates, and lias been required to replace 
 the shares or their value at the suit of the real owner, 
 it may bring an action at law against the person at 
 whose request upon the presentation of the forged certifi- 
 cates, the new issue of certificates was made.* 
 
 309. THE BIGHTS AND REMEDIES OP THE REAL 
 OWNER. An owner of shares of stock cannot, where free 
 from negligence or bad faith, be deprived of them by a for- 
 gery of his name, or of any other material part of the power 
 of attorney to transfer indorsed thereon. If by reason of 
 
 1 Hilyard . South Sea Co. 2 P. Co. 44 Md. 551; Pratt v. Machinists' 
 
 Wins. 76; Ward v. Central R.R. Co. Nat. Bank, 123 Mass. 110; Denny v. 
 
 87 Geo. 515; Hambleton c. Cent. Lyon, 88 Pa. St. 98; Johnston v. 
 
 Ohio Ry. Co. 44 Md. 551, in which Renton, L. R. 9 Eq. 181; Cottam v. 
 
 case dividends were paid to the Eastern Counties' Rys. 1 Johns. & 
 
 pledgee on the stock after the forge- H. 243; Taylor v. Great Indian Pen- 
 
 ry had been discovered. Simm v. insular Ry. 4 DeG. & J. 559. 
 
 Anglo-American Tel. Co. L. R. 5 Q. * Mechanics' Nat. Bank v. Field, 
 
 B. D. 188. 126 Mass, 345. 
 
 *Hambleton . Central Ohio Ry.
 
 ILLEGAL AND TOKTIOCTS PLEDGES. 409 
 
 such forgery an apparently legal title to such shares of stock 
 is vested in a third person, and the company upon the 
 presentation of such forged indorsement, assumes to issue a 
 new certificate thereon, the rights of the real owner are 
 not affected. 1 
 
 Where new certificates have been issued by the com- 
 pany upon such forged indorsement, the owner may proceed 
 by bill in equity, praying for the issue of new certificates to 
 himself, and his reinstatement as stockholder, or a decree 
 may be entered for the value of the stock at the time of the 
 demand, with dividends. 4 Relief may be sought in equity 
 against the transferee of the new certificates, requiring a 
 restoration thereof, and leaving the transferee to his remedy 
 against the company.* But, upon a bill in equity against 
 both a company and transferees of the stock, and decree 
 that the company should issue new certificates to the owner, 
 the rights of the two co-defendants, as between themselves, 
 were not decided. 4 The owner has his action at law against 
 the person participating in such unauthorized transfer 5 and 
 
 1 Pollock v. Nat. Bank, 7 N. T. Houston & T. Ey. Co. 53 Tex. 162; 
 274; Sewall v. Boston Water Power Midland Ey. Co. v. Taylor, 28 Beav. 
 Co. 4 Allen, 277 ; Pratt v. Machinists' 287 ; s. c. 8 H. L. Cas. 751 ; Davis v. 
 Nat. Bank, supra; Telegraph Co. v. Bank of England, 2 Bing. 393; Dai- 
 Davenport, 97 U. S 369; Davis v. ton v. Midland Ey. Co. 12 C. B. 458; 
 Bank of England, 2 Bing. 393, 407; Swan v. N. B. Australian Co. 7 H.& 
 Ashby v. Blackwell, 2 Eden, 299; s. N. 603; s. c. 2 H. & C. 175; Duncan 
 c. Ambl. 503; Sloraan v. Bank of v. Luntby, 2 McN. & G. 30; Sloman 
 England, 14 Sim. 475; Bank of Eng- v. Bank of England, 14 Sim. 475; 
 land v. Parsons, 5 Ves. 665, 669; Ashby v. Blackwell, 2 Eden, 299; 
 Hartga v. Bank of England, 3 Ves 55. and where it cannot i;ssue any new 
 
 8 Telegraph Co. v. Davenport, 97 shares, the company should be re- 
 
 TJ. S. 369; Sewall v. Boston Water quired to pay the value of the stock. 
 
 Power Co. 4 Allen, 277 ; Pratt . Pollock v. National Bank, supra. 
 
 Machinists' Nat. Bank, 123 Mass. * Weaver. Barden, 49 N.Y. 286. 
 
 110; Lowry v. Commercial Bank, * Pratt . Mechanics' Nat. Bank, 
 
 Taney'sDec. 310; Pollocks. National 123 Mass. 110; Sewall v. Boston Wa- 
 
 Bank, 7 N. Y. 274; Baltimore. ter Works Co. 4 Allen, 277. 
 
 Ketchum, 57 Md. 23 ; Chew v. Bank s Sewall v. Boston Water Works 
 
 of Baltimore, 14 Md. 199 ; Strange v. Co., supra.
 
 410 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 as against the company, for his loss. 1 Neither the absence 
 of blame on the part of the officials of a company, in making 
 an unauthorized transfer, nor the bona fides of a purchaser of 
 certificates stolen from the owner, is a defense to a demand 
 and suit by the real owner.* 
 
 310. RIGHTS OF INNOCENT HOLDER FOR VALUE OF 
 NEW CERTIFICATE. The title of a bona fide holder for 
 value, by proper indorsement, of a new certificate 
 of stock issued by a corporation upon a forged indorse- 
 ment, or of a new certificate of stock, properly 
 indorsed, issued in place of a stolen certificate, re- 
 ceiving the same without notice, and for a valuable con- 
 sideration advanced upon the faith and credit thereof, is 
 free from the infirmities of his transferrcr. Such transferree 
 is not bound to look beyond the certificate, or to as- 
 certain the validity of the transfer from the books of 
 the company. Holding. such new certificate, he has a title 
 by equitable estoppel as against the company, not from the 
 person perpetrating the fraud, but as having acted upon the 
 statements and representations of the company in issuing 
 such new certificate. 8 As between himself and the company, 
 such bona fide holder for value is not required, upon 
 proceedings in equity, to surrender the shares issued to 
 him, although by reason of obedience to other decrees re- 
 quiring the issue of new shares to the real owner, the cor- 
 poration has issued a greater amount of capital stock than 
 authorized by its charter. 4 
 
 'Midland Ry. Co. t>. Taylor, 28 Mass. 110; Bank v. Lanier, 11 Wall. 
 
 Bcav. 287: s. c. 8 H. L. Cas. 751. 369; in re Bahia etc. Ry. Co.L. R. 3 
 
 1 Telegraph Co. c.Davenport, 97 U. Q. B. 584 ; Hart v. Frontino etc. Co. 
 
 S. 369. L. R. 5 Ex. Ill; Simra v. Anfjlo- 
 
 1 Lowry t>. Commercial Bank, American Tel. Co. L. R. 5 Q. B. D. 
 
 Campbell, 310; Strange v. Houston 188. 
 
 & T. Ry. Co. 53 Tex. 162; Salisbury 4 Machinists' Nat. Bank v. Field, 
 
 Mills . Townsend, 109 Mass. 115; 126 Mass. 345. 
 Pratt v. Mechanics' Nat. Bank, 123
 
 ILLEGAL AND TORTIOUS PLEDGES. 411 
 
 The rules of equitable estoppel relative to forgery in 
 stock certificates were applied in a case where a loan was 
 made by a bank in good faith upon a memorandum of in- 
 debtedness, as collateral security for which there was 
 pledged what purported to be a certificate for two hundred 
 shares of stock of a railway company issued in the name of the 
 bank. The certificate in fact was originally for two shares 
 only, and in the name of a third person, the alterations 
 being made by forged erasures and interlineations. Upon 
 payment, the cashier of the bank, there being no suspicion 
 of the genuineness of the certificate, indorsed the same in 
 blank, to restore its availability to the pledger, and returned 
 it to him. Afterwards another loan was obtained from 
 Matthews upon the same collateral. The forgery being 
 discovered, and the pledger arrested and bankrupt, Matthews 
 brought an action against the bank upon the cashier's in- 
 dorsement. The rules of estoppel in pais were enforced 
 against the bank to set up the forgery as a defense to the 
 claim of the second pledgee, *' because it would be a wrong 
 on its part and injury to others whose conduct had been 
 influenced by its acts and omissions." 1 The same rules of 
 estoppel were applied in favor of a holder for value, in 
 good faith, of a certificate of stock, where such certificate, 
 while in the name of a third person, was in possession of the 
 owner, but was stolen from him by such third person, and 
 negotiated as by one having the legal title. 9 
 
 311. THE TITLE ACQUIRED UNDER FRAUDULENT 
 ISSUES OF FICTITIOUS STOCK. The title of pledgees of 
 certificates of stock, holding the same for value advanced 
 in good faith, without notice of defenses, is sustained where 
 the issue and hypothecation of such stock is a fraud on 
 the part of the officers of the company issuing the same. 
 The rule is limited to cases where such issue of fictitious 
 
 1 Matthews v. National Bank, * Winter v. Belmont Mining Co. 
 Holmes, 396. 53 Cal. 428
 
 412 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 stock is made by the governing officers of a corporation 
 and the recognized representatives of it, with plain au- 
 thority to make transfers and issue certificates. In such 
 cases (as said by the United States Supreme Court, in the 
 case of Pollard v. Vinton), 1 " The officer is the corporation 
 [the italics are those of the court] for many purposes. Cer- 
 tainly a corporation can be charged with no intelligent 
 action, or with intending any purpose, or committing any 
 fraud, except as this intelligence, this purpose, this fraud, 
 is evidenced by the actions of its officers. And while it 
 may be conceded for many purposes they are agents, and 
 are to be treated as agents of the corporation, or of the 
 corporators, it is also true that, for some purposes, they are 
 the corporation, and their acts as such officers are the acts 
 of the corporation itself." The court (by Miller, Jus.) 
 cite in this connection the case of the N. Y & N. H. R. R. 
 Co. v. Schuyler. 9 The Schuyler frauds in connection with 
 the capital stock of the New York and New Haven Rail- 
 road Company gave occasion to the leading cases on the 
 subject of the rights of holders of certificates of stock, for 
 value, without notice, where the transactions were grossly 
 fraudulent, and the issue of fictitious stock enormous. The 
 railroad company, however, received the benefit of part of 
 the money raised upon the fictitious stock as collateral 
 security, using it in the construction of the road. Schuyler 
 himself was president and director, as well as transfer 
 agent. 8 
 
 312. ESTOPPEL IN PAIS AS APPLIED AGAINST COR- 
 PORATIONS. The principles upon which such decisions are 
 founded are stated in New York and New Haven Railroad 
 Company v. Schuyler. The natural and established dis- 
 tinction between that which a corporation is not authorized 
 to do under any circumstances, or which in its very nature 
 
 1 105 U. S. 712. ler, 84 N. Y. 30; Bridgeport Bank . 
 
 84 N. Y. 80. N.Y. & N.H. R.R. Co. 30 Conn. 231. 
 
 N. Y. & N.H. R.R. Co. v. Schuy-
 
 ILLEGAL AND TORTIODS FLEDGES. 413 
 
 is utterly prohibited by law, or its charter, and that which 
 it may do for certain purposes, and not for others, or on the 
 happening of a particular event, is recognized in the 
 opinion. 1 The rule is then applied to corporations and 
 their officers that where a principal has clothed his agent 
 with power to do an act upon some extrinsic fact, 
 necessarily and peculiarly within the knowledge of the 
 agent, and of the existence of which the act of executing 
 the power is itself a representation, a third person dealing 
 with such agent in entire good faith, pursuant to the ap- 
 parent power, may rely upon the representation, and the 
 principal is estopped from denying its truth to his preju- 
 dice.* Corporations are held responsible to the same ex- 
 tent, and under the same circumstances, that a natural 
 person is chargeable with the acts or neglects of his agent; 
 and if the agents employed conduct themselves fraudu- 
 lently so that if they had been acting for private employers 
 the persons for whom they were acting would have been 
 affected by their fraud, the same principle prevails where 
 the principal under whom the agent acts is a corporation. 8 
 And a civil action may be brought against such corporation 
 by an injured person for every grade and description of 
 forcible, malicious, or negligent tort or wrong which it 
 commits, however foreign to its nature or beyond its powers 
 by law or charter the wrongful transaction may be. 4 But 
 
 1 Mechanics' Bank v. Bank, 16 N. Great Western Ry. Co. 5 H. L. Cas. 
 
 Y. 151, 155 ; N.Y. & N. H. R.R. Co. 86. 
 
 v. Scbuyler, 34 N. Y. 30: Willis v. * Railroad Co. v. Schuyler, 34 K 
 
 Philadelphia and Darby Ry. Co. 13 Y. 30; Bisscll v. Railroad Co. 22 N. 
 
 Phila. 33. Y. 305, 309 ; Goodspced . Bank, 22 
 
 'Railroad Co. v. Schuyler, 34 N. Conn. 54; Life Insurance Co. v. In- 
 
 Y. 30; Griswold v. Haven, 25 N. Y. surance Co. 7 Wend. 31 ; South & N. 
 
 595. Ala. R. R. Co. . Chappell, 61 Ala. 
 
 Railroad Co. v. Schuyler, 34 N. 529; Albert. Savings Bank, 2 Md. 
 
 Y. 30; Merchants' Bank v. State Dec. 169; Carter v. Howe Machine 
 
 Bank, 10 Wall. 650 ; Thayer v. Bar- Co. 51 Md. 290; Williams v. Ins. Co. 
 
 low, 19 Pick. 511; Frankfort Bank 57 Miss. 759; Frankfort Bank . 
 
 t. Johnson, 24 Me. 490; Ranger v. Johnson, 24 Me. 490; Beach v. Ful-
 
 414 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 in order to be entitled to the application of the rules of 
 estoppel the person relying upon the false representations 
 of another must have been ignorant of the truth, and have 
 acted upon such false representations. 1 
 
 313. EQUITABLE ESTOPPEL, AS ENFORCED IN NATION- 
 AL BANK v. WATSONTOWN BANK. The rules of equitable 
 estoppel, or estoppel by conduct, were applied by the 
 United States Supreme Court, in the late case of National 
 Bank v. Watsontown Bank,* arising out of a claim to 
 a transfer and issue of certificates by the latter bank under 
 a pledge of its shares to the Cecil National Bank by Powell & 
 Co., with power of sale upon default. Such default occurring, 
 the certificates were forwarded to the bank for transfer, and 
 entries were made in the ledger. Upon request of the pled- 
 gee, the cashier of the Watsontown Bank undertook to sell 
 the stock and sold some shares, making debit and credit 
 entries on the stock ledger. The pledger became insolvent, 
 and the bank then refused to complete the transfer, claiming 
 a statutory lien upon the stock for an indebtedness of the 
 
 ton Bank, 7 Cow. 436; Ricord v. a company, induced B. by false repre- 
 
 Central Pac. R.R. Co. 15 Nev. 167; sentations that the company needed 
 
 Alexander v. Relfe. 74 Mo. 495; the aid of her stocks, to surrender 
 
 Boogher v. Life Assn. 75 Mo. 32."}; her certificates, indorsed with blank 
 
 Philadelphia Ry. Co. v. Quiglcy, 21 power of attorney, A giving to B his 
 
 How. (U. S.) 209; National Bank . own due-bill. The stock was then 
 
 Graham, 100 U. S. 702; Copley v. transferred and sold to an innocent 
 
 Machine Co. 2 Woods, 494; Chesnut holder for value, the proceeds being 
 
 Hill Turnpike Co. V. Rutter, 4 Serg. appropriated by B. Subsequently, 
 
 & R. 16; Fcntoii v. Machine Co. 9 by connivance with other officers, A 
 
 Phila. 189; Cumberland Ry. Co.. obtained the issue of shares in ex- 
 
 Baab, 9 Watts, 458; Vance v. Erie cess of the charter limit to B, the 
 
 Ry. Co. 32 N. J. L. 334; Green v. company continuing to pay divi- 
 
 London Omnibus Co. 7 C. B. N. S. dends to her. A bill was brought to 
 
 290; National Ex. Co. v. Drew, 2 hold the company liable on the fic- 
 
 McQ. H. L. Cas 103; Yarborough v. titious stuck, but was dismissed 
 
 Bank of England. 16 East. 6; Walk- upon the limitation of the doctrine 
 
 er v. Railway Co. L. R. 5 C. P. 640. of estoppel stated in the text. 
 
 Wright's App. 99 Pa. St. 425. * National Bank v. Watsontown 
 
 The facts were: A, the president of Bank, 105 U. S. 220.
 
 ILLEGAL AND TORTIOUS PLEDGES. 415 
 
 pledger. The court (Matthews, Jus.) say: " On the sup- 
 position that not the legal title, but only an equity, based 
 upon an executory contract for a transfer, passed to the ap- 
 pellants, by virtue of the transaction with the cashier of the 
 Watsontown Bank, their right to the relief prfiyed for is not 
 less clear. Aside from the recognition of the title, as com- 
 plete, by accepting and acting upon the power of attorney 
 given by Tome to sell and transfer it as his stock, and the 
 sales made to the Scotts under it, whose title is not denied, 
 and yet cannot be better than that of their vendor, which is 
 disputed, the subsequent conduct of the Watsontown Bank 
 raises an equity against it, which is superior to its legal 
 right to insist upon a lien on account of the debt of Powell 
 & Co. [the pledgers]. When Tome made his claim on 
 behalf of the Cecil National Bank [the pledgee] for a trans- 
 fer of the stock, if the appellee had intended to insist on its 
 legal rights and assert its lien, then was the proper time to 
 do it ; for it then, at least, had notice of the interest and 
 the claim of the appellants. If it had done so promptly 
 the latter might still have had an opportunity to obtain 
 other security, or to enforce by other means their claims 
 against their debtors, who, although in default, do not ap- 
 pear to have been as yet in extremis. So far, however, from 
 adopting this course, the Watsontown Bank pursued one 
 exactly the reverse. It permitted the parties by its actual 
 exercise to rest in the belief that their right to dispose of the 
 stock for the purpose of paying the debt due them would 
 not be questioned, until the failure and assignment of Powell 
 & Co. made any other resort useless; and, having induced 
 them to alter their condition by reliance upon assurances, 
 which were equivalent to a declaration that it had no adverse 
 claim, the appellee cannot now be permitted to assert a 
 lien, lost by its own laches, and the enforcement of which 
 would operate as a fraud." 
 
 314. EQUITABLE ESTOPPEL AS APPLIED TO THE TERMS 
 OF CERTIFICATES. The rules of equitable estoppel as ap-
 
 416 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 plied to representations made by a company upon the 
 face of certificates of stock by which a company is estopped 
 to deny that it has the stock represented by the certificates 
 are enforced where it is stated that the shares of stock are 
 transferable upon the books of the company only upon the 
 return and cancellation of the certificate. A by-law upon 
 its records that such certificates of stock may be transferred 
 by a separate instrument does not affect the application of 
 the rule of estoppel. The fact that other shares of stock 
 have been issued by the company upon an assignment by an 
 independent deed, or upon other considerations, without the 
 surrender of a certificate, so worded, is no excuse or defense 
 for the company, as against a holder of the certificate, in- 
 dorsed for value advanced in good faith, without notice of 
 equities. 1 The holder for value of a certificate issued by 
 the proper officers of a corporation, without notice of fraud, 
 or other defenses against the same, has a primary and direct 
 claim, either to be admitted as a stockholder of the corpora- 
 tion, or where that is impossible, the limit placed by the 
 charter upon the issue of stock having been reached, to such 
 damages as shall be sufficient to recoup him for his loss." 
 Such holder for value, without notice, upon a transfer of the 
 shares of stock to his name upon the books of the company, 
 is protected, although there be no authority on the part of 
 the company to make the transfer because of the number of 
 shares of stock already issued. 8 Although a certificate of 
 stock itself is not the title to the shares of stock, it is an 
 authoritative declaration that such a title exists, which may 
 operate as an equitable estoppel in favor of third persons 
 who part with value in the belief that it is true. 4 
 
 1 Strange 0. Houston & T. Ry. Co. Bank of Kentucky v. Sclmylkill 
 
 53 Tex.162; Holbrook 0.N.J. Zinc Co. Bank, 1 Pars. 180. 
 
 57 N. Y. 616; McNeil v. Tenth Nat. Bayard v. Bank, 52 Pa. St. 232. 
 
 Bank. 40 Ib. 331; N. Y. & N. H. R. 4 Bank of Kentucky v. Sclmylkill 
 
 R Co. . Schuyler, 34 Ib. 81; Bris- Bank, 1 Pars. 180; Railroad Co. v. 
 
 bane v. Railroad Co. 25 Hun, 438; Schuyler, 34 N. Y. 30, 52, 80; in re 
 
 Bayard v. Bank, 52 Pa. St. 233. Bahia & S. F. Ry. Co. L. R. 3 Q.B.
 
 ILLEGAL AND TORTIOTJS PLEDGES. 417 
 
 315. ESTOPPEL OF REAL OWNER BY BLANK INDORSE- 
 MENT OF CERTIFICATES. The real owner of shares of stock 
 holding the certificates may estop himself as against any 
 claim against a company to replace his stock, or to pa}' him 
 damages for an unauthorized transfer thereof, by gross care- 
 lessness in his acts in and about such certificates, or by his 
 indorsement in blank and delivery of them. The real owner 
 may estop himself, by making a blank indorsement, with 
 irrevocable power of attorney to transfer, upon his certificate 
 of stock, and then entrusting the same to a third person, 
 under a secret restriction as to the use to be made of it, 
 not appearing upon the certificate, and known only to the 
 parties. By such indorsement and delivery of the certificates, 
 the legal title and apparent ownership vest in the holder. 
 Where such certificates pass into the hands of bona fide 
 pledgees, for value, without notice, the real owner, whose 
 misplaced confidence has enabled the deception to be prac- 
 tised, must suffer the loss. In dealings with his certificates, 
 the owner is required to use reasonable care, as when in- 
 dorsed in blank and in the hands of a third person, the 
 presumption is that he is a holder for value, entitled to use 
 
 595. In Willis v. Philadelphia & business entrusted to their care. Nor 
 
 Darby Ry. Co. 13 Phila 33, the court is it necessarily conclusive against 
 
 (Hare, P. J.) say: " It is well settled such a purchaser that the party from 
 
 that one who, as a purchaser or whom he bought was cognizant of 
 
 lender, gives value on the faith of a or participated in the fraud. If a 
 
 certificate of stock, authenticated certificate of stock is not a ncgotia- 
 
 by the seal of the corporation and ble instrument, it is a written decla- 
 
 the signatures of the proper officers, ration that the holder has a definite 
 
 acquires an equitable title and may share in the capital or profits of the 
 
 require the corporation to transfer the concern, which, though delivered to 
 
 stock to him, or respond in damages him, is intended for circulation and 
 
 for the default. It is not a sufficient virtually addressed to all the world, 
 
 answer to such a demand that the and third persons who are misled by 
 
 certificate was fraudulently issued, such an instrument, may justly rc- 
 
 because corporations are not less quire that the loss shall fall on the 
 
 than natural persons answerable for corporation, and not on them." 
 the conduct of their agents in the 
 27
 
 418 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 such certificates of stock as he pleases. 1 Where, however, 
 reasonable care has been exercised by the owner, he is not 
 responsible for the loss. As where blanks in a power of 
 attorney indorsed on a certificate for 200 shares were filled, 
 so as to transfer 60 shares only, but by unauthorized changes 
 and erasures the indorsement was made to cover the whole 
 200 shares. The officers of the company with great neg- 
 ligence, issued a new certificate upon the surrender of the 
 erased and forged certificate, without inquiry. The com- 
 pany was required either to replace the stock, or to pay the 
 owner the market value at the time of entering the decree.* 
 A bona fide holder for value, without notice, of a 
 certificate of stock, with a warrant of attorney to transfer 
 indorsed in blank by the treasurer of a company negotiat- 
 ing the same, is protected as against persons subsequently 
 purchasing the same stock at a general sale of the assets 
 of such company, who received no certificate. Having a 
 right to presume the act of indorsement was made by the 
 officer whose functions naturally and reasonably included 
 such an act and that it was preceded by all needful circum- 
 stances, the holder was not required to seek a verification 
 of the presumption by an inspection of the corporation books. 
 Third persons are authorized to act upon the indorsement by 
 such an officer as being an authentic proceeding of the corpo- 
 ration, although it be, in fact, a fraud. 8 Where trustees of a 
 corporation, having charge of the transfer of shares, per- 
 mitted certain shares to be transferred to an innocent person, 
 advancing value, without notice, by one acting in fraud and 
 without authority, the loss resulting was placed upon the 
 stockholders, in a suit between the latter and the innocent 
 person. 4 
 
 'Wright's A pp. 99 Pa. St. 425; Scwall . Boston Water Power 
 
 Pennsylvania R. R. Co.'s App.86 Ib. Co. 4 Allen, 277. 
 
 80; Borland v. Clark, 20 Kans. 349; Walker v. Detroit Transfer Co. 
 
 Ault v. Colket, 2 W. N. C. 322; 47 Mich. 338. 
 
 Coles 0. Bank of England, 10 A.& 4 Cohen e. Gwynne, 2 Md. Ch. 
 
 E. 437; Young v. Grote,4 Bing. 252. Dec. 357.
 
 ILLEGAL AND TORTIOTJS PLEDGES. 419 
 
 316. THE MISAPPROPRIATION OF STOCK CERTIFICATES 
 BY BROKERS AND AGENTS. The owner of shares of stock 
 iu a corporation, holding the certificates issued therefor, who, 
 having indorsed such certificates with an irrevocable power 
 of attorney to transfer it in blank, entrusts the same, in the 
 usual courses of business, to a third person as a broker or 
 agent, for some special purpose, is estopped to set up any fraud 
 or misappropriation on the part of such broker or agent, as 
 against an innocent pledgee, advancing value, without notice, 
 upon the apparent ownership of the certificates by such a 
 broker or agent. No secret equities of fraud or misappro- 
 priation can be set up by such owner, as existing between 
 the agent or broker and himself, to the prejudice and loss of 
 a pledgee for value, without notice. The person, who thus 
 places another in a position so that he is able to commit a 
 fraud, should suffer the loss rather than an innocent 
 pledgee, who deals with such person upon the credit of his 
 possession of such indicia of title as a certificate of stock 
 indorsed in blank and apparent ownership thus conferred. 1 
 Upon a pledge of stock certificates by an agent or other 
 person entrusted with the legal title thereto by indorsement 
 in blank and apparent ownership, for his own debt, as against 
 a pledgee, advancing value, in good faith, in the usual 
 course of business, and without notice of the secret equities 
 between the real owner and the pledger, or that any person 
 claimed an interest therein other than the pledger, the 
 owner is estopped to set up such fraud and misappropria- 
 tion to defeat the title thus acquired. 8 Certificates of stock 
 held in secret trust by A, with full evidences of title, were 
 transferred to B, and B in turn, transferred to C, both trans- 
 
 1 Burton v. Peterson, 12 Phila. Barden, 49 N. Y. 286 ; Atlantic Bank 
 
 397; Burton's App. 93 Pa. St. 114; v. Ferree, 17 K J. Eq. 117; Stone v. 
 
 Penn. R. R. Co.'s App. 86 Ib. 80; Maryx, 14 Nev. 362; Strange 0. 
 
 Dovey's App. 97 Ib. 53; Borland . Houston & T. R. R. Co. 53 Tex. 162; 
 
 Clark, 26 Kan. 349; Sstltus v. Ever- Thompson v. Tolland, 48 Cal. 112; 
 
 ett, 20 Wend. 278; Crocker v. Crock- Gass v. Hampton, 16 Nev. 185. 
 
 er, 31 N. Y. 507; McNeil . Tenth Otis v.. Gardner, 105 111. 436. 
 Nat. Bank, 46 Ib. 325 ; Weaver v.
 
 420 QUASI-NEGOTIABLE COLLATEKAL SECURITIES. 
 
 fers being for value, and without notice, actual or implied, 
 either by B or C, that a secret trust existed in favor of third 
 persons. The cestuis que trust are estopped to object to the 
 transfers. 1 
 
 The rules of equitable estoppel were applied in favor of 
 stock brokers, who, upon request, and delivery of certifi- 
 cates of stocks, duly indorsed, by one claiming to own them, 
 but who, in fact, held them as collateral security for a debt, 
 the amount of which had been tendered by the real owner 
 of the stock, but refused, sold the shares on the stock ex- 
 change, paying the proceeds to the person from whom they 
 received them, without any knowledge of the previous 
 transactions. The real owner sued the stock brokers to re- 
 cover damages. The action of the stock brokersjn making 
 such sale, not depending upon the actual title or authority 
 of the party with whom they dealt directly, but having been 
 derived from the acts of the real owner, the latter was es- 
 topped from disputing as against them, the existence of the 
 title or power, which through neglect or mistaken confidence 
 was caused or allowed to appear to be vested in the person 
 who delivered the certificates to them.* But where blank 
 transfers of shares had been delivered to a broker for a 
 valid purpose, and in order to carry out a deceit and fraud 
 and to secure the money of innocent persons, the broker 
 was obliged to resort to felony to get the certificates, 
 and to forgery to render them available, the principle 
 was announced in an action against the company, by the de- 
 frauded owner to have his shares replaced, that, in order to 
 constitute an estoppel in pais as against him, his negligence 
 must have been the proximate cause of the deceit, and that 
 the principles of equitable estoppel required not only an act 
 invalid per se, but a person forbidden to assert its invalidity, 
 for equitable reasons.* 
 
 1 Borland . Clark, 26 Kan. 349. N. S. 400; s. c. 7 H. & N. 603; 
 Stone t. Maryx, 14 Nev. 362. (Wilde, B.); aff. 2 H. & C. 175. 
 
 * Swan v. N. B. Aust. Co. 7 C. B.
 
 ILLEGAL AND TORTIOUS PLEDGES. 421 
 
 317. ESSENTIAL CONDITIONS OF PLEDGE, UNDER MIS- 
 APPROPRIATION AND FRAUD. Absence of knowledge or 
 notice of misappropriation is essential where certificates of 
 stock are received as collateral security from persons en- 
 trusted with the legal title and apparent ownership, in 
 order to entitle the pledgee to protection. Bad faith, or 
 knowledge or notice of fraud is necessary to defeat the 
 pledgee's title, who advances money upon such evidences of 
 title and ownership ; but where these are shown, no title 
 can be acquired even by a holder for value. 1 A certificate 
 of stock was appropriated by an agent entrusted therewith, 
 to its proper purpose as collateral security, the name of the 
 pledgee being inserted in the power of attorney, and the 
 debt having been paid, the stock was returned to the agent. 
 A pledgee subsequently receiving the same, being chargeable 
 with notice of the erasure of the name of the first pledgee, 
 acquired no rights therein as against the real owner, the 
 limited authority of the agent expiring with the making of 
 the first pledge.* The pledgee in cases of misappropria- 
 tion of stock certificates, must also be a holder for value in 
 good faith, without notice, in the usual course of business. 
 So far as the same are pledged as collateral security for an 
 antecedent debt, without further consideration, the title 
 of the pledgee is subject to antecedent equities in states 
 where the restricted rule prevails. 3 
 
 A pledge of a certificate of stock of a bank was made 
 by a cashier as collateral security for an advance to him- 
 self, the certificate being one of several signed in blank by 
 the president, and was also signed by the cashier, and filled 
 up with the name of the latter as owner. Although the 
 pledgee advanced money in good faith and was in a general 
 sense an innocent holder of the certificate, the circumstances 
 that the cashier was acting for himself in issuing the cer- 
 
 1 Crocker v. Crocker, 31 N. Y, * Denny v. Lyon, 88 Pa. St. 98. 
 
 507; Porter v. Parks, 49 Ib. 564; 3 Weaver >;. Barden, 49 K Y. 
 
 Strange v. Houston & T. R. R. Co. 286; Strange v. Houston & T. R. K. 
 
 53 Tex. 162. Co., 53 Tex. 162.
 
 422 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 tificate, and was using it for his own benefit, charged the 
 pledgee with the duty of inquiry ; and failing to make the 
 investigation, which, if made, would have developed the 
 fraud, she was not an " innocent person," the issue of the cer- 
 tificate being unauthorized and a fraud, nor was the pledgee 
 entitled to an action Tor her loss as against the bank. 1 
 
 318. MEASURE OF DAMAGES, IN CASES OF FORGERY 
 AND SPURIOUS STOCK. The measure of damages allowed 
 the real owner, where a company has issued upon forged 
 indorsements new certificates of stock which have passed into 
 the hands of innocent holders for value, without notice, is 
 the value of the stock at the time of the demand for the is- 
 sue of new shares, with any dividends that may have accrued; 
 or the company may be required to replace the stock, issue 
 new certificates, and pay dividends.* As against a prior 
 indorser of a certificate, erased and forged^ but without 
 knowledge thereof, upon the faith of whose indorsement ad- 
 vances were made upon the certificate as collateral security, 
 the pledgee recovered the whole amount of his loan, the 
 pledgor having become bankrupt, and a felon by reason of 
 the forgery. 1 In a case where a company refused to trans- 
 fer stock, new certificates having been already issued upon 
 fraudulent misrepresentations, damages were estimated at 
 the market value of the stock on the day of demand, and 
 interest. 4 The like rule was applied in a case of certificates 
 tainted with forgery, the question of damages, if there were 
 no market value at the time of the demand, being left with 
 the jury on the evidence. 5 Where erasures had been made 
 upon a certificate increasing the number of shares intended 
 to be transferred, and other forgeries, the company was 
 
 'Moores v. Bank, 15 Fed. Rep. Willis v. R'y Co. 13 Phila. 83; 
 
 141; aff. Ill U. S. 156; see Western Woodkouse . Ins. Co. 35 La. Ann. 
 
 R. R. Co. v. Bank, 60 Md., 36. 238. 
 
 'Telegraph Co. v. Davenport, 97 In re Bahia & S. F. Ry. Co., L. 
 
 U. S. 369; Pollock v. National Batik, R 3 Q. B. 594; Swan v. Mining Co. 
 
 7 N. Y. 274. 13 Q. B. D. 105. 
 
 Matthews v. Bank, Holmes, 396.
 
 ILLEGAL AND TORTIOUS PLEDGES. 423 
 
 required either to replace such extra shares, or to pay the 
 owner the market value at the time of entering the decree. 1 
 The measure of damages allowed in equity to pledgees, 
 holding spurious certificates of stock as collateral security 
 for notes of the pledger, the president of a railroad com- 
 pany issuing the stock, and who had loaned their money 
 on the credit of the representations contained in such cer- 
 tificates, the pledgees receiving them, indorsed with the 
 usual powers to transfer, in blank, is subject to the rule 
 that such stock is held liable to any loss or deterioration in 
 its value which might possibly result from the fraudulent 
 or negligent conduct of officers or directors. The pledgees 
 of the stock were not creditors, nor could the entire prop- 
 erty of the company be devoted to their payment to the ex- 
 clusion of other persons whose equity was equal to their 
 own. As no demand for a transfer of the stock had been 
 made, the rule of damages applied was, that, while the 
 pledgees holding genuine certificates should be given other 
 valid certificates of stock, those who had advanced their 
 money upon the spurious certificates, issued beyond the 
 limit prescribed by the charter,' should be paid by the com- 
 pany a sum equal to the value of the shares claimed by 
 them upon the hearing before the master to assess 
 damages. 4 In the case of the Bank of Kentucky v. Schuyl- 
 kill Bank, 3 the Legislature of Kentucky, upon request, 
 passed a law authorizing the corporation in that case to issue 
 an amount of valid stock equal to and to be used in place 
 of that issued fraudulently. 
 
 1 Sewall v. Boston Water Power 1 Pars. Eq. 180. 
 Co., 4 Allen, 277. 
 
 Willis v. Philadelphia & Darby 
 Ry Co., 13 Phila. 33.
 
 121 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 CHAPTER XXXII. 
 
 THE SUB-PLEDGE OF STOCK CERTIFICATES. 
 
 319. The transfer and sub-pledge of stock certificates. 
 
 320. Sub-pledges of stocks for loans greater than principal debt. 
 
 821. The sub-pledge of stock certificates indorsed in blank. 
 
 322. Sub-pledges of stock certificates. 
 
 323. The Massachusetts rule as to sub-pledges of stock certificate's. 
 
 324. Sub pledges upon void loans and antecedent debts, when bubject to 
 
 equities. ^ 
 
 325. Sub-pledges under a limited title. 
 
 326. Equitable application by sub-pledgee of proceeds from securities. 
 
 327. The broker's use of customer's stock certificates. 
 
 319. THE TRANSFER OF STOCK CERTIFICATES BY 
 PLEDGEE. The pledgee holding certificates of stock, in- 
 dorsed by the owner in blank, with irrevocable power of 
 attorney to transfer, upon a present loan or discount of 
 commercial paper, may make his collateral securities avail- 
 able for the purpose of raising money thereon. He may 
 assign and transfer absolutely his interest in such col- 
 laterals, together with the personal obligations of the 
 pledger. The pledgee may also sub-pledge the collateral 
 stock securities held by him, having the legal title, upon 
 a bona fide advance or discount by a third person, not ex- 
 ceeding in amount the indebtedness for which such certi- 
 cates of stock are held as collateral. The pledgor will have 
 no cause for complaint by either of these valid uses of col- 
 lateral securities. He may entitle himself to a return of 
 such securities upon payment of the amount of his original 
 debt at maturity, to such assignee or sub-pledgee holding 
 the same. The right to transfer and to sub-pledge such 
 collateral securities is a right which every lender of money
 
 THE SUB-PLEDGE OF STOCKS. 425 
 
 has. Without it, the business of banks and brokers could 
 not be carried on, and commerce itself would be needlessly 
 restricted. 1 
 
 320. SUB-PLEDGES OP STOCKS FOR LOANS GREATER 
 THAN PRINCIPAL DEBT. The pledgee of stock certificates, 
 indorsed in blank, holding the legal title and apparent 
 ownership, may confer upon a sub-pledgee advancing value 
 upon the credit of such title and apparent ownership, in 
 good faith, and without notice of equities, a more extended 
 right, as against the owner and pledgor, than he himself 
 has. The presumption arises in favor of third persons ad- 
 vancing money in good faith and without notice that one in 
 possession of certificates of stock indorsed in blank is the 
 owner thereof, a holder for value, with a good title. The 
 act of sub-pledge, by a pledgee holding the title and posses- 
 sion, for a loan greater in amount than the principal debt, 
 is unauthorized and fraudulent as between the parties to the 
 original contract of pledge ; but as against the innocent 
 sub-pledgee for value, without notice, the owner is es- 
 topped to set up any defenses or equities. Having enabled 
 the fraud and deceit to be practised, by his misplaced con- 
 fidence in allowing the pledgee to appear as the owner of 
 certificates of stock, indorsed in blank, the pledgor must 
 bear the loss. 9 
 
 1 Canfield v, Minneapolis Assn. 14 New Jersey Zinc Co. 57 Ib. 616 ; 
 
 Fed. Rep. 801; Jarvis v. Rogers, 13 Crocker v. Crocker, 31 Ib. 507; Kort- 
 
 Mass. 389, 417 ; Goss . Emerson, 23 right v. Commercial Bank, 20 Wend. 
 
 N, H.38; Chamberlain. Greenleaf, 91, s. c. 22 Ib. 348; Chamberlain 
 
 4 Abb. 1ST. C. 178; Langton v. Waite, v. Greenleaf, 4 Abb. N. C. 178 ; Felt 
 
 L. R. 6 Eq. 165; Ex parte Sergeant, v. Heye, 23 How. Pr. 359; Fatman, 
 
 17 Ib. 279; Donald v. Suckling, L. v. Lobach, 1 Duer. 354- Leavitt v. 
 
 R. 1 Q. B. 385, 611 ; France v. Fisher, 4 Ib. 1 ; Prall v. Tilt, 28 
 
 Clark, 22 Ch. D. 830; aff. 26 Ib. 257. N. J. Eq. 493 ; Mt. Holly Turnpike 
 
 * McNeil . Tenth Nat. Bank, 46 Co. <o. Ferree, 18 Ib. 17 ; Wood v. 
 N. Y. 325; O?den v. Lathrop, 65 Ib. Smith, 92 Pa. St. 379; Penn. R. R. 
 158; Dnscoll v. West Bradley Manf. Co.'s App. 86 Ib 83; Bank of Ken- 
 Co. 59 Ib. 96; Merchants' Bank v. tuckyw. Schuylk ill Bank, IPars. Eq. 
 Livingston, 74 Ib. 223; Holbrook . 248; Cherry v. Frost, 7 Lea, 1 ; Jarvis
 
 426 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 In the leading case of McNeil v. Tenth National 
 Bank 1 (Rapallo, J.), involving the claims of a pledgor 
 as against a sub-pledgee of stock certificates, indorsed 
 in blank, the acknowledged rule of equitable estoppel was 
 declared, that " where the true owner holds out another, 
 or allows him to appear as the owner of or as having full 
 power of disposition over the property, and innocent third 
 parties are thus led into dealing with such apparent owner, 
 they will be protected. Their rights in such case do not 
 depend upon the actual title or authority of the party with 
 whom they deal directly, but are derived from the act of 
 the real owner, which precludes him from disputing, as 
 against them, the existence of the title or power, which 
 through neglect or mistaken confidence, he caused or 
 allowed to appear to be vested in the party making the con- 
 veyance." The court further say: "If the owner entrusts 
 to another not merely the possession of the property, but 
 also written evidence over his own signature of title thereto, 
 
 . Rogers, 13 Mass. 105; &. c. 15 Ib. stitute and appoint * * * 
 389; Gass v. Hampton, 16 Nev. 185; true and lawful attorney, irrevocably 
 Stone v. Maryx, 14 Ib. 362 ; Brew- for * * and in * * name and 
 ster v. Sime, 42 Cal. 139 ; Thompson behalf, to make and execute all ncc- 
 . Tolland, 48 Ib. 112; Mocatta v. essary acts of assignment and trans- 
 Bell, 27 L. J. Ch. 237 ; in re Tahiti fer required by the regulations and 
 Cotton Co. L. R. 17 Eq. 273; Lang- by-laws of said bank, 
 ton v. Waite, 6 Ib. 165; Simm v. "In witness whereof, I have hcre- 
 Anglo-Am. Ry Co. 5 Q. B. D. unto set my hand and seal this * 
 188. day of 
 
 1 46 N. Y. 325, 329, 330. McNiel "(Signed) B. MCNEIL. 
 
 was the owner of shares of stock of "Sealed and sworn in presence of 
 a national bank, the certificate of * * * ' 
 
 which he delivered to and left with Without authority, and without the 
 
 his stockbroker as collateral security pledgor's knowledge, the brokers 
 
 for any balance of account. Upon pledged the stock with other col- 
 
 the certificate was indorsed an as- lateral to another broker as se- 
 
 signment in blank, as follows: curity for a loan of $4-">,000. At the 
 
 "For value received, the under- request of the broker, the defendant 
 
 signed hereby assigns and transfers bank paid the loan of $45.000 and 
 
 unto * * * shares of the capital received the collateral securities, 
 
 stock of the First National Bank of The broker became insolvent and 
 
 St. Johnsville, and do hereby con- the original pledgor demanded the
 
 THE SUB-PLEDGE OF STOCKS. 427 
 
 and an unconditional power of disposition over it, the case 
 is vastly different [from that of the pledgee of an ordinary 
 chattel]. There can be no occasion for the delivery of 
 such documents, unless it is intended that they shall be 
 used, either at the pleasure of the depositary, or under con- 
 tingencies to arise. If the conditions upon which this ap- 
 parent right of control is to be exercised are not expressed 
 on the face of the instrument, but remain in confidence 
 between the owner and the depositary, the case cannot be 
 distinguished in principle from that of an agent who receives 
 secret instructions qualifying or restricting an apparently 
 absolute power. * * * I am at a loss to perceive on what 
 principle itcau be claimed that an apparent naked authority 
 is more effectual to bind the party giving it than an 
 apparent ownership as well as authority." 
 
 321. THE SUB-PLEDGE or STOCK CERTIFICATES IN- 
 DORSED IN BLANK. The ussage of indorsing certificates of 
 stock in blank renders them, although not negotiable like 
 the favored instruments of commerce, but so far quasi- 
 negotiable that, under the application of the rules of 
 equitable estoppel, they pass from hand to hand in bona fide 
 transactions of loan free from antecedent equities. An 
 irrevocable power of attorney executed in blank by the 
 owner in whose name the certificate of stock is issued, enures 
 to the benefit and advantage not only of the first holder of 
 such certificate for value, in good faith, without notice, to 
 whom it may be delivered, but as in the case of commercial 
 paper indorsed in blank or payable to bearer, every subse- 
 quent holder for value is entitled to the privileges resulting 
 
 return of the stock from the bank, not been rendered nor demand marie, 
 
 upon payment of the amount due The lower court decided in favor of 
 
 upon his account, about $3,000, the the pledgor, and the case was twice 
 
 bank's interest in the stock, after de- argued in the Court of Appeals, the 
 
 ducting the amount realized from decision supporting the rights of the 
 
 the other collaterals, being over bank acquired under the sub-pledge, 
 
 $15,000. The shares were worth $17,- and without knowledge of the pledg- 
 
 000. The account, however, had or's title to the stock.
 
 428 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 therefrom. Where such certificates of stock, indorsed in 
 blank, are in the possession of a pledgee, who sub-pledges 
 the same, no notice or knowledge sufficient to put such sub- 
 pledgee upon inquiry is presumed from the fact that the 
 certificate is in the name of another person, otherwise the 
 availability of stock certificates as collateral would be in 
 great part destined. 1 
 
 A indorses in blank and delivers to B certificates of 
 stock as collateral, upon which he obtains a loan. B. sub- 
 pledges the certificates to C for value, who again sub- 
 pledges them to D, the indorsement remaining blank. The 
 last pledgee D, if a holder for value, in the usual course of 
 business, has a good title against everybody.* 
 
 322. SUB-PLEDGES OP STOCK CERTIFICATES. The 
 sub-pledge of stock certificates held by pledgees with title is 
 supported where made upon an advance, or other valuable 
 consideration, in good faith, without notice, although the 
 pledgee may be chargeable with notice of misappropriation. 
 A pledge of stocks belonging to an estate was made by 
 one of several executors to stockbrokers as collateral secu- 
 rity for his own indebtedness upon stock speculations, with 
 power of attorney signed "A., acting executor." The 
 brokers, who were chargeable with notice of the misappro- 
 priation, sub-pledged the stock for a loan made in good faith, 
 without notice. The fraud being discovered, the remaining 
 executors sought in equity to recover the stocks from the 
 sub-pledgees. They were only given relief upon the equit- 
 able terms of paying the full advances of the sub-pledgee. 1 
 
 The technical doctrine of lis pendens is not enforced to 
 defeat the title of a sub-pledgee of certificates of stock for 
 
 1 Wood's App. 92 Pa. St. 379; In re Tahiti Cotton Co. L. R. 17 
 
 Felt v. Heye, 23 How. Pr. 359 ; Eq. 273. 
 
 Leavitt v. Fislier, 4 Duer. 1 ; Kort- s Gould v. Farmers' Loan & Trust 
 
 right v. Commercial Bank, 20 Co., 23 Hun, 322. 
 
 Wend. 91; McNeil e. Fourth Nat. 'Wood's App. 92 Pa. St. 379. 
 Bank, 46 N, Y. 825 (Rapallo, J.).
 
 THE SUB-PLEDGE OF STOCKS. 429 
 
 value, without notice. Upon discovery of a previous mis- 
 appropriation of stocks of an estate by an executor, a court 
 of equity appointed a new trustee. The court was about to 
 order the company to transfer the stocks to the trustee, but 
 before the entry thereof, the executor indorsed the certifi- 
 cates in blank, and passed them to a third person for value 
 advanced, who sub-pledged them for a loan. Upon default, 
 the sub-pledgee sold the stocks, but the company gave 
 public notice that there were no such stocks, and the pledgee 
 had to buy them himself. The company still refusing to 
 transfer, the sub-pledgee recovered the full amount of his 
 damages. 1 
 
 Stocks pledged upon a loan of money were sub-pledged 
 for value, and on the same day were again sub-pledged with 
 other collaterals for a loan and as collateral security for an 
 antecedent debt, without more. The second sub-pledgee, 
 so far as he had made a bona fide advance, was protected as 
 a holder for value in the usual course of business ; as to the 
 past indebtedness, the transaction occurring in New York, 
 he was subject to equities. The first pledgee paid the full 
 value of the stock to redeem it, and was allowed to recoup 
 himself from the sale of the other collaterals, after the second 
 sub-pledgee had repaid himself his actual advances, upon 
 which he was a holder for value of the securities. 1 
 
 It is no defense to a customer as against a suit brought 
 for the price of stocks bought by a broker that, under the 
 well-established usage of stockbrokers to use stocks which 
 they are carrying as collateral to raise money to continue 
 their business, that a sub-pledgee of such stocks, upon de- 
 fault, had sold the stocks. The failure of the broker to 
 redeem being a default in a subsequent duty, the liability of 
 the customer continued. The latter, however, might recoup 
 his damages. 1 
 
 1 Holbrook v. New Jersey Zinc Co. Hun. 322 ; Stenton v. Jerome, 54 N. 
 57 N. Y. 616. Y. 480. 
 
 * Gould v. Farmer's L. & T. Co. 23 3 Capron v. Smith, 86 K Y. 418 ; 
 
 Grumau v. Smith, 82 Ib. 25.
 
 430 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 As no notice is charged from the use of the words "as 
 trustee " in mining stocks, and no presumption as to the 
 existence of any cestui que trust arises therefrom, a pledgee 
 holding such stocks as collateral for stock speculations, may 
 sub-pledgee the same for a loan and future advances. Where 
 this is done, the pledger and owner is bound to the pledgee 
 for the full amount of the loan and advances until notice of 
 the pledger's interest. 1 
 
 323. THE MASSACHUSETTS RULE AS TO SUB-PLEDGES 
 OP STOCK CERTIFICATES. In Massachusetts, the rule is 
 established that a pledgee of stock holding certificates of 
 stock under written assignment and blank power of attor- 
 ney indorsed thereon may cause a transfer to be made upon 
 the books of the company either to himself, or to some other 
 person as trustee, so as to protect the title and possession 
 to the collaterals. Such a right on the part of the pledgee 
 is necessarily implied. 9 The pledgee, however, is not per- 
 mitted, under statutory enactments, to sell or loan or pledge 
 the stock thus held as collateral, but is required to retain the 
 same in his possession, so that upon the maturity of the 
 debt, or at any time afterwards before a proper sale, he may 
 be in a position, upon pa} T ment, to restore such stock 
 to the pledger. 8 Certificates of stock held as collateral, 
 under a blank power of attorney, absolute in terms, the 
 receipt given therefor showing it to be held as collateral 
 security for a loan, were transferred by the pledgee to his 
 own creditor in order to fulfil a prior contract for borrowed 
 stock. Such a transfer operated as a conversion of the stock. 
 The pledgee, upon failure to pay the loan, sold the same 
 number of like shares of stock and sued for the balance of 
 the debt unsatisfied. The pledger was allowed, in such 
 action, to set-off the wrongful conversion, and to recover 
 
 1 Gass v. Hampton, 16 Nev. 185. 'Fowle t>. Ward, 113 Mass. 548 ; 
 
 *Day v. Holmes, 103 Mass. 306; Fay e. Gray, 124 Ib. 500 ; Hathaway 
 Fay v. Gray, 124 Ib. 500. t>. Fall River Bank, 131 Mass. 14,
 
 THE SUB-PLEDGE OF STOCKS. 431 
 
 the difference between the value of the stock at the time of 
 the conversion and the amount due on the note, and had a 
 judgment for the difference. 1 Nor is it any excuse, in Mas- 
 sachusetts, fora wrongful sale or pledge of such stock that 
 the pledgee has always held a sufficient number of like 
 shares to return to the pledger upon payment of the debt 
 secured. 8 But it is not a conversion of stock where a 
 transfer of the certificates is made to third parties while held 
 as collateral for the purpose simply of avoiding injury to the 
 credit of the pledgee who received the certificates in- 
 dorsed, and was ready to return them to the pledger upon 
 payment. 8 
 
 324. SUB-PLEDGES UPON VOID LOANS AND ANTECE- 
 DENT DEBTS, WHEN SUBJECT TO EQUITIES. No title is con- 
 veyed, as against the pledgor, where the sub-pledgee of 
 certificates of stock, properly indorsed, is based upon a 
 transaction of loan between the pledgee and sub-pledgee 
 tainted with usury and void by statute. The sub-pledgee 
 receiving stock certificates upon such void loan is not 
 a holder for value in the usual course of business. If 
 any recovery can be had, as where such contracts are void- 
 able only, the sub-pledgee is subject to prior equities. 4 A 
 borrowed money from B on stock certificates indorsed in 
 blank, and B sub-pledged them to C, who was without 
 notice of A's rights, for a loan to himself, retaining the 
 principal notes. The loan made by the sub-pledgee was 
 tainted with usury. Upon default, the sub-pledgee sold the 
 collaterals. The pledgor sued to recover either the stock 
 or the proceeds thereof, and took judgment, an attempt to 
 set-off the debt due to the pledgee not being allowed, as 
 
 'Fay. Gray, 124 Mass. 500. "in order that what was intended 
 
 8 Ibid. as a security might not become a 
 
 *Day v. Holmes, 103 Mass. 306. burden." Heath v. Griswold, 18 
 
 Nor was it a conversion of the stock, Blatchf. 555. 
 
 where a pledgee of shares placed the 4 Leitch t>. Wells, 48 N. Y. 593. 
 
 eame in the name of a third person,
 
 432 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 the negotiable securities had not been transferred with the 
 collaterals, and non constat might still be in the hands of 
 the pledgee or a third person, a holder for value, without 
 notice. 1 
 
 In jurisdictions where the restricted rule is followed 
 that an indorsement and delivery of negotiable collaterals 
 as security for the payment of an antecedent debt, without 
 further consideration, is not sufficient to constitute the 
 pledgee a holder for value, in the usual course of business, 
 a sub-pledgee receiving certificates of stock, although with 
 the legal title and apparent ownership, as collateral security 
 for an antecedent debt merely, without any extension of 
 time for the payment of the principal debt, or other valua- 
 ble consideration, is not a holder for value, in the usual 
 course of business, so as to come within the rules of equita- 
 ble estoppel announced in the leading case of McNeil v. 
 Tenth National Bank.* This limited rule, subjecting sub- 
 pledgees to secret equities, was enforced in a case where 
 a loan was obtained through an agent of a trust company, 
 upon the discount of a note, and certain stocks, bonds and 
 mortgages, and other securities, as collaterals. The agent 
 afterwards sub-pledged the note and securities to a third 
 person as collateral security for a pre-existing debt, without 
 further consideration. As the sub-pledgee received the 
 securities subject to equities between the pledgor and the 
 trust company by reason of want of consideration, 
 he was charged, in seeking to enforce the mortgage se- 
 curity, with the value of the stock certificates, as the 
 mortgage was given as a further security to the stock, and 
 having parted with the latter, its return upon payment had 
 been rendered impossible. 1 
 
 325. SUB-PLEDGES UNDER A LIMITED TITLE. It is 
 an essential element of the application of the rule of 
 
 'Felt c. Heye, 23 How. Pr. Guss v. Hampton, supra; and Gould 
 359. t>. Farmer's L. & T. Co. 23 Hun, 322. 
 
 Weaver t. Bardcn, 49 N. Y. 325; Ashton's App. 73 Pa. St. 153.
 
 THE SUB-PLEDGE OF STOCKS. 483 
 
 equitable estoppel, which protects an innocent sub- 
 pledgee loaning money to a pledgee who has been entrusted 
 with certificates of stock, indorsed by the pledger, that the 
 transaction of loan shall be founded upon the credit of the 
 legal title and apparent ownership of the pledgee. If there 
 be no pretension on the part of the pledgee of ownership of 
 such stock certificates, and the loan is made avowedly 
 as for a third person, the original pledger and owner, the 
 latter is not within the rule of estoppel in pais stated, 
 nor can the sub-pledgee enforce his stock collateral as 
 against the owner, for any sum in excess of the principal 
 debt for the payment of which the stock was first pledged. 
 Under the circumstances stated, the sub-pledgee is charge- 
 able with notice that the power of the pledgee may be 
 limited, and his advances to an amount greater than the 
 principal debt are made at his peril. This rule was en- 
 forced where a broker loaned $3,000 on a certificate of 
 stock, which he received unindorsed. Upon applying 
 himself for a loan upon the stock, he found it was neces- 
 sary, to make his collateral available, that the certificate 
 should be indorsed. A loan applied for by the broker as 
 for a customer, was refused him until this was done. The 
 pledgor was induced to indorse the certificate by the repre- 
 sentation of the pledgee that he needed it for his own se- 
 curity. Upon the certificate thus indorsed, the sub-pledgee 
 made a loan of $8,000, ostensibly for a customer of the 
 pledgee, as stated. The sub-pledgee sought, upon default, 
 to foreclose his lien upon the stock, but as against the 
 pledgor, he was restricted to a recovery of the amount of 
 the first loan. 1 A sub-pledgee can take no better title to 
 the stock itself as represented by the certificates than the 
 
 1 Merchant's Bank v. Livingston, sub pledgee, for value, without 
 74 N. Y. 223. The court, however, notice, from a pledgee holding them 
 recognize the general rule as to the under indorsement in blank, with 
 more extended right which may be the legal title and apparent owner- 
 acquired over such collateral securi- ship, and claiming to be the owner, 
 ties, where they are received by a 
 28
 
 434 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 owner had at the time of the sub-pledge. Where at such 
 time of sub-pledge, the pledger has only paid forty per 
 cent, of the face of the stock, a sub-pledgee is a purchaser 
 for value in the due course of business to the extent only 
 of its then value. Nor will a subsequent payment on and 
 change of the form of stock increase the sub-pledgee's in- 
 terest therein. 1 
 
 326. APPLICATION BY SUB-PLEDGEE OF PROCEEDS 
 FROM COLLATERALS. The sub-pledgee of certificates of 
 stock is subject to equitable rules as to the application of 
 proceeds from collateral securities, in cases where he holds 
 certificates of stock owned by different pledgers, and there- 
 tofore received as collateral security by the several pledgees. 
 The pledgers of such stock may require, in equity, that 
 such securities shall be applied by the sub-pledgee paripassu 
 in payment of the loan. Such sub-pledgee is not allowed to 
 favor the collateral stocks of one pledger at the expense of 
 others, by an intentional discrimination in the sale thereof. 
 Where this has been done, the equitable principle of sub- 
 rogation is resorted to, although the sub-pledgee has acted 
 without notice of the claims of the several pledgers. 
 If by the sale of the collateral stocks of one or two of the 
 pledgers, enough has been realized to discharge the claims 
 of the sub-pledgee, and other securities remain in his hands, 
 equity will order a sale of the whole, so that each pledger 
 may bear his pro rata share of the common burden. 9 A firm 
 of stock brokers, carrying stocks of different customers upon 
 margins as collateral security for the payment of the purchtise 
 price at the appointed time of delivery, sub-pledged such 
 stocks to different persons as security for advances. As no . 
 customer was able to identify his individual stock as being 
 in the hands of any particular sub-pledgee, any relief was 
 impossible ; but in cases where identification of the stock 
 
 1 Cherry v. Frost, 7 Lea, 1. Gould v. Central Trust Co. 6 
 
 Abb. N. Cas. 381.
 
 THE SUB-PLEDGE OF STOCKS. 435 
 
 could be made, the customers were allowed to folio wit, and if 
 sold by the sub-pledgee, to claim the proceeds. 1 A sub- 
 pledgee from a sub-pledgee received certificates of stock of 
 several parties as collateral security, partly for a special 
 loan to the sub-pledgee, and partly for an antecedent debt 
 without more, and was not as to the latter, under the New 
 York rule, a holder for value, in the usual course of business. 
 One of the pledgees, whose collateral securities was thus sub- 
 pledged, was obliged to pay the full value of the stock, in 
 order to return the same to his pledger. As a surplus re- 
 sulted from the sale of the other collaterals, after paying 
 the bona fide advance of the second sub-pledgee, the bene- 
 fit thereof was given the pledgee, as against the claim of 
 the sub-pledgee, on account of the antecedent debt. 9 
 
 327. THE BROKER'S USE OF CusTOMEp k \s STOCK CER- 
 TIFICATES. Stockbrokers, who have purchased shares of 
 stock for a customer, upon a contract to buy and carry for 
 a certain time, the brokers holding the certificates represent- 
 ing the shares of stock and the customers furnishing margins, 
 are entitled, by commercial custom, to use the particular 
 certificates of stock so purchased and transferred to them, 
 by way of sale, loan or pledge. Shares of stock of com- 
 panies quoted on the Stock Exchanges of the country, have 
 no particular value one over the other, and no reason exists 
 for retaining any particular certificate received upon a pur- 
 chase. Stockbrokers, however, are generally required to 
 retain enough shares of any given stock so that they may 
 be able to complete their contracts with their customers at 
 any time agreed. The right to sell, loan, or pledge stocks 
 carried for a customer does not include the right to specu- 
 late with it. s The same rule is applied as to the want ol 
 
 1 Chamberlain v. Greenlcaf, 4 Abb. Stewart v. Drake, 46 Ib. 449; Allen 
 N. Cas. 178. v. Dykers, 3 Hill, 593; s. c. 7 Ib. 
 
 2 Gould v. Farmers' L. & T. Co. 497; Frostfl. Clarkson, 7 Cow. 24; 
 23 Hun. 322. Wynkoop v. Leal, 64 Pa. St. 361; 
 
 8 Levy v. Loeb, 85 N. Y. 370; Hubbell v. Drexel, 11 Fed. Rep. 115; 
 Lawreuce v. Maxwell, 53 Ib. 19 ; Price v. Grover, 40 Md. 102.
 
 436 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 identity, or the absence of " ear marks," in the case of gold 
 certificates 1 and warehouse receipts for grain and other 
 commodities.* The duties of the parties to the contract of 
 pledge, as between the broker and his customer, and the 
 use of the certificates of stock, may be governed by agree- 
 ment. Where such contracts are made in good faith, and 
 not against public policy, nor in contravention of any 
 statute, courts enforce them.* 
 
 1 Merchant's Bank . State Bank, 
 10 Wall. 604. 
 
 'Bailey . Bensley, 87111. 556. 
 
 Baker v. Drake, 66 Ib.518; Law- 
 rcnce v. Maxwell, 53 Ib. 19; Stenton 
 t>. Jerome, 54 Ib. 480; Taussig v. 
 Hart, 58 Ib.425; Ogden v. Lathrop, 
 66 I b. 158; Levy v. Loeb, 85 Ib. 370; 
 Hubbell v. Drexel, 11 Fed. Rep. 115. 
 
 Where an express agreement is en- 
 tered into by the parties requiring 
 the broker to keep on hand the 
 stocks or bonds purchased, a substan- 
 tial compliance therewith must be 
 shown before the broker can recover 
 from his principal. w Hardy v. Jau- 
 don, 41 N. Y. 619; s. c. 1 Kobt. 261.
 
 THE PLEDGEE'S SALE OF STOCKS. 437 
 
 CHAPTER XXXIII. 
 
 THE SALE OF COLLATERAL STOCKS. 
 
 328. The pledgee's sale of stocks, upon default. 
 
 329. The pledgee's right of sale under contract. 
 
 330. localization of pledged stock, by trustees for pledger. 
 
 331. The requirements of valid notice and sale. 
 
 332. The pledgee, upon his sale of stocks, cannot purchase. 
 
 333. The title of the bona fide purchaser at pledgee's sale. 
 
 334. Sale by broker carrying stocks, upon default waiver of notice. 
 
 335. The broker's delay in sale, no defense against suit. 
 
 336. Measure of damages for wrongful sale by brokers. 
 
 337. Measure of such damages in New York and Pennsylvania. 
 
 338. The pledgor entitled to profits on unauthorized sale. 
 
 339. The broker's right of set-off against damages for conversion. 
 
 328. THE PLEDGEE'S SALE OF STOCKS, UPON DE- 
 FAULT. The pledgee holding certificates of stock indorsed 
 with a power of attorney to transfer signed, as collateral 
 security for a loan or discount of commercial paper, is en- 
 titled to sell such collaterals, at public sale, upon default of 
 the pledgor, after due demand, and notice of the time and 
 place. Having the legal title to the collateral securities, 
 the pledgee is able to make them available, as the pur- 
 chaser at such sale has a right to demand, as had the 
 pledgee, transfer of the shares of stock to his own name 
 on the books of the company, and to obtain new certificates. 1 
 Sub-pledgees of stock certificates, holding the same for 
 value, are also entitled to sell such collateral securities, 
 
 'Nahring n. Bank of Mobile, 58 106111.433; Langton v. Waite, L."R. 
 Ala. 204; Stevens . Hurlburt Bank, 6 Eq. 165; France v. Clark, L. R. 
 31 Conn. 146; Denton v. Jackson, 22 Ch. D. 830;aff. 26 Ib. 257.
 
 438 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 upon demand and notice. 1 A private sale is not permitted 
 to be made, even under contract, much below the current 
 market quotation for the stock. Such a sale is open to in- 
 quiry and suspicion. 8 A stockbroker has the right to sell 
 stocks which he has bought for a customer, upon the latter 
 advancing margins, where, upon a subsequent depreciation 
 in the market value of the stocks, the customer fails, upon 
 demand, to keep good such margins as agreed. The 
 broker may decline to carry the stocks any longer, and sell 
 the same at his pleasure, without notice. The advances 
 made by the stockbroker being about ninety per cent, of 
 the purchase price of the stock, his right of sale, upon de- 
 fault of the customer to put up further margins, accrues at 
 once. 8 The commission merchant, advancing money for the 
 purchase of property consigned to him has the'right to sell 
 the same at such time as he sees proper, to the extent and 
 in payment of his advances. 4 
 
 A pledgee of certificates of stock of a national bank, 
 after transfer had been obtained on the books of the bank, 
 sold the same under a power contained in the contract of 
 pledge. His right of sale was not allowed to be ques- 
 tioned by the pledger, nor his representatives, although the 
 sale was made to relieve the pledgee of liability from the 
 impending bankruptcy of the bank. 5 Stocks were pledged 
 aj collateral security for the payment of a note due in 
 
 1 Gould v. Farmer's Loan and makes default, upon demand for 
 
 Trust Co. 23 Hun, 322; In re Bon- further margins, will have no cause 
 
 ney, 8 Daly, 75. for complaint that the broker ceases 
 
 'Nahring v. Bank of Mobile, 58 to hold and carry it, but sells the 
 
 Ala. 204. same without notice." 
 
 Hubbell v. Drexel. 11 Fed. Rep. 4 Butterfleld v. Stevens, 59 Iowa, 
 
 115; Dando's App. 94 Pa. St. 76; 596; Corbett v. Underwood, 82 
 
 Stevens v. Hurlburt Bank, 31 Conn. 111. 324; Moeller v. McLasan. 60 Ib. 
 
 16; Covell v. Loud, 135 Mass. 41. 317; Denton v. Jackson, 106 Ib. 
 
 The court (Devens J.) say: " Upon 433; Weed v. Adams, 37 Conn. 378, 
 
 an agreement to keep a margin good Howard v. Davis, 40 Mich. 546; 
 
 to a certain percentage of the cur- Brown v. Graw, 14 Pet. 479 ; Field v. 
 
 rent market value of the stock from Farrington, 10 Wall 141. 
 
 time to time, the customer, if he 'Magruder v. Colston, 44 Md. 349.
 
 THE PLEDGEE'S SALE OF STOCKS. 439 
 
 ninety days, under a contract by which the pledgee agreed 
 to hold the stocks the same time. The pledgee was allowed 
 to sell the stocks at the expiration of the time stated, al- 
 though the note representing the loan was entitled to three 
 days of grace. 1 A sale of stocks under a contract of pledge 
 made by a married woman for a loan of money to herself 
 and her husband, although none of the money was used for 
 necessaries or for her separate estate, cannot be disputed 
 when made in good faith, in accordance with the terms of 
 the contract.* 
 
 329. THE PLEDGEE'S SALE OF STOCKS, UNDER CON- 
 TRACT. Contracts of pledge of stock certificates, entered 
 into by persons, under which a power of sale of the securi- 
 ties upon default is given the pledgee, are valid. The only 
 requirement is, that the pledgee shall act in good faith in 
 such realization of the collateral securities. The pledgor 
 has no cause for complaint, so long as the sale of his property 
 is conducted honestly and according to the contract of 
 which he is a party. 3 A sale of stock below the market 
 price, under power of sale given in the contract, is not 
 enough of itself to charge a broker with the difference, unless 
 it be clearly shown that such sale was made with intent to 
 injure and defraud the pledgor. Such negligence or want 
 of care must be shown in the mode or time or place of sale 
 as to raise a conclusive presumption of the intent to injure 
 the interests of the pledgor, if it is sought to charge the 
 pledgee with liability for loss. 4 If the pledgor has entered 
 into contract giving a power of sale of his collaterals upon 
 default, it is no objection to such sale that he fears that such 
 securities may be sold at a great sacrifice. 8 
 
 Upon the insolvency of the pledgor, the pledgee of stock 
 certificates holding them as collateral security for a call 
 
 Nankin v. McCullogh, 12 Barb. Hubbell v. Drexel, 11 Fed. Rep. 115. 
 
 103. 4 Durant v. Einstein, 35 Abb. Pr. 
 
 9 Dando's App. 94 Pa. St. 76. 223. 
 
 8 Vail v. Hamilton, 85 K Y. 453; * Rascb v. Creditors, 1 La. Ann. 31.
 
 440 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 loan, is entitled to sell his securities, paying any surplus into 
 court for the benefit of those concerned. 1 And stockbrokers 
 who have advanced their own money to purchase stocks for 
 their customers, may, upon the insolvency or bankruptcy of 
 their customer, close the transaction, and sell out the stock 
 without notice, and may claim against the estate for any 
 balance, holding any surplus for the benefit of its represen- 
 tatives.' The assignee of an insolvent pledger may require 
 stock held as collateral security by a creditor to be sold, and 
 such distribution of the proceeds to be made as a court of 
 equity may direct. 8 And where a pledgee holding certifi- 
 cates of stock in trust for the pledger, was compelled to pay 
 the full value thereof to an assignee in bankruptcy of the 
 pledger, such payment gave him the legal title to the stock 
 as against the pledger. 4 
 
 330. REALIZATION OF PLEDGED STOCKS, BY TRUS- 
 TEES FOR PLEDGEE. Certificates of stock were deposited 
 by way of collateral security, transfers being made on the 
 books of the company to the names of trustees, the certifi- 
 cates being delivered to the pledgee. The contract of 
 pledge provided that, upon default in payment of the loan 
 or of interest, the pledgee should have the right to sell such 
 shares, and apply the proceeds in satisfaction of the debt. 
 The transaction, constituting a mortgage of the shares, and 
 the legal title vesting in the pledgee, upon default in pay- 
 ment, a foreclosure of the shares was decreed, with a short 
 time for redemption/ A written assignment of stocks to a 
 trustee empowered to sell enough at discretion to discharge 
 a note due to a third person, if the interest thereon is not 
 paid at a specified day, being a trust to sell, the transferrer 
 
 1 In re Ginnell, 9 N. B. R. 137. General Credit & Dis. Bank v. 
 
 Lacey t>. Hill, L. R. 8 Ch. 921. Glegg, L. R. 22 Ch. D. 549; Red- 
 
 1 Yeatman v. Savings lust. 95 U. S. m:vyne v. Foster, L.R. 2 Eq. 467 ; see 
 
 764. Carter v. Wake, L. R. 4 Ch. D. 605. 
 4 Thompson t>. Tollund, 43 Cal. 99.
 
 THE PLEDGEE'S SALE OF STOCKS. 411 
 
 of the stocks to such trustee is not entitled to demand or 
 notice before sale. 1 
 
 331. THE REQUIREMENTS OF A VALID NOTICE AND 
 SALE. Reasonable notice as to time and place of sale is re- 
 quired of the broker holding stock certificates as collateral 
 security, with margins of the customer, for advances made 
 in the purchase, and of the pledgee receiving such stock 
 certificates as collateral upon a loan or discount of com- 
 mercial paper, before a valid sale, in the absence of a special 
 contract, can be made. The notice should state the day, 
 time, and place of sale with clearness ; but, as the purpose 
 of giving notice is to inform the pledger of the sale, and 
 give him an opportunity to be present and guard his interests, 
 if this is practically accomplished in good faith, the mode or 
 manner of such notice is immaterial. 2 Notices of sale for 
 two days, 8 or five days, 4 or seven days, 5 are reasonable. 
 Such sales of stock are valid when made on the Stock Ex- 
 change of the city in which the transaction of pledge has 
 taken place. A better opportunity is thus offered to secure 
 the current value of the stock than at a public auction. 6 In 
 early cases in New York it was held that a sale at the Stock 
 Exchange was not within the definition of a public sale, but 
 such sales are now supported. 1 The burden of proof is 
 
 1 Murdock . Columbus Ins. Co. 889; Bryan . Baldwin, 7 Lans. 174. 
 
 59 Miss. 152; Milliken v. Dchon, 27 4 Vose v. Florida Ry. Co. 50 KY. 
 
 N. Y. 364. 369, 373. 
 
 8 Conyngham's App. 57 Pa. St. e Maryland, Fire Ins. Co. v. Dal- 
 474; Vanliorne v. Gilbough, 10 W. rymple, 25 Mel. 242. 
 N. C. 347; Gruman v. Smith, 51 N. Ravenstock v. Torney, 32 Md. 
 Y. 25; Cameron . Durkheim, 55 Ib. 169; Maryland Fire Ins. Co. v. Dal- 
 425; Stenton v. Jerome, 54 Ib. 410; rymple, supra : Brown v. Ward, 3 
 Stewart v. Drake, 46 Ib. 449;Cortel- Duer, 660 ; Sparkhawk v. Drcxel, 12 
 you v. Lansing, 2 Caines' Cas. 200; N. B. R. 450, 470 ; Warren . Bran- 
 Morris Canal & Banking Co. v. den Manuf. Co. cited in Chcever v. 
 Lewis, 12 N. J. Eq. 3'23; Child v. Meyer, 52 Vt. 75. 
 Hugg, 41 Cal. 519 ; Fletcher v. Dick- ' Dykers v. Allen, 7 Hill, 497 ; 
 inson, 89 Mass. 23. Raiikin v. McCullogh, 12 Barb. 103; 
 
 1 Stewart v. Drake, 46 N. Y. 449 ; Brass v. Worth, 40 Barb. 648; Mark- 
 
 Willoughby v. Comstock, 3 Hill, ham v. Jaudon, 41 N. Y. 235.
 
 442 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 upon the pledger to show that a proper place for the sale 
 lias not been selected. 1 His failure to object to the mode 
 or place of sale within a reasonable time after notice, raises 
 a presumption that he is satisfied, and may amount to 
 a ratification.* 
 
 V 
 
 332. THE PLEDGEE, UPON HIS SALE OF STOCKS, CAN- 
 NOT PURCHASE. The pledgee of certificates of stock is 
 within the rule governing pledgees of negotiable collateral 
 securities that, only under exceptional circumstances, is he 
 permitted to be a purchaser at his own sale, or at a public 
 sale of such stock securities by a third person. A sale of 
 such collaterals by a pledgee to himself, or through an agent 
 or some one acting in his interest, is a breach of the contract 
 of pledge, contrary to good faith, and the pledger^ may treat 
 such sale and purchase as a conversion. 3 The pledgor may 
 elect to treat such purchase by a pledgee by himself or 
 through agents, as a nullity, as in no way affecting the rela- 
 tions of the parties to the contract of pledge, and upon 
 payment or tender of the principal debt, is entitled to 
 redeem such collateral securities. 4 The pledgor may, if he 
 
 1 Schepeler v. Eisner, 3 Daly, 11. self. Parsons n. Martin, 11 Gray, 
 
 * Vanhorne v. Gilbough, 10 W. N. Ill ; Taussig v. Hart, 58 N.Y. 425. 
 
 C. 347; Kelsey v. Bank of Crawford * Bryan . Baldwin, 52 N. Y. 232; 
 
 Co. 69 Pa. St. 426. Mott v. Havana Bank, 22 Hun, 354; 
 
 Killianfl. Hoffman, 6 Bradw. 200; Duden v. Waitzfclder, 16 Ib. 337; 
 
 Maryland Fire Ins. Co. v. Dalrym- Wright v. Ross, 36 Cal. 414 ; Stokes 
 
 pic, 25 Md. 342; Marye . Strause, 5 v. Frazier, 72 111. 428; Killian v. 
 
 Fed. Rep. 483; Carroll v. Mullanphy Hoffman, 6 Bradw. 200; Bank v. 
 
 Savings Bank, 8 Mo. App. 249, 254; Dubuque R. R. Co. 8 Iowa, 277; 
 
 Middlesex Bank v. Minot, 4 Met. Middlesex Bank v. Minot, 4 Met. 
 
 325; Bank 0. Railroad Co. 8 Iowa, 325; Pickering v. Dcmcritt, 100 
 
 277; Stokes e. Frazier, 72 111. 428; Mass. 416; Day . Holmes, 103 Ib. 
 
 Canfield v. Minneapolis etc. Assn. 300 ; Maryland Fire Ins. Co. v. Dal- 
 
 14 Fed. Rep. 801; Brookman v. rymplc, 25 Md. 242, 269;Bryson. 
 
 Rothschild, 3 Sim. 155; aff. 5 Ryner, Ib.424; Hestonvillc R.R.Co. 
 
 Bligh, N. S. 165 ; Gillett t>. Pepper- v. Shields, 3 Brewst. 257 ; Canfield v. 
 
 corne, 3 Bcav. 78 ; Robinson v. Mol- Minneapolis etc. Assn. 14 Fed Rep. 
 
 lett, L. R. 7 H. L. 802. Where stock 501 ; Kimber c. Barber, L. R. 8 Ch. 
 
 is delivered to a broker for sale, he 56 ; Brockman v. Rothschild, 3 Sim. 
 
 cannot become the purchaser him- 155.
 
 THE PLEDGEE'S SALE OF STOCKS. 443 
 
 pleases, ratify such sale. 1 Where the transaction of loan, 
 however, is between brokers, members of the same stock 
 exchange, and the stock held as collateral security is sold 
 out " under the rule," the proceedings partake of the char- 
 acter of a foreclosure, and the pledgee is allowed to become 
 the purchaser. 8 
 
 333. THE TITLE OF THE BONA FIDE PURCHASER AT 
 PLEDGEE'S SALE. The sale and delivery of certificates of 
 stock held by a pledgee under indorsement in blank, so that 
 he has the legal title and apparent ownership, to a bona fide 
 purchaser for value, without notice of equities, vests in the 
 purchaser a good title to the shares of stock, although as 
 between the pledgor and pledgee, the sale of such stock is 
 unauthorized and tortious, and in violation of the contract 
 of pledge. As against such bona fide purchaser for value paid, 
 without notice, on the credit of the title and apparent owner- 
 ship of the pledgee, the pledgor is not allowed to set up claims 
 to the certificates. As between the pledger and the purchaser, 
 no privity of contract or relation exists. 8 The rule applies, 
 under like circumstances, to the title of bona fide purchas- 
 ers, for value, without notice, where the sale is made by one 
 holding such certificates of stock, indorsed in blank, as sub- 
 pledgee. 4 A delivery of certificates of stock, indorsed in 
 blank, was made as collateral security for an advance, but 
 no transfer procured as required by the charter of the com- 
 pany. The pledgee might have sub-pledged the stock, but 
 not having obtained the legal title, he had no right of sale 
 without a previous demand for payment. A purchaser for 
 value, but chargeable with notice of the facts, can, at such 
 
 1 Carroll 0. Mullanphy Savings Fire Ins. Co. v. Dalrymple, 25 Md. 
 Bank, 8 Mo. App. 249, and cases 342; Little v. Barker, Hoffm. Ch. 
 supra. 487 ; Talty v. Freedman's Savings 
 
 2 Quincy v. White, 63 N. Y. 370. Bank, 93 U. S. 321 ; Prall v. Tilt, 27 
 376; Newport Bridge Company v. N. S. Eq. 393; Warren v. Branden 
 Douglas, 12 Bush, 672, 720. Manuf. Co. 52 Vt. 75 n. 
 
 1 Conyngham's App. 57Pa.St. 474; 4 Mount Holly etc. Co. v. Ferree, 
 Wood's App. 92 Ib. 379; Maryland 17 N. J. Eq. 117.
 
 444 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 sale, acquire no greater interest in such shares of stock than 
 the amount of the principal loan ; nor can he require a trans- 
 fer of such shares of stock by the company. 1 Shares of 
 stock were bought by a broker from a minor, fraudulently 
 acquiring possession of the same, at less than one-third their 
 value, and sold immediately afterwards to a purchaser .also 
 for much less. The purchase from the minor not being a 
 bona fide transaction in the usual course of business, the 
 second purchaser, chargeable with knowledge of the facts, 
 stood in no better position than his assignor.* 
 
 334. SALE BY BROKER CARRYING STOCKS, UPON DE- 
 FAULT. WAIVER OP NOTICE. In transactions where a 
 broker purchases and carries stock on the order pf a cus- 
 tomer, paying about ninety per cent of the cost from his own 
 money, the customer depositing margins and sometimes col- 
 laterals, and agreeing to keep such margins at a certain per- 
 centage of the current market quotations, if deprecia- 
 tions occur in the value of the stock, and after demand 
 for further margins, the customer defaults, the broker may 
 make an immediate sale of the stocks on the stock exchange, 
 without notice. 8 A customer replied, when asked for addi- 
 tional margins, " I cannot give them to you ; I have no 
 money ; I cannot put up any more money ; this ruins me ; I 
 hope it won't ruin you ; you must take care of yourself." 
 This was sufficient for the brokers to sell at once. 4 A day's 
 notice to a customer to put up additional margins was insuffi- 
 cient, and a sale thereunder, unauthorized ;' and where 
 
 1 France c. Clark, L. R. 22 Ch. 4 Cameron v. Durkheim, supra. 
 
 D. 830; aff. 26 Ib. 257. A sale was not authorized where the 
 
 * Anderson v, Nicholas, 28 N. Y. notice was that unless further mar- 
 
 COO. gins were furrished, the stocks 
 
 Covell v. Loud, 135 Muss. 41 (16 would be "used." Genet v. How- 
 
 C. L. J. 471); Butterfleld v. Stevens, land, 4-> Barb. 560. 
 
 69 Iowa, 596; Markham v. Jaudon, 5 Colt v. Owens, 90 N. Y. 368. A 
 
 41 N. Y. 235 ; Baker v. Drake, 66 day's notice was held sufficient in 
 
 Ib. 518 ; Gruman v. Smith, 81 Ib.25; Milliken v. Dehon, 27 N. Y. 364. 
 Cameron v. Durkheim, 55 Ib. 425.
 
 THE PLEDGEE'S SALE OF STOCKS. 445 
 
 the notice was that other margins must be deposited at an 
 early hour on the same day, the sale upon default was not 
 sustained. 1 Where it is impossible to notify the pledger of 
 intended sale, only at a great expense of time, and to require 
 the consequent delay would be unfair to the broker carry- 
 ing the stock, no notice need be given.* 
 
 Written contracts defining the rights of parties, upon 
 default and sale, are resorted to in order to avoid the diffi- 
 culties and litigation which frequently arise from objections 
 by customers to the validity of sales made by brokers where 
 the latter, having purchased stocks mainly with their own 
 funds, and are carrying the same for their customer, who 
 pays interest upon advances, and agrees to keep certain 
 margins good during the period intervening before and to 
 the time of delivery, and upon default the broker has sold 
 the stocks and losses result which the customer is called 
 upon to pay. By such agreements it is provided that upon 
 default of the customer the broker shall be entitled to pro- 
 ceed at once to sell stocks held by him, without notice, at 
 public or private sale, the customer to be liable for any 
 deficiency, or entitled to any surplus, upon payment of 
 proper charges. Such contracts are valid, when made in 
 good faith, and fairly executed. 3 Where a power of sale, 
 public or private, without notice, is given upon margins 
 falling below a certain percentage of the market value, the 
 broker may sell the stock purchased by him for his cus- 
 tomer, and paid for mainly out of his own funds, whenever 
 
 1 Burkctt 0. Taylor, 86 K Y. 618. v. White, 63 Ih. 158; Ogdcu v. Lath- 
 
 * City Bank v. Babcock, Holmes, rop, 65 Ib. 535; Baker v. Drake, G6 
 
 180. Ib. 518; Colket v. Ellis, 10 Phila. 
 
 1 Child V. Hogg, 41 Cal. 519; Hy- 375. In early cases the power of 
 
 att v. Argenti, 3 Ib. 151; Hamilton sale given in such contracts was not 
 
 v. State Bank, 22 Iowa, 306; Clark sustained, as being a waiver of an 
 
 . Bouvain, 20 La. Ann. 70; Bryson equity of redemption. Campbell v. 
 
 v. Itayner, 25 Md. 424; Maryland Parker, 9 Bosw. 322; Hanks v. 
 
 Ins Co. v. Dairy mple, Ib. 242, 264, Drake, 49 Barb. 186; Wilson v Lit- 
 
 269 ; Stenton v. Jerome, 54 N.Y. 480; tie, 2 N. Y. 443, 448. 
 Wicks . Hatch, 62 Ib. 535; Quiucy
 
 446 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 the market renders it prudent, not only for the protection 
 of his own interest, but also for the benefit of his cus- 
 tomer. 1 
 
 835. THE BROKER'S DELAY IN SALE, NO DEFENSE 
 AGAINST SUIT. The broker carrying shares of stock pur- 
 chased by him for a customer, upon a deposit of margins, 
 as security for his advances, is under no obligation to sell 
 the stocks in order to provide funds to pay the debt of the 
 customer. The customer is not discharged as to his personal 
 obligation, by reason of mere neglect of the broker to sell 
 the stocks, although in the meantime they have depreciated 
 in value, or even become worthless. At any time, upon the 
 equitable terms of paying his debt to the broker, the cus- 
 tomer may require a transfer of the certificates representing 
 the shares of stock, or during the option, may require the 
 closing of the deal, receiving any surplus from the sale of 
 the stocks, or paying losses.* Nor is it any defense for the 
 customer, as against an action by his brokers for moneys 
 paid at his request and services performed, that although the 
 brokers gave notice they would no longer carry the stocks un- 
 less further margins were furnished, and the margins were 
 not sent, continued to hold such stocks until they became 
 valueless. Had the market advanced after a sale of the stock, 
 the customer would probably have insisted that the brokers 
 were liable for a. wrongful sale. 8 The failure to sell col- 
 lateral stocks after the entry of judgment on the principal 
 debt, will not entitle the pledgor to a return of the col- 
 laterals, so long as the judgment remains unpaid. 4 
 
 336. MEASURE OF DAMAGES FOR WRONGFUL SALE 
 BY BROKERS. A customer is entitled to his action for 
 
 1 Wicks v. Hatch, 62 N. Y. 535. Granite Bank . Richardson, 7 Met. 
 
 * O'Neil v. Wightman, 87 Pa. St. 407; Robinson v. Hurley, 11 Iowa, 
 
 394; Williamson v. McClure, 37 Ib. 410; Richardson t>. Insurance Co. 27 
 
 402; Lawrence v. Maxwell, 53 N.Y. Gratt. 749. 
 
 19; Tntrgard v. Courtenius, 15 Wend. * Essex v. Linderman, 71 Pa.St.76. 
 
 155; Rozet v. McClcllan. 48 111. 345; * Fisher v. Fisher, 98 Mass. 303.
 
 TUB PLEDGEE'S SALE OF STOCKS. 447 
 
 damages against his broker, where the latter has sold the 
 collateral stocks without demand for further margins, or 
 for payment of the debt for which certificates of stock are 
 held as collateral security, or has failed to give reasonable 
 notice of the time and place. If the customer or pledger 
 suffers damage by the unauthorized sale of the broker or 
 pledgee, the latter are liable to make good the loss. 1 
 Such damages in exceptional cases may exceed the value of 
 the stock at the time of the conversion, piovided they are 
 a proximate result, and are included in a just compensa- 
 tion.* The measure of damages resulting from unau- 
 thorized sales by brokers includes all those arising or flow- 
 ing from the wrongful act, being the value of the stocks at 
 the time of the conversion, interest to judgment, and any 
 special damage legitimately arising out of matters in ex- 
 istence at the date of the tort. 3 Or the pledgor may re- 
 cover a sum of money sufficient to buy new shares, with 
 allowance for dividends paid, and interest, or he may have 
 a re-conveyance cf the shares. 4 
 
 The rule of damages applied, where a broker carrying 
 shares of mining stocks, usually of uncertain value, to- 
 gether with margins, as security for his advances, interest 
 and commissions, makes atortious sale of such shares, is the 
 highest market value of the stock at any time between the 
 conversion and the verdict, with interest. 6 Where stocks 
 were obtained by a minor fraudulently, and sold for one- 
 third their value, the purchaser being chargeable with 
 knowledge, the measure of damages recovered by the 
 owner upon a refusal of the purchaser to re-transfer, was the 
 value of the stock and interest from the commencement of 
 the action. 6 A sale of certificates of stock, held as col- 
 lateral security, to a third person, was made by the pledgee, 
 upon default, upon a pre-arranged contract, and refusal to 
 
 1 Denton v. Jackson, 10G 111. 433. * Fowle v. Ward, 113 Mass. 548. 
 
 * Seymour v. Ives, 48 Conn. 109 ; 6 Dent v. Holbrook, 54 Cal. 145. 
 
 Bates v. Wiles, 1 Handy, 532 Anderson v. Nicholas, 28 N. Y. 
 
 8 Boylan v. Huguet, 8 Nev. 345. 600.
 
 448 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 allow the pledger an additional day's time, although the 
 latter offered funds as promised, and demanded return of 
 the collateral stocks. Such a sale being clearly inequitable, 
 the pledger was allowed to recover his damages. 1 
 
 367. MEASURE OF SUCH DAMAGES IN NEW YORK AND 
 PENNSYLVANIA. The measure of damages where there has 
 been an unauthorized sale of stocks carried by a broker on 
 margins furnished by a customer, for speculative purposes, 
 is held, in New York, to be the market price of the stocks 
 from the time of such sale to a reasonable time after notice 
 thereof is received by the customer. 9 If, in the meantime, 
 the stock has advanced in value, the customer is entitled to 
 the difference, although where it has declined, thejjustomer, 
 suffering in fact no injury by such sale, is not allowed to 
 claim a greater benefit than if the wrongful act had never 
 been committed. 3 The question of what is a reasonable 
 time is governed by the circumstances of each case, and is 
 generally left to a jury to decide. 4 
 
 The rule approved in Pennsylvania as to the measure of 
 damages for conversion of stock in the absence of any trust 
 relation between the parties, or of any obligation to deliver 
 specific shares, is the market value of the stock on the day 
 it should have been delivered, with interest thereon, to the 
 
 1 Stevens v. Bank, 31 Conn. 146. Hill. 593 ; s. c. 7 Ib. 497 ; Wilson . 
 
 9 Baker v. Drake, 53 N. Y. 211 ; Little, 2 N. Y. 443 ; Roinaine v. 
 B. c. 66 Ib. 518 ; Thayer v. Manley, Allen, 26 Ib. 309 ; Burt v. Dutcher, 
 73 Ib. 305 ; Gruman v. Smith, 81 Ib. 34 Ib. 493 ; Marklmm v. Jaudon, 41 
 2'j ; Colt v. Owens, 90 Ib. 368 ; Ib. 235 ; Morgan v. Gregg, 46 Barb. 
 Roberts v. Berdell, 61 Barb. 37. 183 ; Nauman v. Caldwell, 2 Swee- 
 Overruling the rule formerly pre- ney, 212. The like rule was de- 
 vailing in New York by which the clared in an early case in Pennsyl- 
 measure of damages recovered by vania. Bank of Montgomery v. 
 the customer was the highest mar- Reese, 26 Pa. St. 143. 
 ket price for which such stock had * Gruman . Smith, 81 N. Y. 25. 
 been sold in the interval between 4 Baker v. Drake, 53 N. Y. 211 ; 
 the conversion, and the day of s. c. 66 Ib. 518; Colt v, Owens, 90 
 trial, and even during the progress N. Y. 338. 
 of the trial. Allen v. Dykers, 8
 
 THE PLEDGEE'S SALE OF STOCKS. 449 
 
 time of trial, being the rule of damages as on contracts of 
 other marketable commodities, where there has been no 
 fraud, and the parties stand in equali jure. 1 Upon an 
 action of assumpsit for the value of stock disposed of at an 
 unauthorized sale, the tort being waived, the recovery is 
 limited to the value of the stock at the time of the conver- 
 sion, with interest. 1 Where such stocks are held in trust 
 under a contract of pledge, the dividends and accretions be- 
 longing to the pledger, an unauthorized sale makes 
 the pledgee chargeable with what would have been received 
 had the stocks been retained until the equity of redemption 
 of the pledger was foreclosed by sale, after notice, in the 
 manner prescribed by law ; and the measure of damages in 
 such actions is the value of the stock at the highest rate it 
 has at any time since attained in the market. This rule of 
 damages is strictly confined to trust transactions, the other 
 rule being applied where the facts require it. 1 
 
 338. THE PLEDGOR ENTITLED TO PROFITS ON UN- 
 AUTHORIZED SALE. Upon a wrongful sale of stocks by a 
 pledgee made before the maturity of the principal note, and 
 a tender of the debt, and demand for the collaterals 
 is made by the pledgor at maturity, an offer by the pledgee 
 of like shares of the same stock, which, in fact, he has pur- 
 chased subsequently to the unauthorized sale at a great de- 
 preciation in price, is insufficient. The pledgor is entitled, at 
 his election, to decline to receive such shares, and may 
 bring an action against the pledgee for the profits realized 
 upon the unauthorized sale. The decline in value of the 
 stocks pledged subsequently to the sale forms no defense to 
 such action. 4 Certain certificates of stock, properly in- 
 
 1 North v. Phillips, 89 Pa. St. 250; Work . Bennett, 70 Ib. 484; North 
 
 Huntington etc. Co. v. English, 86 Ib. v. Phillips, 89 Ib. 250. 
 
 257. 4 Fowle v. Ward, 113 Mass, 548 ; 
 
 * Wagner 0. Peterson, 83 Pa. St. Shaw v. Spencer. 100 Ib. 382; 
 
 233. DykerstJ. Allen, 7 Hill, 497 ; Rankin 
 
 fl. Kelly, 69 Pa. St., 403 ; . McCullough, 12 Barb. 103 ; Law- 
 29
 
 450 
 
 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 dorsed, were -delivered to stockbrokers as collateral se- 
 curity for a loan. Before maturity of the loan, the pledger 
 contracted to sell the stock, and tendered the loiin with in- 
 terest for the full time, demanding the collaterals. The 
 pledgees, meanwhile, had sold the stock, and refused to ac- 
 cept payment or to reconvey the stock until the maturity of 
 the loan ; and the principal had to pay his vendee differences. 
 At the time fixed for paj-ment, the brokers returned a like 
 number of shares of stock, which they had purchased at A 
 great decline in price. The pledger sued for the profits 
 which had been realized. In the absence of express con- 
 tract, the pledgee having no authority to sell until the ma- 
 turity of the principal loan, the \ ledger was entitled to 
 charge him with the price obtained at such sale if he found 
 
 rence v. Maxwell, 53 N. T. 19 ; 
 Taussigt>. Hart, 49 Ib. 301 ; Conyng- 
 bam's App., 57 Pa. St. 474 ; Hun- 
 saker v. Sturgis, 29 Cal. 142 ; ex 
 parte Dennison, 3 Ves. 555. The 
 reasons of the rule are stated in 
 Taussig v. Hart, supra, in which it 
 was agreed that the broker should 
 buy and sell stocks, as the customer 
 should direct, upon a margin of ten 
 per cent, and the benefit of dividends, 
 all purchases and sales to be regular. 
 The broker speculated in the stock, 
 and bought it in at a decline. The 
 court (Rapallo.J.) say : " The sub- 
 sequent acquisition by the brokers, 
 after the stock had fallen to a very 
 low figure, of a sufficient number of 
 shares to replace those which theyhad 
 held for account of their principal, 
 did not relieve them from liability. 
 Such re-acquired stocks were never 
 accepted by the principal, and he 
 was in fact ignorant of the transac- 
 tions. To allow a broker to sell his 
 customer's stock without authority 
 
 and speculate upon replacing it at 
 a lower price would be encouraging 
 speculations by agents, at the risk 
 of their principals, totally inadmis- 
 sible under familiar rules. Should 
 the stock rise largely in price after 
 the broker had thus divested him- 
 self of all control over the shares 
 which he had purchased on the or- 
 der of his principal, the broker 
 might be unable to replace the 
 shares, and the principal would 
 have no remedy except a personal 
 claim against the broker. This 
 clearly is not what is contemplated 
 under an agreement to buy and 
 carry stocks. The customer does 
 not rely upon an engagement of the 
 broker to procure and furnish the 
 stocks when required, but to pur- 
 chase and hold the number of 
 shares ordered, subject to the pay- 
 ment of the purchase price." The 
 customer was allowed the value of 
 the stock on the day of sale.
 
 THE PLEDGEE'S SALE OF STOCKS. 451 
 
 it to his interest so to do, notwithstanding any subsequent 
 reduction in the market value of the stock. 1 
 
 339. THE BROKER'S RIGHT OF SET-OFF AGAINST DAM- 
 AGES FOR CONVERSION. Upon a contract by which a broker 
 agrees to purchase certain stocks for a customer, and to 
 carry the same, holding the stocks and margins deposited 
 by the customer as security for his advances there is on the 
 part of the customer an agreement, express or implied, that 
 the margin shall, if the stock depreciates, be replenished 
 and kept good, upon demand, and that, upon the failure so 
 to do, the stock may be sold upon reasonable and customary 
 notice. A sale without such notice is a conversion and 
 does not bind the pledgor, who, in a suit by the broker for 
 a deficiency, may insist upon a full indemnity for his loss or 
 injury. This, however, is not necessarily the whole amount 
 of such claim of the broker.* Nor will an unauthorized sale 
 of stock certificates by a pledgee, no demand or notice being 
 given, vest the immediate right to their possession in the 
 pledgor, so as to entitle him to maintain an action of trover 
 for the whole value of the shares, or for nominal damages.* 
 But a broker employed to purchase and carry stocks, and 
 under agreement or usage, holding the title thereto in his 
 own name, is not entitled to maintain an action against his 
 customer for not furnishing moneys to pay for the stocks, 
 without demand of payment, and tender of the stocks. 
 Should the broker, under such circumstances, sell the stocks 
 without notice, thersby disabling himself from making a 
 transfer thereof, such sale is a conversion, and the broker 
 loses any right of action he might otherwise have had. 4 
 
 1 Langton v. Waite, L. R. 6 Eq. to satisfy his obligation by trans- 
 
 165. Upon hearing on the appeal, f erring a like amount of the same 
 
 it appeared that the pledgor, after stock, and his bill was dismissed, 
 
 receiving the substituted stock from Langton v. Waite, L. R. 4 Ch. 402. 
 
 the broker, sold the same, so that it * Vail v. Hamilton,85 N. Y. 453. 
 
 was impossible for him to re-trans- 'Nahring v. Bank of Mobile, 58 
 
 fer the stock in accordance with the Ala. 20 ; Halliday r>. Holgate, L. R. 
 
 offer in his bill. He was not per- 3 Ex. 299. 
 
 milled any more than the pledgee 4 Merwin v. Hamilton, 6 Duer, 24.4.
 
 452 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 CHAPTER XXXIV. 
 
 THE RIGHTS OF THE PLEDGOR OF STOCKS. 
 
 g340. Relief of the pledgor of collateral stocks, in equity. 
 
 341. Relief of pledger by specific performance, by redemption, etc. 
 
 342. Limitations of pledger's relief in equity. 
 
 343. Pledger's right to redeem stock defeated by laches. 
 
 344. The recovery at law of the pledgor of stocks. 
 
 345. No action of trover by pledgor on pledgee's transfer. 
 
 346. Upon discharge of debt, pledgor entitled to his collateral stocks. 
 
 340. RELIEF OP THE PLEDGOR OF COLLATERAL 
 STOCKS, IN EQUITY. Courts of equity take cognisance of 
 cases arising from the use of certificates of stock as collateral 
 security, upon acknowledged grounds of equitable jurisdic- 
 tion. Generally, the pledgor of collateral stocks has a full 
 and complete remedy at law for wrongful sales and transfers 
 by the pledgee, and resort to equity is not necessary, and is 
 not permitted. The value of the shares of stock represented 
 by the certificates is fixed by the daily transactions on the 
 Stock Exchanges, and is easily arrived at, and the facts thus 
 established are as available at law as in equity. Equity 
 however, will in proper cases, decree specific performance 
 of a contract for the delivery of particular stocks having a 
 special value ; and in other ways aid the parties to the con- 
 tract of pledge. 1 Courts of equity will aid the pledgor, 
 
 'Fraseru Charleston, 11 S. C. 486; 391 ; Strasbourg v. Echtcrnact, 21 
 
 Hathaway . Fall River Bank, 131 Pa. St. 220 ; Canfield v. Minneapolis 
 
 Mass. 15; Newton t>. Fay, 10 Allen etc. Assn. 14 Fed. Rep. 801; Ross r>. 
 
 505; Pinkertou . Manchester R. R. Union Pac. Ry. Co.. 1 Woolw. 26 ; 
 
 Co., 42 N. H. 424; Hasbrouck v. Fallen v. Railroad Co., 1 Dill. 121 ; 
 
 Vandcrvoort, 4Sanclf.74; Treasurer Brick v. Brick, 98 U. S. 514; Hay- 
 
 t>. Commercial Mining Co., 23 Cal. ward v. National Bank, 96 Ib. 611 ;
 
 THE RIGHTS OP THE PLEDGOR. 453 
 
 where certificates of stock, indorsed with power of attorney 
 to transfer, have been delivered as collateral security, and 
 transferred upon the books of the company, by requiring dis- 
 covery of the real interest of the pledgee in the stock. 
 Testimony will be heard as to the considerations and pur- 
 poses of the transfer, and upon the equitable terms of pay- 
 ment of the principal debt, a re-conveyance of the shares of 
 'stock is decreed. 1 Where the evidence is in favor of the 
 claims of the pledgee to retain the stock, dismissal of the 
 bill is generally ordered.* A pledger of collateral stocks, or 
 one who has acquired his interest, may bring a suit in equity 
 to set aside an invalid sale of such securities, where the 
 pledgee, through its agent, became the purchaser. 8 Equity 
 will compel a replacement of stocks held as collateral security, 
 lost through the gross negligence of the pledgee, or pay- 
 ment of the value ; 4 and will control the application of 
 securities held from different pledgers by sub-pledgees, so as 
 to carry out equitable principles in the resort to such securi- 
 ties, and distribution of proceeds. 6 
 
 341. RELIEF OF PLEDGOR BY SPECIFIC PERFORMANCE, 
 BY REDEMPTION, ETC. The remedy of the pledger, for an 
 unauthorized transfer of his stock, or its misappropriation or 
 tortious sale, is by an action at law, but cases of a special or 
 particular stock, however, may arise, in which courts of 
 equity will decree a specific performance of an agreement to 
 convey or to replace or to transfer specific stocks where the 
 ordinary rules of damages in actions at law would be 
 altogether insufficient. The rule is usually enforced in 
 regard to shares of stock of mining companies, which occupy 
 
 France . Clark, L. R 22 Oh. D. * Fowle v. Ward, 113 Mass. 548. 
 880 ; Shaw v. Fisher, 5 DeG. M. & Chamberlain v. Greenleaf, 4 Abb. 
 G. 596. N. Cas. 178 ; Samuels v. Boykin, 27 
 
 1 Newton v. Fay, 10 Allen, 505 ; Ga. 47 ; Barnes v. Mott, 64 N. Y. 
 Burke's App., 99 Pa. St. 350. 397. 
 
 'Burke's App., 99 Pa. St. 350. 
 
 * Canfleld v. Minneapolis etc. Assn. 
 14 Fed. Rep. 801.
 
 454 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 an uncertain position on the public exchanges, and are 
 generally of changing, indeterminate value, so that it is 
 difficult to arrive at their real worth. Such shares of 
 stock may also possess a particular and special value to 
 certain persons. 1 A bill to redeem shares of stock, brought 
 by the assignee of an insolvent pledger, was supported, 
 where the pledgee claimed to retain the collateral securities 
 under a contract for liabilities other than the principal note 
 discounted at the time of the pledge, and in which a tender 
 of the amount of the principal note was made, upon the equit- 
 able terms of payment of the debt, with interest, after 
 deducting dividends collected by the pledgee. Such a 
 cause may be referred to a master to state an account, 
 where necessary.* In a redemption suit, where a mortgage 
 of certain shares of stock for a term of }-ears to" secure the 
 purchase of like stock at the end of the term, and the pay- 
 ment of interest in the meantime, the mortgagee had per- 
 mitted the transaction to continue after the end of the 
 term, the stock then heavily declining in value, the 
 mortgagor was allowed to redeem by purchasing stock at 
 the time of the trial, not being charged with the value 
 thereof at the expiration of the term, the mortgagee having 
 waived the obligation to purchase at that particular time. 3 
 An authorized pledge of stock of a third person was made by 
 stockbrokers to a bank for a specific loan, the brokers giving 
 a promissory note as personal evidence of indebtedness, the 
 bank being chargeable with notice that the loan was for the 
 third person, and to be used in paying part of the purchase 
 money of the stock, and that the stock belonged to such 
 third person. A tender of the loan was made, but the bank 
 
 1 Cushman v. Thayer Mnf?. Co., master v. Consumers' Ice Co.. 5 Daly, 
 
 76 N. Y. 365; White v. Schuyler, 1 313; Treasurer v. Commercial Min- 
 
 Abb. N. S. 300; Philip t. Barker, 2 ing Co., 23 Cal. 391. 
 
 Barb. 608 ; Purchase v. New York * Hathaway v. Fall River Bnnk, 
 
 Exoh. Bank, 8 Robt. 164 ; Middle- 131 Mass. 15. 
 
 brook 0. Merchants' Brink, 41 Barb. 'Blylh v. Carpenter, L. R. 2 Eq. 
 
 481 ; 8. c. aff. 3 Abb. App. 295 ; Buck- 501.
 
 THE EIGHTS OF THE PLEDGOE. 455 
 
 claimed a lien on the stock for other loans to the stock- 
 brokers remaining unpaid. The owner of the stock waa 
 allowed to redeem the same or recover damages, although the 
 power of attorney of the stockbroker was absolute in its 
 terms. Chargeable, however, with knowledge of the limited 
 power of the agent, the bank could acquire no greater 
 rights than those actually given. 1 
 
 342. LIMITATIONS OF PLEDGOE' s BELIEF IN EQUITY. 
 The pledger, when he seeks relief in equity, is required to do 
 equity. Where a bona fide advance has been made on the 
 collateral securities deposited, or other valuable considera- 
 tion, equity requires that the debt shall be first paid before 
 it will lend its aid to obtain a retnrn of the securities. 
 In this, it carries into effect the rule that equity follows 
 the law. Although the sale or sub-pledge of stock col- 
 lateral stocks be a tortious, unauthorized act, or if it be before 
 the power of sale given by the contract of pledge has come 
 into force, default not having occurred, the contract of 
 pledge is not annihilated, and law, as well as equity, re- 
 quires that as against any claim for damages arising there- 
 from, the amount of the bona fide loan made thereon shall 
 be set-off as a counter-charge. 2 Nor will equity aid a 
 trustee, holding shares of a company for an adult cestui que 
 trust, who paid the money, but to whom upon the execution 
 and presentation of a transfer by the trustee, the company 
 refused to transfer the shares. The company subsequently 
 became bankrupt, and the trustee claimed an indemnity 
 from the cestui que trust against future calls. As 
 no calls had been made, and no proof was offered that 
 any would be made, no ground for equitable relief was 
 shown, and the bill of the trustee was dismissed. 3 The 
 receiver of an insolvent firm of stockbrokers is not required 
 
 1 Talmadge . Third Nat. Bank, liday v. Holgate, L. R. 3 Ex. 
 
 91 N. Y. 581. 299. 
 
 9 Hathaway v. Bank. 131 Mass. 15; * Hughes-Hallet . Indian Mines 
 
 Newton t>. Fay, 10 Allen, 505; Hal- Co., L. R. 20 Ch. D. 561.
 
 456 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 in equity to redeem the stock sub-pledged by the firm by 
 paying the debts due to the sub-pledgees, and will have no 
 right to do so at the risk of loss to the general creditors. 
 Even a tender of his debt made to him by a pledgor of such 
 stock so sub-pledged, imposes no special duty upon such 
 receiver to redeem the stock for the benefit of the pledgor. 
 The rule is otherwise where such stock is in the hands of 
 the receiver. Upon paying his debt, the pledgor thereof is 
 equitably entitled to a return of his collateral stocks, and 
 such receiver will be required to deliver them. 1 Equity 
 will not take jurisdiction of an account arising out of a 
 transaction in collateral stock securities, upon the ground 
 of settlement of complicated accounts, where one item only 
 is in dispute.* 
 
 343. PLEDGOR'S RIGHT TO REDEEM STOCKS DEFEATED 
 BY LACHES. The pledgor of certificates of stock may, 
 however, lose his claim to equitable relief by laches. If he 
 permits any claim or right he may have to redeem shares of 
 stock pledged as collateral security to sleep for j-ears, and 
 then, upon an increase in the market value of such stock, 
 tenders the amount of his indebtedness in order to secure 
 the advantage of the rise, courts of equity refuse to aid him 
 to obtain a return of his collateral securities. A bill was 
 brought in equity to redeem mining stocks delivered to a 
 bank as collateral security for a loan made in good faith. 
 The stocks, upon default in payment of the loan, were sold 
 under a valid contract of pledge, and purchased by three 
 directors of the bank at a price above the market quota- 
 tions. The proceeds of the sale discharged the loan, of 
 which the pledgor was informed, and made no objection. 
 The stocks increased in value, and four years afterwards, 
 the pledgor gave notice to the bank that he desired to 
 redeem the collateral securities; and upon refusal, sued but 
 
 1 Chamberlain v. Grcanleaf , 4 Abb. ' Durant t>. Einstein, 35 How. Pr. 
 N. Cas. 178. 223.
 
 THE RIGHTS OF THE PLEDGOR. 457 
 
 unsuccessfully. Having failed to act with diligence before 
 any material change in the circumstances or in the value of 
 the stock had intervened, the pledger had lost any right 
 which he might have had to repudiate the sale and recover 
 the stocks. 1 Seven years' delay is laches. 1 A delay of 
 eleven years constituted a bar to any equitable relief of a 
 pledger, who deposited shares of stock as collateral se- 
 curity for a note, and was seeking to take advantage of a 
 considerable rise in the market value of the stock. 3 An 
 application for equitable relief, brought nineteen years after 
 the contract of pledge, was not favored, the- principal evi- 
 dence of the debt, promissory notes, and equitable remedy 
 being barred by the statute of limitations. 4 In Louisiana, 
 however, shares of stock pledged as security for a loan con- 
 stitute a constant acknowledgment of the debt, and inter- 
 rupt prescription during the time the pledged securities 
 remain in possession of the pledgee/ 
 
 344. THE RECOVERY AT LAW OF THE FLEDGOR OF 
 STOCK. Actions of trover founded upon conversion of 
 shares of stock, may be brought by a pledgor, whose stocks 
 have been sold without authority, or compliance with the 
 established customs and usages of stock exchanges. The 
 pledgor may recover damages, subject generally to recoup- 
 ment by the pledgee of the amount of his loans. 8 The 
 
 'Hay ward v. National Bank, 96 derson v. Nicholas, 28 N. Y. 600; 
 
 U. S. 611. Ayres v. French, 41 Conn. 151; Boy- 
 
 1 Adams v. Sturges, 55 111. 468. Ian v. Huguel, 8 Ncv. 352; Kulm v. 
 
 3 Waterman v. Brown, 31 Pa. St. McAllister, 96 U. S. 89. Contra: Nc-i- 
 161. ter v. Kelly, 69 Pa. St. 407. The 
 
 4 Robert v. Sykes, 30 Barb. 173. mere pledge of stocks purchased by 
 6 Conger v. City of New Orleans, a broker for a customer on margins, 
 
 32 La. Ann 1250; Blanc v. Hertzog, will not amount to a conversion, 
 
 23 Ib. 293; Citizen's Bank v. Knapp, Chamberlain v. Greeuleaf, 4 Abb. 
 
 22 Ib. 117; Police Jury v. Donaldo, N. Cas. 178. Assessments p-iid on 
 
 Ib. 107; City Bank v. Johnson, 21 Ib. the stock by the pledgee are proper 
 
 128. matters by way of recoupment or in 
 
 Payne v. Elliott, 54 Cal. 339; mitigation of damages on the trial of 
 
 McCalla v. Clark, 55 Ga. 53; Nahring an action of trover for conversion of 
 
 t. Bank of Mobile, 58 Ala. 204 ; An- stock. McCalla v. Clark, supra.
 
 458 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 necessary requirement that the whole present interest in the 
 property sought to be recovered, should be in the pledger, 
 to sustain an action of trover, defeats such action in cases 
 where there has been an unauthorized sale of stock certifi- 
 cates, if no payment or tender of the principal debt has 
 been made. Until the pledgor has paid or tendered his 
 debt, he is not entitled to a re-delivery of stock certificates 
 held as collateral security. The entire present interest is 
 vested in the pledgee, and no presumption arises that the 
 pledgee, even by a wrongful sale, consents to revests in 
 the pledgor an immediate interest or right in the pledged 
 securities sufficient to sustain an action of trover. 1 Under 
 this rule, where a pledgee was vested with the legal title to 
 the shares of stock held as collateral security, the pledgor 
 was not entitled to maintain an action of trover.*" 
 
 345. NO ACTION OF TROVER BY PLEDGOR ON 
 
 PLEDGEE'S TRANSFER. Actions of trover brought by 
 pledgers are not supported as against pledgees of cer- 
 tificates of stock, indorsed with power of transfer, and who 
 have made transfers to third persons for convenience upon 
 proper considerations, where still retaining control thereof. 
 Where mining stocks were held as collateral security, a 
 transfer of some of the shares to third persons was 
 made in order to relieve the pledgee from the supposed in- 
 jury to his credit of carrying so much mining stock. The 
 new certificates, indorsed in blank, were retained by the 
 pledgee, who was ready to re-deliver the same upon pay- 
 ment of the debt. The transaction not amounting to a con- 
 version of the certificates of stock, and no tender of pay- 
 ment, demand for the stock and refusal to convey having 
 been made, the pledger's action of trover was not 'sus- 
 tained.* Nor was a transfer of stock a conversion thereof, 
 
 'Halliday v. Holgate, L. R. 3 Ex. 'Nahring t>. Bank of Mobile, 58 
 299; Johnson v. Stear, 15 C. B. JS. Ala. 204. 
 S. 330. Day r. Holmes, 103 Mass. 306.
 
 THE RIGHTS OF THE PLEDGOR. 459 
 
 where a pledgee placed the same, by surrender of certificates 
 and the issue of new certificates in the name of a third 
 person so that such stock being intended as a security 
 might not become a burden. 1 It was held not a conversion, 
 so as to make a partnership liable, where one partner hold- 
 ing stocks for a third person, with power of sale, trans- 
 ferred the stock to the partnership name, the other members 
 having no interest in the transaction. 8 
 
 346. UPON DISCHARGE OF DEBT, PLEDGOR ENTITLED 
 TO HIS COLLATERAL STOCKS. In common with other 
 pledgees, the holders of certificates of stock, transferred as 
 collateral security, are not entitled to retain possession of 
 the collaterals after payment of the principal debt by the 
 pledger. The same rule applies where a valid tender of the 
 debt has been made at maturity. A refusal to re-deliver 
 such collateral securities upon such tender, because of an 
 unwarranted claim to retain the stock, is a conversion there- 
 of by the pledgee. 8 Where a sub-pledgee had sold, under a 
 contract of pledge, stock certificates, indorsed with power 
 to transfer, upon default of the pledgee, who had transferred 
 the stock held by him as collateral security separate from 
 the debt, and thus had incapacitated himself from returning 
 the same on payment, the pledger was allowed to maintain 
 an action for the conversion, without a tender of the debt for 
 which the stock was originally pledged, as against the sub- 
 pledgee, he not being a holder for value, in the usual course 
 of business, on account of usury in his loan. 4 A pledgee of 
 stock certificates as collateral security has no more right to 
 retain them after the principal debt is tendered than a bank 
 has to retain notes offered for discount and refused, or no 
 more than if upon the stock being offered as collateral secur- 
 ity for the payment of principal notes, discount of the notes 
 is refused. 5 
 
 1 Heath e.Griswold, 18 Blatchf. 555. 531; McCalla v. Clark, 55 Ga. 53. 
 * Adams v. Sturges, 55 111. 468. 4 Felt v. Heyc 32 How. Pr. 359. 
 
 8 Talmadge v Nat. Bunk, 91 N. Y. Hathaway v. Bank, 131 Mass. 15.
 
 460 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 CHAPTER XXXV. 
 
 THE BROKER'S OPTION CONTRACT. 
 
 347. The broker's option deal for his customer, 
 
 348. The " seller's option " contract valid. 
 
 349. Option deals, to be settled upon differences, illegal. 
 
 350. The validity of option contracts, as shown by evidence. 
 
 351. Evidence of intention, upon action on contract by broker. 
 
 352. The broker's option contract valid, upon purchase of stock. 
 
 353. Other option contracts held valid. ^ 
 
 354. The broker's option deals on boards of trade. 
 
 355. The options known as puts, calls, straddles, and shaves. 
 
 347. THE BROKER'S OPTION DEAL FOR HIS CUS- 
 TOMERS. The contracts made by stockbrokers and other 
 brokers operating upon the commercial Exchanges of the 
 country, made upon the order of customers, depend for their 
 validity on the character of the options which are traded in, 
 and the intentions of the parties. The speculative option 
 known as "seller's" option, is the most common in use. It 
 gives the seller an option of delivery during the time speci- 
 fied therein, with an express condition to deliver the com- 
 modity sold at a time fixed by the contract. Where this 
 contract is made bona fide by the parties thereto, it is valid, 
 and claims arising thereunder are enforced by the courts 
 without exception. The validity of such option is not 
 affected, where one of the parties acts in good faith and with 
 the intention of fulfilling the same, by the fact that the 
 other secretly intends not to deliver or receive any property 
 at the expiration of the option, but to close the deal by pay- 
 ing differences. The broker is entitled to recover from his 
 customer, where deals in valid options have been made upon 
 exchanges, upon orders of customers, and losses have oc-
 
 THE BROKER'S OPTION CONTRACT. 461 
 
 curred, which the broker has paid upon request, the suras 
 advanced and his commissions, although it was never in- 
 tended to deliver or receive any property upon such deals. 
 The broker, however, cannot recover upon any contract 
 entered into between himself and the .customer providing 
 for speculations upon the Exchanges in stocks or other com- 
 modities, where the intention of both parties at the making 
 of the contract was that the only deals were to be mere 
 wagers on future prices, without any delivery, or the option 
 deals, known as " puts " and " calls," condemned and ren- 
 dered void by statute. Courts refuse to aid the parties to 
 enforce payment of losses incurred upon such illegal con* 
 tracts ; and the negotiable paper given in settlement thereof, 
 is, under the statutory provisions of several states, also void, 
 even in the hands of holders for value, without notice. 1 
 
 The broker making purchases or sales of property upon 
 option contracts on the Exchanges upon the order of his 
 customer, comes within the rule of agency that " what a 
 man may do by himself he may do by another. A man may 
 employ a broker to make a contract for him, and to execute 
 it for him in any manner in which it would be lawful for 
 him to make and execute it if acting for himself in person. 
 Any man, although not a dealer in wheat, may therefore 
 lawfully employ a broker on the Exchange to sell wheat for 
 him for delivery at a future time, and to execute the con- 
 tract for him by purchasing upon the market the wheat for 
 delivery when the time arrives for its delivery, or by settling 
 with the purchaser upon the payment of the difference 
 between the contract price and the market price, if the pur- 
 
 'Rountree . Smith, 108 U. S. edict, 77 N. Y. 202 ; Cook . Davis, 
 Rep. 269; Gilbert v. Guagar, 8 Biss. 53 Ib. 318; Wilhelm v. Carr, 80 N.C. 
 214; Clark t>. Foss, 7 Ib. 551; Jack- 294; Brua's App. 55 Pa. St. 294; 
 son v Foote, 12 Fed. Rep. 37; Union North v. Phillips, 89 Ib. 115 ; Dick- 
 Nat. Bank v. Carr, 15 Fed. Rep. 458; son v. Thomas, 93 Ib. 278 ; Cole v. 
 Cobb v. Prell, Ib. 774 ; Bartlett v. Milmine, 88111. 349; Pixley a.Boyn- 
 Smith, 13 Ib. 263; Lehman v. Strass- ton, 79 Ib. 351; Everingham V. 
 berger , 2 Woods, 557 ; Rumsey . Meighan, 55 Wis. 354. 
 Berry, 65 Me. 574; Bigelow v. Ben-
 
 4(52 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 chaser shall waive the execution of the contract by the 
 delivery of the wheat, according to its terms." 1 
 
 348. THE " SELLER'S OPTION " CONTRACT, VALID. 
 A contract for the future delivery of commodities, whether 
 stocks, grains, provisions, or other property, at a time 
 certain absolutely, but with what is called a " seller's 
 option" for a definite period before that time depends for 
 its validity upon the mutual intentions and purposes of the 
 parties. The option may refer to the fact of delivery, or 
 merely to the time of delivery. If it be the bona fide inten- 
 tion of the vendor to deliver, and of the vendee to receive, 
 and the option consists only in the time of delivery within a 
 certain period, the contract is valid.* The validity of the 
 contract where the intention of the parties at the time of 
 making such contract, was, that the only option should be 
 as to time of delivery, is not affected by a subsequent agree- 
 ment to close the deal by payment of differences between 
 the contract price and market value on or before the day of 
 settlement.* Nor will the fact that the vendor has not, at 
 the time of making such contract of sale, the stocks, grain, 
 or other property in his possession, nor does not expect to 
 have them on hand and has no means of getting the same, 
 
 'Kent v. Miltenberger, 13 Mo. 253 ; Disborough v. Ncilson, 3 Ib. 
 
 App. 503 (Thompson J.). 81. And in stock operations: Bige- 
 
 * Jackson v. Footc, 12 Fed. Rep. low v. Benedict, 70 N. Y. 202; Cook 
 37 ; Melcliert v. American Union Tel. v. Davis. 53 Ib. 318 ; Frost v. Clark- 
 Co. 11 Ib. 193; Union Nut. Bank??. son, 7 Cow. 21 ; Cassard r. Hinman. 
 Carr.lSlb. 438; Porter e.Viets, 1 Biss. 1 Bosworth, 207; Noycs v. Spauld- 
 177; Clarke v. Foss, 7 Ib 540 ; Fix- ing, 27 Vt. 420; Hibblewhitc e. 3Io- 
 ley v. Boynton, 79111.851; Wolcott Mornic. 5 M. & W. 4; Shales v. 
 c. Heath. 78 Ib. 433 ; Logan v. Mas- Seignoret. 1 Ld. Raym.440 ; Ashtnn 
 ick, 81 Ib. 415 ; Cole . Milmine, 88 . Dakin, 4 H. & N. 809; Mortimer 
 Ib. 349 ; Webster t>. Sturges, 7 v. McCullcn, 7 M & W. 20. 
 Bradw. 560; Calderwood v. McCrea, * Melchert t>. American Union Tel. 
 11 Ib. 543; Taggart v. Sawyer, 14 Co. 11 Fed. Rep. 193; Gilbert v. 
 Bush. 727 ; Rumsey v. Berry, 65 Me. Guagar, 8 Biss. 214 ; Clarke v. Foss, 
 574 ; Gregory v. Wendell, 39 Mich. 7 Ib! 540. 
 340 ; Giles v. Bradley, 2 Johns. Cas.
 
 THE BROKER'S OPTION CONTRACT. 463 
 
 except by purchase on the market on or before the day of 
 the promised delivery under the contract, render it invalid, 
 if there be a bona fide intention to make such delivery. 1 
 The advance, as a part of such contract, of margins by the 
 customer to cover fluctuations of prices in the stocks, or 
 grain, or other property, for which the option is sold, pend- 
 ing delivery or settlement at the time fixed by the contract 
 for the closing of the option, according to the rules and 
 usages of the Exchange upon which the deal is made, is a 
 valid transaction.* 
 
 349. OPTION CONTRACTS, TO BE SETTLED UPON DIF- 
 FERENCES, ILLEGAL. The intentions of the parties to the 
 contract is of controlling effect as to the validity 
 or invalidity of the trades made by a broker for his 
 customer. A broker who agrees with his customer 
 to trade for him on the Exchange so that all deals 
 shall be settled by the payment of differences only, 
 and who makes such sales or purchases with third 
 parties upon the Exchange with the like intent, can- 
 not enforce any claim founded upon losses in carrying out 
 the contract, as the same is illegal and void, and comes (in 
 some states) within statutory enactments against gaming. 
 The form in which such option contracts upon speculative 
 deals is drawn up is not conclusive of the charac- 
 ter of the deals, as a jury is authorized to look into 
 
 1 Sawyer v. Taggart, 14 Bush, 727; And as to stock operations: Hatch 
 
 Williams v. Tiedeman, 6 Mo. App. v. Douglass, 48 Comi. 116; Cassard 
 
 269 ; Whitehead v. Root, 3 Met. 587; 0. Hindman, 1 Bosw. 207; Bigelow 
 
 Stanton v. Small, 3 Sandf. 230 ; Me- v. Benedict, 70 N. Y. 202 ; Morris v. 
 
 Ilvaine w.Edgerton, 2 Robt.422 ; Cole Tunbridge, 83 Ib. 92 ; Smith v. Bou- 
 
 v. Milmine, 88 111. 349; Logan v. vier, 70 Pa. St. 325; Grizewood v. 
 
 Musick, 81 Ib. 415 ; Wolcott fl.Heath, Elaine, 11 C. B. 526 ; Mortimer v. 
 
 78 Ib. 433 ; Brown v. Meyers, 20 Morine, 6 M. & W. 58 ; Thacker v. 
 
 Gratt. 296; Porter . Viets, 1 Biss. Hardy, L. R. 4 Q. B. D. 285. 
 
 177 ; ex parte Young, 6 Ib. 53 ; * Union Nat. Bauk v. Carr, 15 Fed. 
 
 Clarke v. Foss, 7 Ib. 540; Kibble- Rep. 438; s. c. 5 McCrary, 71. 
 white v. McMornie, 5 M. & W. 462.
 
 464 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 the very transaction itself, and determine from facts and 
 circumstances dehors the option ticket, what was the 
 original contract between the broker and customer, and the 
 character of the deal in which the agreement is made that 
 there shall be no delivery. If the transaction is only a 
 speculation in prices by all the parties interested, it is of 
 no importance that the form assumed for the transaction is 
 in the form of a seller's option, valid everywhere. 1 In order, 
 however, to have the effect stated of rendering the contract 
 void, and to defeat the recovery of the broker from his cus- 
 tomer, it is essential that the illegal purpose of merely 
 wagering on prices should be mutual with both broker and 
 customer, and the third persons with whom such deals were 
 made on the Exchange. If such valid contracts for the sale 
 or purchase of any commodity are entered by one of the 
 parties in good faith with the intention to perform the 
 same, in accordance with the rules and usages of the Ex- 
 change in which the deal is made, they are sustained. The 
 broker who, under such circumstances, has paid a loss caused 
 
 1 Cobb . Prcll, 15 Fed. Rep. 774 ; Cooke v. Davis, 53 N. Y. 318 ; Cam. 
 Bartlett v. Smith, 13 Ib. 263 ; Mel- eron t>. Durkheim, 55 Ib. 425 ; Pea- 
 chert v. American Union Tel. Co. 11 body v. Speyers, 56 Ib. 230 ; Barnard 
 Ib. 193; Third Nat. Bank*. Harri- v. Backhaus, 52 Wis. 593; Evering- 
 soii, 10 Ib. 243 ; Gregory v. Wat- ham . Meighan, 55 Ib. 354. And 
 owa, 57 Iowa, 711 ; Union National in cases of stocks: Dicksou v. Thorn- 
 Bank v. Carr, 15 Fed. Rep. 438; as, 93 Pa. St. 278; Brua's App. 55 
 Pickering v. Case, 79 111. 238 ; Lyon Pa. St. 299; North . Phillips, 89 Ib. 
 v. Culbertson, 83 111.33; Corbett v. 250; Matlon v. Sheen, 75 Ib. 166 ; 
 Underwood, Ib. 324 ; Calderwood v. Swartz's App. 3 Brewst. 131 ; Kirk- 
 McCrea, 11 Bradw. 543; Tenny . patrick v. Bonsall, 72 Pa. St. 155; 
 Foote, 4 Ib. 591 ; s. c. 95 111. 109; Maxtenu. Ahcen, 75 Ib. 166;Fareira 
 Gregory v. Wendell, 39 Mich. 337 ; v. Gabell, 89 Ib. 89; Yerkes v. Salo- 
 s. c. 40 Ib. 432 ; Sawyer . Taggart, mon, 18 Hun, 471 ; Cassard v. Hiu- 
 14 Bush, 727; May v. Hoagland, 9 man, 1 Bosw. 20; Bigelow v. Bene. 
 Bush, 172; Rudolph v. Winters, 7 diet, 70 N. Y. 202; Sampson v. Shaw, 
 Neb. 126; Wilhelm v. Carr, 80 N. C. 101 Mass, 145; Buck v. Albee, 26 Vt. 
 294 ; Rumsey v. Berry, 65 Me. 570 ; 184 ; Grizewood v. Elaine, 11 C. B. 
 Williams v. Tedeman, 6 Mo. App. 73; Fisher c. Bridge, 3 El. &B1. 642: 
 269 ; Waterman v. Buckland. 1 Ib. ex parte Marnham, 2 DeG. F. & J. 
 45; Teekes u. Soloman, 11 Hun, 473; 634.
 
 THE BROKER'S OPTION CONTRACT. 465 
 
 by a change in the market value, upon his customer's request, 
 may recover the amount of such advance from the cus- 
 tomer, although it may have been the intention of the latter 
 simply to speculate in prices, and to settle all trades by 
 paying or receiving differences. 1 
 
 Contracts to sell or purchase stocks without any intention 
 to deliver or receive, are gaming contracts, and utterly 
 void.* No recovery was allowed, the transaction being re- 
 garded as a gaming device, where a customer directed a 
 stockbroker to sell a number of certain shares short on his 
 account, although no certificates were delivered to the 
 broker. The contract between the parties was that there 
 should be no actual delivery of the stock, but that the cus- 
 tomer was to protect the broker from loss if the market 
 value of the stock advanced, and to receive any difference 
 in value from the broker if it declined. The broker was at 
 liberty to make an actual delivery of the stock, which was 
 in fact done, with stock borrowed for that purpose by the 
 broker. The stock rose in value, and losses resulted which 
 the broker paid, and then sued the customer to recover the 
 amount. 8 In another action, a mere bet that certain stocks 
 would sell within a certain sum in so many days, with no 
 intention by either party to receive or deliver the stocks, 
 the promissory notes made by the customer to the broker 
 and delivered as margins upon the deal, were unenforce- 
 able in the hands of the broker, or of any indorsee not a 
 holder for value without notice. 4 
 
 'Rountree . Smith, 108 U. S. vary or change the illegal character 
 
 269; Pixley v. Boynton, 79 111. 353; of a wagering contract in stocks, in 
 
 Clarke v. Foss, 7 Biss. 540 ; Lehman Farreira v. Gabell, 89 Pa. St. 89. 
 
 . Strassberger, 2 Woods, 559; Wil- 8 Brua's App. 55 Pa.St.294 ; North 
 
 helm*;. Carr, 80 N.C. 294; Sawyer v. v. Phillips, 89 Ib. 250; Bigelow v. 
 
 Taggart, 14 Bush, 727; May v. Hoag- Benedict, 70 N. Y. 202 ; Buck v. Al- 
 
 land, 9 Ib. 172. The fact that some bee, 26 Vt. 184; Grizewood v. Elaine, 
 
 of the parties with whom the stock- 11 C. B. 73. 
 
 broker dealt were actual buyers and 8 Dickson v. Thomas, 93 Pa. St. 
 
 sellers, and did not intend to gam- 278. 
 
 ble, was considered insufficient to * Brua's App. 55 Pa. St. 294. 
 30
 
 466 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 350. THE VALIDITY OF OPTION CONTRACTS, AS SHOWN 
 BY EVIDENCE. The intention of the parties to such option 
 contracts, notwithstanding the agreements appear in written 
 instruments, will be allowed to be proved, and are of con- 
 trolling importance as to the character of such contract, 
 whether valid or not. 1 Where parties have been in the 
 habit of dealing in options illegal in character, the broker, 
 seeking to recover damages in an action at law for breach 
 of contract by his customer, upon deals alleged by the 
 customer to be of like character, is required to show by a 
 preponderance of evidence that the later transactions in- 
 volved in the suit were founded upon valid option con- 
 tracts. 1 The duty of the court in such cases is ** to 
 scrutinize very closely these time contracts^, and if the 
 contracts are such as to throw doubt upon the question of 
 the intention of the parties, it is not too much to require a 
 party claiming rights under such a contract to show 
 affirmatively that it was made with actual view to delivery 
 and receipt of the grain.'" An intention to violate the 
 law prohibiting gaming contracts is not presumed where 
 brokers employed to trade for a customer testified that they 
 had no intention to make and did not make any illegal option 
 contracts for their customer, the other parties to the deal 
 not being produced at the trial, nor their depositions read. 
 The contracts actually made were the valid " seller's op- 
 tions," the common contract, and in some instances the com- 
 modity purchased was actually delivered. The fact alleged 
 that a very large proportion of the option contracts on the 
 Exchange where the deals were made, are settled by pay- 
 
 1 Cassard t>. Hinman, 1 Bosw. 207; lett v. Smith, 13 Fed. Rep. 263; 
 
 Yerkes v. Salomon, 18 Hun, 471; Union Nat. Bank v. Carr, 15 Ib.438. 
 
 Bigelow v. Benedict, 70 N. Y. 202; Cobb v. Prell, 15 Fed. Rep. 774. 
 
 Colderwood v. McCrea, 11 Bradw. 'Barnard v. Backhaus, 52 Wis. 
 
 543; Dolby v. Spaids, 8 Ib. 549; Far- 593. Cited with approval by Me- 
 
 reira t>. Gabell, 89 Pa. St. 89; Kirk- Crary, J., in Cobb t. Prell, 15 Fed. 
 
 patrick v. Bonsell, 72 Ib. 155; in re Rep. 774 
 Morgan, 2 DeG. F. & J. 634; Bart-
 
 THE BROKER'S OPTION CONTRACT. 467 
 
 ment of differences, the number being so large in propor- 
 tion to contracts in which actual delivery is mutually 
 intended as to raise an inference that the trades in question 
 were of that character, is not of itself sufficient, in the 
 absence of all other evidence, to create a presumption that 
 the deals made for the customer were for the payments of 
 differences only. 1 
 
 Evidence may be introduced tending to sustain the claim 
 of brokers operating on an Exchange, in an action for ad- 
 vances paid on account of losses and services rendered, that 
 they were employed as brokers or commission merchants to 
 purchase or to sell wheat for future delivery, and that in 
 all of the contracts entered into by them with other par- 
 ties on the Exchange the business was conducted in their 
 own name, but for defendant's benefit and on his account, 
 and in every instance an actual delivery of wheat was in- 
 tended by them and the other parties to the contract. 4 The 
 same evidence was given by a number of stockbrokers on 
 the New York Stock Exchange, establishing bona fide 
 purchases and sales in a "short" stock option, where 
 an action of assumpsit was brought by the broker to 
 recover moneys paid out and commissions, and the defense 
 was that the speculation was a mere stock jobbing transac- 
 tion, to be settled upon differences only.* In another case, 
 where an attempt was made to set up illegality, in the con- 
 tracts between a broker and his customer, as a defense to 
 an action to enforce a guaranty of a negotiable promissory 
 note, given in settlement of the account, with other like 
 notes made by the customer, and received, before maturity, 
 by a bona fide pledgee for value, advanced upon the dis- 
 count of a note of the broker, with the other note executed 
 by a third person and guaranteed by the customer, indorsed as 
 collateral security. It was shown in evidence that the 
 
 'Rountree t>. Smith, 108 U. S. 'Smith v. Bouvicr. 70 Pa. St. 
 269. 825. 
 
 Bartlett v. Smith, 13 Fed. Rep. 
 263.
 
 468 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 options dealt in were valid, and that the broker, at the 
 time of the first engagement, explained to the customer 
 that by reason of his having many buyers and sellers as 
 customers, he might arrange so as to avoid delivery upon 
 his deals, was without effect upon the character of the valid 
 deals actually made, and formed no defense to the guaranty 
 in the hands of a pledgee for value, without notice. 1 
 
 351. EVIDENCE OF INTENTION, UPON ACTION ON CON- 
 TRACT BY BROKER. Evidence to establish the intention of 
 parties to settle upon differences only, in cases where the 
 broker seeks to recover moneys paid by him for losses, by 
 an action upon his contract with the customer is properly 
 given by the parties. Where such agreement has not 
 assumed a written form, the intention of the parties may be 
 learned from their conversations and correspondence. If it 
 be established by evidence that the mutual intentions of 
 both parties were that no deliveries of the commodities 
 bought or sold for the customer should be made, and that all 
 deals should be settled upon .the payment or receipt of 
 differences merely, no recovery by the broker is permitted 
 for a breach of such contract, in the event of losses paid by 
 him, the contract itself being illegal and void.' The illegal 
 character of such deals, established by evidence, where the 
 parties, both broker and customer, join in the intention to 
 deal in nothing but speculations on prices, will defeat any 
 claim of the broker against the customer founded upon losses 
 paid in such transactions, although he shows by the testi- 
 mony of other brokers upon the Exchange, that some of the 
 deals made were with actual sellers and buyers, not intend- 
 ing to gamble. 8 
 
 The rule applied to the broker, defeating his recovery 
 
 1 Jackson v. Footc, 11 Fed. Rep. 37. Backhaus, 52 Wis. 593 ; Pickerings. 
 
 Cobb v. Prell, 15 Fed. Rep. 774 Cease, 79 111. 328; Lyon . Culbcrt- 
 
 (McCrary, J.) ; Melchcrt v. American son, 83 111. 83. 
 On.. Tel. Co. 11 Ib. 193; Gregory v. Faricra v. Gabell, 89 Pa. St. 89. 
 Wendell, 89 Mich. 837; Barnard t>.
 
 THE BROKER'S OPTION CONTRACT. 469 
 
 upon mere gaming speculations, is enforced against the cus- 
 tomer, where, after trading upon differences, through a 
 broker, upon margins and securities deposited, until the 
 same are exhausted, he seeks to recover the same, or the 
 value thereof, from the broker. Neither party to illegal and 
 void gaming contracts will be aided, by a court of law or 
 of equity. 1 
 
 352. THE BROKER'S OPTION CONTRACT VALID, UPON 
 PURCHASE OF STOCK. Option contracts, although the cus- 
 tomer's intention to settle by paying or receiving differences 
 be known to the broker, are supported where the broker 
 actually purchases the agreed commodity upon the contract. 
 The fact that the broker accepted the order on the implied 1 
 terms and understanding that he would not be called upon 
 by the customer to deliver the stocks, nor that the customer 
 would pay for the same, but that the intention was that the 
 stocks should be resold by the broker for the customer 
 before the day of payment arrived, and that the latter 
 should either pay or receive on the re-sale, the difference, 
 after allowing the broker's charges, is not sufficient to 
 defeat the claim of the broker.* The like rule was applied 
 in a case where an order was given to a stockbroker : " I 
 want to buy say 100 shares of Union Pacific on margin ; will 
 you take $1,000' first mortgage bond N. Y. & O. R. R., and 
 do it?" The stock was bought by the broker, and subse- 
 quently sold at a profit, and other speculative stock trans- 
 actions followed, resulting in losses exceeding the value of 
 the collateral. The broker had made actual purchases of 
 stock, and was ready to transfer the same to the customer 
 on payment of the balance of the purchase money, after 
 crediting the sum realized from the sale of the collateral. 
 As the transactions were made upon valid options, and not 
 for the payment of differences merely, the customer was 
 
 1 Gregory v. "Wendell, 39 Mich. * Asliten v. Daken, 4 Hurls. & N. 
 837 ; Buck v. Albee, 26 Vt. 184. 867.
 
 470 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 required to pay the losses. 1 The following transaction, an 
 operation on the London Stock Exchange, is supported, as 
 not coming within the definition of a mere wager. A mem- 
 ber of the Stock Exchange loans another member, on a 
 deposit of shares, a sum of money equal to their market 
 value, such sum to be repaid on the next settling day, 
 and if not paid, then according to the rules of the Stock 
 Exchange, the holder is entitled to retain the shares at the 
 market price of that day, the difference in value to be paid 
 by the lender to the borrower, or vice versa, as the shares 
 may rise or fall in value. If the loan is not paid, the trans- 
 action is carried over to the next settling day, upon the then 
 market value, the borrower paying differences. This oper- 
 ation was in one case several times repeated, and at last the 
 pledger became insolvent, and the pledgee took the shares 
 which were worth less than the amount due, and was 
 allowed to prove for the balance of the loan in bankruptcy 
 proceedings. 9 
 
 A transaction was sustained as valid, where a customer 
 employed a broker to sell stock at a certain price, to be deliv- 
 ered on a particular day, and the stock was sold as ordered. 
 At the time of delivery, prices having risen, the broker was 
 obliged to borrow stocks, the customer having none, and 
 afterwards, under instructions, bought stocks at a yet higher 
 price, to replace those borrowed. The customer was re- 
 quired to pay the difference, as a deal, although a specula- 
 tion in stocks, when founded on a sale and purchase thereof, 
 is not an invalid contract. 8 An agreement for the sale ami 
 transfer, at a future day and for a specific price, of a given 
 number of shares of stock which the vendor then actually 
 had, and of which an actual transfer was intended, is not a 
 stock- jobbing or wagering contract. 4 A vendor of stock, of 
 which he was not at the time of sale possessed, but which 
 
 1 Hatch . Douglass, 48 Conn. 110. paid on several successive settling 
 
 * Ex parte Phillips. 2 DeG. F. & J. days. Ex parte Morgan, Ib. 37. 
 
 84. The rule is applied to a sale * Smith v. Bouvier, 70 Pa. St. 825. 
 
 of stocks where differences were 4 Noyes t>. Spaulding, 27 Vt. 4U.
 
 THE BROKER'S OPTION CONTRACT. 471 
 
 he afterwards bought and caused to be transferred to the 
 vendee, is entitled to an action for the price. 1 
 
 353. OTHER OPTION CONTRACTS HELD VALID. An 
 option contract, whereby A, for a valuable consideration, 
 agreed to receive from B at any time within six months 
 from the date of the contract $2,500 United States gold 
 coin, and to pay therefor in good current funds at the rate 
 of $1.95 in currency for every $1.00 in coin, the contract 
 expressly declaring that B did not contract to deliver the 
 coin, but to pay the consideration for the privilege of deliv- 
 ering it or not at his option, is a valid option contract with 
 no inherent vice therein, under the general rule that a 
 vendor of commodities who expects to acquire or produce 
 them in time for a future delivery, and is not willing to 
 enter into an absolute contract to deliver, and yet is anxious 
 to create a market for them, may bargain for an option, 
 which while relieving him from liability, permits him to 
 make a sale if he is able to deliver. 8 A " call " was sold, 
 for a consideration, the seller agreeing to deliver at any 
 time within six months, five thousand barrels of oil. The 
 contract was : " If this oil is called for, this call becomes a 
 contract ; ten days' notice shall be given, and the under- 
 signed, or his assigns, agree to receive and pay for the same 
 at 10 cents per gallon." While evidence, with other facts, 
 of the intentions of the parties, either to gamble or not, the 
 contract on its face was not an illegal deal. 8 
 
 354. THE BROKER'S OPTION DEALS ON BOARDS OF 
 TRADE. The option deals on Boards of Trade are gener- 
 ally the usual contracts known as " seller's option," by 
 which the vendor has a choice as to the time of delivery of 
 
 1 Mortimer v. McCullan, 7 Mels.& 240 ; Railroad Company v. Dane, 43 
 W. 20. N. Y. 240 ; Brown v. Hall, 5 Lans. 
 
 2 Bigelow v. Benedict, 70 N. Y. 180. 
 
 202 ; Disborougli v. Neilson, 3 Johns. s Kirkpatrick v. Bonsall, 72 Pa. St. 
 Cas. 81 ; Stanton v. Small, 3 Sandf. 155.
 
 472 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 the goods sold being the terra during which such option 
 runs, but is bound to deliver at the expiration of the time. 
 The delivery by the seller is provided for by the terms of 
 the contract, and by the rules and regulations of the several 
 Boards, and, is, unless settlement be otherwise made, re- 
 quired, under penalty of discipline and possibly expulsion 
 from the Exchange. The deal, however, may be closed at any 
 time during the option by a bona fide settlement, without 
 delivery, or by an arrangement with other firms by a process 
 known as " ringing out," or a kind of clearing house, by 
 which several trades are settled at once. Such arrangements, 
 however, are only matters of convenience. Clearing houses, 
 under the management of such Boards, performing the same 
 duties as the clearing-house of the New York Stock Ex- 
 change, are in operation. 1 
 
 355. THE OPTIONS KNOWN AS "PUTS," "CALLS," 
 *' STRADDLES, " AND " SHAVES." The option called a. 
 "put" is a privilege given for a consideration of deliver- 
 ing, or not delivering, as the seller may elect, of a 
 quantity of grain, or stocks, or other property, within 
 a certain time, at a specified price. The party sell- 
 ing the privilege agrees that if delivery be made 
 within tl*3 specific time he will pay for the prop- 
 erty at the price named, or the differences, otherwise 
 the seller of the privilege pockets the money paid therefor. 
 A "call" is the opposite of a " put," the privilege being 
 to call or not to call for delivery at the price agreed upon. 1 
 
 1 Gilbert v. Guager, 8 Biss. 214 ; This contract is subject in all 
 
 Clark. Foss, 7 Ib. 581. The seller's respects to the rules and regulations 
 
 option contract is as follows: of the Board of Trade of the city of 
 
 "[Grain Contract.] Chicago. 
 
 CHICAGO, , 188... We The buyer's contract given to the 
 
 have this day sold to seller is the frame, except in the use 
 
 bushels, No , in store, at of the word "bought" in place of 
 
 per bushel, to be delivered at seller's "sold." 
 
 option during the month of Ex parte Young, 6 Biss. 53; in 
 
 188.., in lots of 5,000 bushels each. re Green, 7 Ib. 338; in re Chandler,
 
 THE BROKER'S OPTION CONTRACT. 473 
 
 A " straddle " is an option which includes the double 
 privilege of a " put " and " call," and secures to the holder 
 the right to demand of the seller at a certain price within a 
 certain time a certain number of shares of specified stock 
 or other property, or to require him to take at the 
 same price within the same time the same shares 
 of stock or other commodity. The time for which 
 such double option shall continue is a matter of 
 contract. 1 The value of a " straddle " as of a kt put " 
 or " call" depends upon the fluctuations of the stock or 
 other property selected. The wider the range of these 
 fluctuations up or down the greater the amount which may 
 be realized. The longer the option continues, the greater 
 the chance of such fluctuations. 2 A " shave " is a contract 
 of a broker, upon consideration, to hold and carry stock in 
 his customer's name for thirty, or sixty, or any other number 
 of days, as the case may be, in order that the customer may 
 have the advantage of any rise in price that may happen 
 in the meantime, the understanding being that he is also 
 to make good any fall in price. In neither case, is it in- 
 tended by the parties that there shall be a delivery of the 
 
 13 Am. L. R. (N. S.) 310. The "put" ing, and it is the contracting for 
 
 contract on grain is as follows: such choice, right, or privilege of 
 
 "CHICAGO , 188... selling or buying at a future time 
 
 Received of A $.. in cousidera- any commodity the statute was in- 
 tion of which we give him, or the tended to prohibit as contra-disl in- 
 bolder of this contract, the privilege guished from an actual sale or pur- 
 of delivering to us or not, prior to chase, with the intend n of deliver- 
 
 three o'clock P. M. of ing or accepting the commodity 
 
 188-., by notification or delivery, spccitied." Tenny v. Foote, 4Brad\v. 
 
 bushels No regular receipts, 594; aff. 95 111. 109. 
 
 at cents per bushel, in store, ' Harris v. Tunbridge, 83 N Y. 92; 
 
 and, if delivered, we agree to receive Story v. Salomon, 71 Ib. 420; Yerkcs 
 
 and pay for the same at the above v. Salomon, 18 Hun, 471. 
 
 price. B." 8 Ex partc Young, 6 Hiss. 53; in re 
 
 The word "options" in the Illi- Chandler, 13 Am. L. R. N. S. 310; 
 
 nois statute against gambling has Harris v. Tuubridge, 83 N. Y. 
 
 been held to mean "a mere choice, 92. 
 
 right, or privilege of selling or buy-
 
 474 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 stock. 1 The option deals described as "puts r ' and " calls," 
 have been declared illegal, 9 and also the " shave."* In the 
 case of the " straddle," the question of legality depends 
 upon the evidence, as in cases of stock speculation, it is 
 not considered as a wagering contract, nor is any illegal 
 intent presumed. Where losses resulted from the wrongful 
 neglect of a broker operating a " straddle," the contract was 
 held so far valid that the customer, a woman, was allowed 
 damages for the tort. 4 
 
 'North . Phillips, 89 Pa. St. 6 Biss. 53; Rudolph v. Winters, 7 
 
 250. Neb. 126. 
 
 Pixley v. Boynton, 79 111. 533; North v. Phillips, 89 Pa. St. 250. 
 
 Pickering v. Cease, Ib. 327; in re 4 Harris fl.Tunbridgc, 83 N.Y. 92; 
 
 Chandler, supra ; ex parte Young, Stoiy v. Salomon, 71 Ib. 420.
 
 THE BROKER'S SUIT. 475 
 
 CHAPTER XXXVI. 
 
 THE BROKER'S SUIT AGAINST CUSTOMER. 
 
 356. The broker's recovery against his customer. 
 
 357. Payment by broker of differences, upon customer's request. 
 
 358. The broker's recovery on bills and notes given for differences. 
 
 359. No recovery allowed broker upon illegal transactions. 
 
 360. Other limitations of the broker's recovery. 
 
 361. No recovery under illegal contracts to " corner." 
 
 362. Relief to the customer, when given. 
 
 356. THE BROKER'S RECOVERY AGAINST HIS CUS- 
 TOMER. The recovery of the broker against his customer, 
 where upon a failure to put up further margins, or upon an 
 order to close the deal, the trade is settled at a loss, which 
 the broker pays, at his customer's request, express or im- 
 plied, is sustained where the contracts between the parties, 
 and those made on the Exchange, are valid. It is also well 
 settled that the customer is liable to the broker in an action 
 for money paid and services performed, although the deals 
 were intended by the customer to be mere wagers or bets 
 on the rise or fall of prices, the actual trades made having 
 been upon valid option contracts, or the property actually 
 bought or sold, for the customer's account, in the name of 
 the broker. The liability of the customer to pay in such 
 action is not affected even where the contracts made upon 
 the Exchange, while valid upon their face, are intended 
 by the parties to be settled by the payment of differences. 
 The action is independent of the contracts made upon the 
 Exchange, and any taint of immorality which might attach 
 if the action were upon mere wagering contracts, forms no 
 defense to a suit by the broker for moneys paid upon re-
 
 476 
 
 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 quest and services performed. The customer is not allowed 
 to gamble at the expense of the broker, who does the work, 
 and generally advances ninety per cent, of the money re- 
 quired to purchase the stocks, or pays the losses upon the 
 closing out of the deal in transactions ,in other commodi- 
 ties. 1 The rule is also applied where there has been a set- 
 tlement between the parties upon the speculative deals 
 made by the broker for his customer, in which losses 
 have been made, and the customer has executed promis- 
 
 'Rountree v. Smith, 108 U. S. 
 Rep. 269; Armstrong . Toler, 11 
 "Wheat. 274; Gilbert . Guager, 8 
 Biss. 214, 217; Clark t>. Foss, 7 Ib. 
 551 ; Third National Bank v. Harri- 
 son, 10 Fed. Rep. 243, Tinsley's case, 
 n.; Bartlctt v. Smith, 13 Ib. 263; 
 Lehman v. Strassberger, 2 Woods, 
 554; Owen . Davis, 1 Bail. (S C.) 
 815; Rumsey v. Berry, 65 Me. 570; 
 Warren . Hewitt, 45 Geo. 501; 
 Smith v. Bouvicr, 70 Pa. St. 825; 
 Durantfl. Bart, 98 Mass. 161 ; Thack- 
 er u. Hardy, L. R. 4 Q. B. D. 685. 
 In Tinsley's case, supra, aff. Bank v. 
 Tinsley, 11 Mo. App. 259, where a 
 broker recovered money paid for 
 losses on invalid option contracts, at 
 the customer's request, the court 
 (Thayer, J.) say: " There are cases 
 arising between factors and brokers 
 and their principals which the courts 
 have apparently treated as though 
 the action was between the princi- 
 pals to the illegal transaction. But 
 the different relations existing be- 
 tween the agent and his principal, 
 in actions by the former to recover 
 monies expended for his principal 
 in settlement of losses on wagering 
 contracts, was apparently not called 
 to the attention of the court." Citing 
 Gregory v. Wendell, 89 Mich. 837; 
 Williams v, Tiedeman, 6 Mo. App. 
 
 269. In Smith . Bouvier, supra, an 
 action of assumpsit for losses paid 
 on speculative stock transactions, 
 the court (Thompson, C. J.) say: 
 " It was sought to instruct the jury 
 that all purchases of stocks, with a 
 view to re-sale and make a profit on 
 .their rise, or contracts to furnish 
 Blocks on time, should be declared 
 gambling transactions and unlawful, 
 not only between the buyer and 
 seller, but as to the brokers or jigents 
 through whom the sales and pur- 
 chases had been made. This would 
 make a great inroad into what has 
 for an indefinite period been regard- 
 ed as a legitimate business, and 
 would either destroy it altogether, 
 or. continued, put the brokers at the 
 mercy of those for whom they trans- 
 act such business. Let it be under- 
 stood that a broker has no power to 
 recover either for advances or com- 
 missions, however honestly he may 
 have dealt, and there will be found' 
 enough persons whose easy con- 
 sciences would throw the loss upon 
 the shoulders of those who advanced 
 the money and earned commissions 
 in their service. It would be a very 
 palpable wrong to the brokers who 
 are licensed to do such business, if 
 such were held to be the law."
 
 THE BROKER'S SUIT. 477 
 
 sory notes or indorsed over other commercial paper executed 
 by third parties. It is no defense as against such paper that 
 the contracts made on the Exchange Avere intended to be 
 settled by the payment of differences, although valid on 
 their face. In such case, the promise is express to pay the 
 money advanced and the commissions earned ; in the 
 other, it is implied, as every customer is bound by the rules 
 of the Exchange in which he employs a broker to deal, and 
 failure of the broker to pay such losses may result in sus- 
 pension and possibly expulsion. 1 
 
 357. PAYMENT BY BROKER OF DIFFERENCES, UPON 
 CUSTOMER'S REQUEST. Where, after a broker or commis- 
 sion merchant lias made for a customer a valid contract for 
 the purchase or sale of stocks or grain, or other commodities, 
 and by reason of the adverse condition of the markets, he is 
 directed by his customer to settle with the buyers or sellers 
 before the maturity of the contract, and by reason thereof 
 pays the differences, exceeding in amount the collaterals 
 and margins deposited by the customer, an action accrues 
 to the broker against his customer for the money paid and 
 and his commissions.* The right of the broker to collect 
 money paid at his request, and for services rendered, was 
 approved in a case, where a customer employed a broker to 
 sell ten thousand bushels of wheat at a certain price to be 
 delivered at a certain time, depositing $700 as a margin, and 
 contracts for its sale were accordingly made. The broker 
 knew at the time the customer had no wheat. The market 
 price of wheat continued to rise, until the transaction finally 
 resulted in a loss of about $3,000, which was paid by the 
 broker. He was allowed to recover the balance of the debt 
 from the customer, after crediting the collateral fund. 8 An 
 
 1 Jackson v. Foote, 12 Fed. Eep. * Gilbert v. Guager, S Biss. 214. 
 37 ; Clark v. Foss, 7 Biss. 540 ; Leh- Rumsey v. Berry, 65 Ale. 570. 
 maim v. Strassberger, 2 Woods, 554; 
 Third Nat. Bank p. Harrison, 10 Fed. 
 Rep. 243.
 
 478 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 action of assumpsit was supported, when brought by brokers 
 against a customer for money laid out and expended in the 
 purchase and sale of stocks, the transaction being a specu- 
 lation based upon bona fide sales and purchases of stocks by 
 the brokers. 
 
 The Court of Queen's Bench of England, in a late 
 case,* sustained the recovery of a broker, as being founded 
 upon valid stock options, where a customer engaged a 
 broker to speculate for him on the London Stock Exchange, 
 knowing that, by the rules of that body, the broker would 
 have to enter into valid contracts to buy and sell stocks, 
 and incur the risk of having to accept and pay for or to 
 deliver the stocks covered by his speculations. The broker 
 knew that the customer was not of sufficient financial ability 
 to pay for or deliver the stocks proposed to be sold or bought, 
 and did not expect or intend to accept delivery nor to 
 deliver stocks sold on his account. The intention of the 
 customer was that the broker should so arrange the deals, 
 that nothing but differences should be paid by or payable to 
 him. The broker made actual sales and purchases, accord- 
 ing to the rules of the Exchange. Upon default of the cus- 
 tomer, the broker was obliged to pay a large sum for losses ; 
 and in an action against the customer, was allowed to 
 recover the money advanced and commissions earned. The 
 recovery of a broker, who has, upon the settlement of void- 
 able contracts, for stocks made upon the Exchange, for the 
 benefit of a customer, paid sums due, upon request, although 
 for differences only, has always been supported by the 
 English courts. 1 
 
 1 Smith v. Bouvier, 70 Pa. St. 825. Exch. 465 ; Knight . Cambers, 15 C. 
 
 Thacker v. Hardy, L. R. 4 Q. B. B. 563 ; Olds v. Harrison, 10 Ex. 572; 
 
 D.685. The like result was reached, Farmer v. Russell, 1 Bos. & P. 296 ; 
 
 upon similar facts, in grain specula- Jcssopp . Lutwyche, 10 Ex. 614 ; 
 
 tions, in Jackson v. Foote, 12 Fed. Falkney . Reynous, 4 Burr. 2069 ; 
 
 Rep. 37. Tenant . Elliott, 1 B.& P. 3 ; Petrie 
 
 1 Rosewarner v. Billings. 15 C. B. c. Hannaway, 8 Term, 418. 
 N. 8. 316 ; Pidgeon v. Burslem, 8
 
 THE BROKER'S SUIT. 479 
 
 358. THE BROKER'S RECOVERY UPON NOTES GIVEN 
 FOR DIFFERENCES. A broker, who has paid losses at his 
 customer's request, upon valid option contracts for the sale 
 of commodities for future delivery, upon an agreement or 
 understanding with the customer that the trades should be 
 settled by the payment of differences only, is entitled to 
 enforce the payment of promissory notes given by the cus- 
 tomer in settlement thereof, as the liability of the customer 
 upon the notes is supported by a good consideration in 
 money advanced and services performed, independently of 
 any prior contract between the parties which may have 
 been tainted with illegality. 1 Promissory notes, secured by 
 mortgage, executed by a customer to secure the payment of 
 moneys advanced by the broker or commission merchant to 
 pay losses resulting from transactions in option deals illegal 
 in their character, are enforced as not necessarily contam- 
 inated by the vice of the original contracts as made upon 
 the Exchange. 4 Nor will a statutory provision making void 
 notes executed in consideration of " money won at any 
 game or gambling device," apply to a note given upon a 
 wager on the future price of grain, although there was no 
 intention by either party to make delivery. 3 A guaranty of 
 the payment of a promissory note of a third person given in 
 settlement of accounts by a customer to a broker, where the 
 option contracts involved might have been illegal at com- 
 mon law, but did not come within the definition of gaming 
 options in a criminal code, will not be defeated by this 
 equity in the hands of a bona fide pledgee for value receiv- 
 ing them for an advance to the brokers, and seeking to 
 enforce such guaranty, upon default in the payment of the 
 principal claim. 4 
 
 359. NO RECOVERY ALLOWED THE BROKER FOR AD- 
 VANCES FOR ILLEGAL TRADES. The aid of courts is not 
 
 1 Lehmann v. Strassberger, 2 * Third National Bank t. Harri- 
 "Woods, 554. son, 10 Fed. Rep. 243. 
 
 * Clark v. Foss, 7 Biss. 540. 4 Jackson v. Foote, 12 Fed. Rep. 37.
 
 480 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 given to brokers or commission merchants, to recover losses 
 paid or commissions, where such broker or commission mer- 
 chant has furnished funds under an agreement, expressed 
 or implied, to enable the customer to deal in mere specula- 
 tions on future prices, or illegal options. Promissory notes 
 given in settlement of such advances cannot be enforced by 
 the parties, and where they are rendered void by statute, 
 are worthless even in the hands of a bona fide holder for 
 value. Such speculations, without any intention of either 
 party to deliver, are mere bets or wagers, the person advanc- 
 ing the stake having no claim to the aid of legal process to 
 recover his money. Being obliged to rely upon illegal and 
 void contracts to establish his claim, no aid is given the 
 broker. 1 An indorsement of negotiable paper made as col- 
 lateral security by a customer to secure money advanced by 
 a broker in order to prosecute the illegal ventures of the 
 customer, and to indemnify the broker from loss by reason 
 of the ventures being made in his name and not that of the 
 customer, is void, and no recovery can be obtained thereon.* 
 The transfer of commercial paper by a customer to a broker, 
 under such circumstances, although ostensibly as margins 
 to protect the broker in his purchases, is but putting up a 
 stake in a game of chance. No greater rights are acquired 
 by the broker, or by parties charged with knowledge, than 
 under an indorsement tainted with forgery. The ownership 
 of such paper remains in the customer, and upon notice to 
 the drawee of a bill of exchange or maker of a promissory 
 note, given as margins upon gambling options, not to pay 
 
 1 Armstrong v. Toller, 11 Wheat. v. Ryan, 3Dcnio, 340; Kirkpntrick . 
 
 258; in re Green's case, 7 Biss 338; Bonsall. 72 Pa. St. 155; Farcira v. 
 
 s. c. 15 N. B. R. 198 ; Third National Gabcll, 89 Ib. 89; Dickson v. Thorn- 
 
 Bank v. Harrison, 10 Fed. Rep. 243; as, 93 Ib. 278; Hooker v. Knab, 2<5 
 
 Bartlett v. Smith, 13 Fed. Rep. 203; Wis. 211; Cannon v. IJrycc, 3 15. & 
 
 Tenny v. Foote, 4 Bradw. 594; s. c. Aid. 179; McKtnnell v. Robinson, a 
 
 95 111. 109; Henderson v. Palmer, 71 M. & W. 434. 
 
 Ill 579; Lyon . Culbertson, 83 Ib. * Tinsloy's case, 10 Fed. Ri-p. 243, 
 
 33; Pickering v. Case, 79 Ib. 328; 245, ;i.; aff. 11 Mo. App. 209. 
 White v. Bass, 3 Cush. 148; Ruckinan
 
 THE BROKER'S SUIT. 481 
 
 the same, the drawee or maker will be charged with the 
 amount of the paper if afterwards they pay the same. 1 
 
 The like rules apply to guaranties of commercial paper 
 made by a customer and transferred to brokers in settlement 
 of illegal gambling speculations upon Exchanges. All bills 
 and notes given in connection with mere speculations in 
 prices or illegal options, are made void by statute, and a 
 guaranty indorsed thereon, is unenforcible even in the 
 hands of a holder for value, without notice. 2 Nor will a 
 compromise between the parties to such void contracts be 
 supported, being tainted with the illegality of the prior 
 transactions. No compromise is possible on the question of 
 validity. 8 
 
 360. THE LIKE RULES AS TO STOCK GAMBLING DEALS. 
 The like rules are applied in cases where brokers dealing 
 in gambling transactions in stocks seek to recover money paid 
 in settlement of losses. No recovery is permitted. 4 Knowl- 
 edge by an indorsee of a bill of exchange that the bill was 
 drawn by a broker and accepted by the customer, for differ- 
 ences arising in several stock-jobbing transactions, will 
 defeat any recovery as against the acceptor. Chargeable 
 with knowledge of the facts, an indorsee although for value 
 can acquire no greater rights than the broker from whom 
 the bill was received. 6 Where such paper given as margins 
 upon stock gambling options, is transferred after maturity, 
 as collateral security for a pre-existing debt, in states where 
 the restricted rule prevails, the pledgee is not a holder for 
 
 1 Bank v. Spaids, 8 Bradw. 493 ; * Everingham v. Meigham, 55 Wis. 
 Dickson v. Thomas, 93 Pa. St. 278 ; 354 ; Melchoir v. McCarty, 31 Wis. 
 iSorth 0. Phillips, 89 Ib. 250; Steers 252. 
 
 v. Lashley, 6 Term, 61 ; Barnard v. * Dickson . Thomas, 93 Pa. St. 
 Backhaus, 52 Wis. 593; Tenny . 278; North v. Philips, 89 Ib. 250; 
 Foote, 4 Bradw. 594; s. c. 95 111. Brua's App. 55 Ib. 299. 
 109; Farriera . Gabell, 89 Pa. St. 'Steers . Lashley, 6 Term, 61. 
 89. 
 
 4 Tenny . Foote, 4 Bradw. 594; 
 s. c. 95 111. 109. 
 31
 
 482 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 value, in the usual course of business, but is subject to an- 
 tecedent equities. 1 
 
 361. NO RECOVERY UNDER ILLEGAL CONTRACTS TO 
 
 " CORNER." Agreements to " corner " a market or to stifle 
 couijjeutioa, being illegal and void, as against public policy, 
 courts of equity refuse to aid parties engaged therein to 
 recover money advanced in connection therewith where 
 they have been executed or to compel a division of the pro- 
 ceeds between the parties. Persons who have participated 
 in such contracts do not come into court with the clean 
 hands necessary when seeking equitable relief. The rule 
 was enforced where all the grain dealers of a town entered 
 into a secret general partnership, providing that each sep- 
 arate firm should conduct their own warehouse as before as 
 if there were no partnership, keep their own books, pay their 
 own expenses, ship their own grain, and furnish their own 
 funds to do business with, and at the end of each month, 
 each individual firm's accounts was to be balanced, and 
 profits or losses stated, and the amount remaining di- 
 vided according the number of shares of each firm in the 
 partnership. A bill for an accounting and division of the 
 profits brought by one of the parties, was dismissed. 9 Equity 
 will not aid parties to enforce aii illegal contract, or a con- 
 tract growing out of an illegal act, but leaves the parties in 
 the situation where they have placed themselves. 8 Upon 
 an agreement to "corner" the market upon a certain stock, 
 a third person advanced funds to aid the purpose. After- 
 wards, he sought to recover the money back, but was given 
 no relief as to the amount actually expended, although al- 
 lowed to recover the funds still in the hands of the parties 
 to the illegal contract. 4 And it is no defense to a nego- 
 tiable promissory note, in the hands of a broker, given on 
 
 1 Brua's App. 55 Pa. St. 299. Buck v. Albee, 26 Vt. 184. 
 
 * Craft t>. McConoughy, 79 111. 4 Sampson V. Shaw, 101 Mass. 145; 
 349. Ball v. Gilbert, 12 Met. 397.
 
 THE BROKER'S SUIT. 483 
 
 account of purchases authorized by the customer, that the 
 latter secretly intended to create a " corner" in the article 
 bought, the broker not being informed of his illegal inten- 
 tion. 1 
 
 362. RELIEF TO THE CUSTOMER, WHEN GIVEN. The 
 presumption arises, in the absence of direct testimony, where 
 a minor of limited means embarks in stock speculations to a 
 large extent, putting up margins, that he does not intend to 
 receive or deliver the stocks bought or sold on his behalf. 
 Failure in these essentials show that the deals entered into 
 were wagering contracts merely, contrary to the policy of 
 the law, and therefore void ab initio. The minor was al- 
 lowed, his entire margins having been lost, to recover the 
 sums advanced by him to the brokers.* A payment of 
 margins may be recovered back and the contract repudiated 
 in a case where the customer purchasing alone acted in good 
 faith, the vendor receiving the margins without obtaining 
 the goods for delivery.* 
 
 1 Wright v. Crabbs, 78 Ind. 487. 3 Gregory v. Wendell, 39 Mich. 
 
 8 Ruchizky c.DeHaven, 97 Pa. St. 337. 
 202.
 
 484 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 CHAPTER XXXVII. 
 
 USAGES ON STOCK AND OTHER EXCHANGES. 
 
 363. The usages and customs of brokers on stock exchanges. 
 
 364. Custom of stock broker to sell upon default without notice. 
 
 365. The usage as to notice of sale in New York. 
 
 366. The sale of stocks by brokers, under special contract. 
 
 367. The usage as to notice of sale on Boards of Trade. 
 
 368. The broker's usages, dealing with his customer's stock. 
 
 369. The broker's usages not to retain identical certificates or grain 
 
 ceipts. 
 
 370. The broker's usages as to funds, charges, and interest. 
 
 371. The broker's usage as to "name" day. 
 
 372. Usages of brokers not binding upon customers. 
 
 363. THE USAGES OF BROKERS ON STOCK EXCHANGES. 
 The relations and contract of a broker and his customer, as 
 to the extent the latter is bound by the customs and usages 
 prevailing upon the Exchange where the proposed deals are 
 to be made, are governed by the general principle that one 
 who employs another to act for him at a particular market 
 as a stock or grain exchange, is regarded as intending that 
 his business shall be done according to the usages and cus- 
 toms of that place, whether the customer is in fact informed 
 of such usages and customs or not. Such usages and cus- 
 toms are scrutinized closely, where they affect the interests 
 of third parties. They are required to be valid, and rea- 
 sonable, and such as not to change the intrinsic character of 
 the contract between the parties. 1 Such usages and customs, 
 
 'Wheeler . Newbould, 16 N. Y. s. c. L.R. 7 H. L. 530; Neilson v. 
 
 392 ; Evans . Wain. 71 Pa. St. 69 ; James, L. R. 9 Q. B. D. 546 ; Robin- 
 
 Marye v. Strouse, 5 Fed. Rep. 486; son v. Mollett, L. R. 7 H. L. 802 ; 
 
 Nichols t>. Merry, L. R. 7 Ch, 733; Maxted o. Paine, L. R 6 Ex. 132;
 
 USAGES ON EXCHANGES. 485 
 
 in order to be enforced as against the customer, roust be so 
 general in their operation as that he must be supposed to 
 have contracted with reference thereto. 1 Nor will evidence 
 of usage be permitted to vary the terms of a special contract 
 between the parties, or to introduce new conditions therein, 
 or to authorize the doing of acts in direct contravention of 
 its provisions, although evidence may serve to interpret the 
 language of the contract, or, where the meaning is equivocal 
 or obscure, to ascertain its nature and extent.* 
 
 364. CUSTOM OF BROKERS TO SELL, ON DEFAULT, 
 WITHOUT NOTICE. The usage of stockbrokers, upon the fall 
 in value of stocks purchased and carried by them for a cus- 
 tomer, below a price sufficient fully to reimburse the broker, 
 to sell the same, upon default, without notice, is valid. 
 The broker carrying stocks upon margins, having advanced 
 ninety per cent, of the purchase money, and holding the 
 certificates and margins as collateral security, is entitled 
 to sell such stocks at the Stock Exchange, without notice 
 to the customer. The customer will also be liable in an ac- 
 tion by the broker, for moneys paid and services rendered, 
 at his request, for the deficiency, if any, arising at such sale. 8 
 The contract of the stockbroker and customer is regarded 
 in Massachusetts, not as creating the relations of a pledgor 
 and pledgee, but as a conditional agreement to deliver so 
 many shares of stock at a certain time and the payment of 
 so much money. Where stocks are bought by a stock- 
 broker chiefly with his own funds, the customer simply 
 putting up margins, and the market declines, and the cus- 
 tomer defaults upon demand for more margin, it is a uniform 
 
 Coles v. Bristowe, L. R. 4 Ch. 5; s Parsons v. Martin, 11 Gray, 111; 
 
 Grissell v. Bristowe, L. 11. 4 C. P. Allen v. Dykers, 3 Hill, 593; s. c. 7 
 
 36; Button v. Tatham, 10 Ad. & E. Ib. 497. 
 
 27 ; Mitchell v. Newhall, 15 M. & Colket v. Ellis, 10 Phila. 375: 
 
 W. 308. Vanborne v. Gilbough, 10 W. K Cas. 
 
 1 Han-is v. Turnbridge, 83 N. Y. 347. 
 92 j Lyon v. Culbertson, 83 111. 324.
 
 486 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 and well-established rule with the stockbrokers to sell the 
 stocks so carried at their pleasure, without notice to the 
 customer. 1 The rule is applied in favor of a consignee or 
 commission merchant, who advances funds upon a shipment 
 of grain or other property, to a large percentage of its 
 value. Such consignee or commission merchant may, in 
 the absence of any agreement, sell the grain or other 
 property, at such time as he sees proper, to the extent and 
 in payment of his advances.* 
 
 365. THE USAGE AS TO NOTICE OF SALE IN NEW 
 YORK. In New York, a broker, purchasing stocks for a 
 customer, upon the deposit of margins, and holding the 
 same in his own name, as collateral security for his ad- 
 vances, is a pledgee. Applying to the parties the rules 
 applicable to the relations of pledger and pledgee, a usage 
 of the Stock Exchange of New York by which the broker, 
 upon failure of the customer to supply further margins, upon 
 demand, might sell such stocks on the Exchange without 
 notice of the time and place, was adjudged illegal. In the 
 leading case of Markhaui v. Jaudon, 8 the Court of Appeals 
 by Hunt, C. J., established the rule upon this sub- 
 ject, which has been followed in later cases. The offer 
 to prove the existence of the custom as stated was " an 
 offer (said the court) not to explain the meaning of particu- 
 lar terms, or to prove attending circumstances, to enable 
 the court to construe the agreement, but to change the 
 rights of the parties. By the law as I have interpreted it, 
 the customer did not lose the title to his stock by any pro- 
 cess less than a sale upon reasonable notice or by judicial 
 
 1 Covell 0. Loud, 133 Mass. 41 Butterfiehl v. Stevens, 59 Iowa, 
 
 (Deveus J.). 596. 
 
 Weed v. Adams, 37 Conn. 378; 41 N. Y. 235. Cited with ap- 
 
 Howard v. Davis, 40 Mich. 546 ; proval in Stenton u. Jerome, 54 N. 
 
 Brown . McGraw, 14 Pet. 479; Y. 480; Baker v. Drake, 66 Ib. 518; 
 
 Field v. Farrington, 10 Wall. 141; Gruman v. Smith, 81 Ib. 25. 
 May field v. Douglas, 1 Sandf. 360;
 
 USAGES ON EXCHANGES. 487 
 
 proceedings. The broker had no right to sell without 
 notice. A practice or custom to do otherwise would have 
 no more force than a custom to protest notes on the first 
 day of grace, or a custom of brokers not to purchase the 
 shares at all in a case like the present, but to content them- 
 selves with a memorandum or entry in their books of the 
 contract made with their customer. Such practice in each 
 case would be in hostility to the terms of the contract, an 
 attempt to change its obligation, and would be void. The 
 proof could not therefore be legally given. * * * It is 
 said that the stocks which are the subject of speculation 
 are fluctuating and uncertain in character ; that to save 
 the broker from loss prompt action is necessary, and that 
 there is no time for notice to the dealer. It is said in the 
 same connection that as the broker can make nothing by the 
 rise of the stock, his advantage being limited to his regular 
 interest and commissions, it is reasonable and must have 
 been the understanding that he should have the power to 
 protect himself against loss by an immediate sale without 
 notice. I cannot assent to this argument. If there is such 
 a necessity, the broker must secure himself by a special 
 contract, giving him the right to sell without notice." 
 
 366. THE SALE OP STOCKS BY THE BROKER UNDER 
 SPECIAL CONTRACT. The rule announced in Markham v. 
 Jaudon, as to the pledge relations of the broker and 
 his customer, and the notice required before a valid sale of 
 stock purchased by the broker for his customer could be 
 made, is subject, as suggested in the leading case, to the 
 limitation that the parties to such a transaction may provide 
 by contract for any manner of disposing of the pledged 
 stocks to satisfy the broker's claim, provided the terms 
 thereof are not in contravention of a statute, nor against 
 public policy, nor fraudulent. 1 A contract that "all trans- 
 
 1 Baker v. Drake, 66 K Y. 518 ; ken v. Dehon, 27 Ib. 364; Wheeler v. 
 Stenton v. Jerome, 54 Ib. 480 ; Milli- Newbould, 16 Ib. 392.
 
 488 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 actions" should be " in every way subject to the usages of 
 your (the broker's j office," entitled the broker to show by 
 evidence that the custom of his office was, upon failure 
 of a customer to furnish sufficient margins, upon demand, 
 to sell the stock at the Stock Exchange, without notice of 
 the time and place of sale. 1 A sale of stocks, without 
 notice, was sustained in a case where an order had been 
 given by an attorney in fact, with full powers, to a broker, 
 "I hereby authorize } r ou to sell in your discretion, at public 
 or private sale and without notice to me, or any notice what- 
 ever, the stocks, bonds or gold, which you are or hereafter 
 may be carrying fcr me, whenever my margin shall fall be- 
 low five per cent." The powers given under such con- 
 tract may be exercised by brokers when in good faith 
 and in the exercise of a sound discretion, they deem the 
 state of the market to justify a sale of the stocks they are 
 carrying.* 
 
 307. THE USAGE AS TO NOTICE OF SALE UPON 
 BOARDS OF TRADE. The custom of brokers or commission 
 merchants on Boards of Trade to close a deal, upon the 
 failure of a customer to deposit, after reasonable notice, 
 further margins, the market being unfavorable, and to sell 
 out the commodity purchased, without notice to the cus- 
 tomer of the time or place of sale, is supported as a valid 
 usage. 8 The transaction between the parties differs from 
 that of the stockbroker and his customer, and is hardly 
 to be regarded as a pledge of property. The broker upon a 
 Board of Trade does not, in the ordinary trading on 
 "seller's options," receive any property or indicia of prop- 
 erty for his customer, but holds merely an executory con- 
 tract for the delivery thereof upon a certain future option 
 
 1 Baker v. Drake, 66 N. Y. 518. . McLason, 60 Ib. 817. A like usage 
 
 * Wicks v. Hatch, 62 N. Y. 535. in the New York Cotton Market was 
 
 Denton r. Jackson. 106 111. 433; supported in Milliken v. Dehon, 27 
 
 Corbett v. Underwood, 83 Ib. 324; N. Y. 864. 
 
 Lyon v. Culbertson, Ib. 33 ; Mocller
 
 USAGES OX EXCHANGES. 489 
 
 or contingency. The deposit of margins, however, to meet 
 the changes of the market upon the particular option traded 
 in is required. The broker may also demand delivery, at 
 the expiration of the option, if no settlement of the deal 
 has been made prior thereto, and may, where he has sold 
 property, be required to deliver under his contract. To 
 protect himself against this liability, he is entitled to close 
 a deal, without notice, where there is a default in furnish- 
 ing margins upon reasonable demand. The rules relative to 
 parties to a contract of pledge, requiring notice of sale, are 
 not applicable to such transactions. 1 Snch usage must be so 
 uniformly acquiesced in, and for such a length of time, as 
 to force the inference that it was known to the contract- 
 ing parties, and formed a part of the contract. 9 
 
 368. THE BROKER'S USAGES, DEALING WITH HIS 
 CUSTOMER'S STOCK. A custom among stockbrokers in Bos- 
 ton, in filling orders for stock, deliverable on or before a 
 certain day, at buyer's option, with interest charges, to buy 
 such stock for cash, or on a shorter option, in their own 
 names, and to "turn " the same, or carry it until the ma- 
 turity of the original contract, charging an additional sum 
 for brokerage, as compensation for such carrying, was 
 held bad, a customer not being chargeable with knowledge 
 of it, and probably bad, any way. 3 Evidence of custom was 
 not permitted that where a customer bought a " straddle," 
 or the double privilege of a "put" and "call," the usage 
 of the broker selling the same was to operate in the stock, 
 holding the " straddle " as a security. It could not be 
 shown as against a customer who had no knowledge of sucli 
 custom. 4 Nor is evidence permitted to prove a custom of 
 brokers to place stock sent them for sale in their own names 
 on the books of the company, and in making transfers to do 
 
 1 Corbett . Underwood, 83 111. 8 Day v. Holmes, 103 Mass. 306. 
 324. * Harris v. Tunbridge, 83 N. Y. 92. 
 
 s Lyon v. Culbertson. 83 111. 33.
 
 490 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 so indiscriminately without regard to the person from whom 
 the stock was received, or for whose account the stock was 
 sold. 1 
 
 An offer was made to prove a custom on the London 
 stock exchange by which stockbrokers loaning money on 
 securities, such as certificates of stock, with full power to 
 transfer, had a right to sell such securities whenever they 
 might think proper ; and that where stock was deposited, 
 and there was no means of identifying it, the practice at the 
 stock exchange was to consider it sufficient to re-transfer 
 the same amount of like stock. A rule of the Exchange was 
 introduced that "in all cases of loans on the deposit of 
 security, the lender is bound to return the identical secur- 
 ities deposited, unless it be otherwise stipulated at the time 
 of the loan." As the alleged custom was in direct opposi- 
 tion to this express rule, it was not supported ; although 
 a broker, while not permitted to sell such securities, may 
 transfer the mortgage or pledge by a further mortgage or sub- 
 mortgage. " The lender might suddenly want his money 
 (says Malins, V. C.), and it would indeed be a very hard 
 rule, if he wanted the money he had lent for a certain pur- 
 pose, if he could not transfer the security to another. That 
 is a right that is not disputed by the original borrower in 
 this case, and is a right that I should consider the lender of 
 money upon any security would have." Nor is there any 
 difficulty in identifying stock, as it is the constant prac- 
 tice of an English court of chancery to trace it when im- 
 properly dealt with.* 
 
 869. THE BROKER'S USAGE, NOT TO RETAIN IDEN- 
 TICAL CERTIFICATES OR GRAIN RECEIPTS. The usage of 
 stockbrokers (where not controlled by statutory enactment 
 or express contract) to sell or pledge stocks purchased for 
 their customers, upon margins, is supported as valid. The 
 
 1 Parsons . Martin, 11 Gray, * Langton v. Waite, L. R. 6 Eq. 
 111. 165 ; ex parte Dennison, 3 Yes. 552.
 
 USAGES ON EXCHANGES. 491 
 
 nmrgin deposited by the customer is generally ten per cent, 
 although other securities may be pledged ; but the purchase 
 is made by the broker chiefly with his own funds and in the 
 course of his business. The broker is not generally required 
 under these circumstances to retain the identical shares, so 
 purchased by him for any particular customer, in his pos- 
 session, since shares of stock bear no " earmarks," but he 
 may use the same in order to raise other moneys wherewith 
 to continue his business, provided he has always had in his 
 possession the like number of shares, and has been ready to 
 fulfil the terms of his contract with the customer by deliver- 
 ing an equal number of like shares as were purchased for 
 him and charged to his account. The business of stock- 
 brokers would soon come to an end if the rule were other- 
 wise, as it would be impossible for them to furnish funds 
 from their private accounts sufficient to cany on the innu- 
 merable transactions made every day on Stock Exchanges. 1 
 A commission merchant operating on the Board of Trade 
 at Chicago, made advances to a customer upon shipments of 
 grain consigned to him, but which the customer directed 
 not to be sold, but to be held for further orders. The grain 
 was placed in a public warehouse, and receipts issued there- 
 for in the name of the commission merchant, but not show- 
 
 1 Nourse t>. Prime, 4 Johns. Ch. 40 Md. 102 ; Worthington v. Torney, 
 
 490 (Chan. Kent); s. c. 7 Ib. 69; 34 Ib. 182 ; Berlin v. Eddy, 33 Mo. 
 
 Allen v. Dykers. 3 Hill, 593 ; s. c. 7 426 ; Boylan v. Huguet, 8 Nev. 345; 
 
 Hill, 497 ; Hardy v. Jaudon, 1 Rob. Gilpiu v. Howell, 5 Pa. St. 41 ; Wyn- 
 
 261 ; Frost v. Clark son, 7 Cow. 24 ; koop v. Leal, 64 Ib. 361 ; Neiler v. 
 
 Rogers v. Gould, 6 Hun, 449 ; Cham- Kelly, 69 Pa. St. 409 ; Noyes v. 
 
 berlain v. Greenleaf, 4 Abb. N. Cas. Spaulding, 27 Vt. 420 ; Hubbell v. 
 
 178; Horton v. Morgan, 19 N. Y. Drexel, 11 Fed. Rep. 115. But a 
 
 170; Stewart v. Drake, 46 Ib. 449; pledge of fifty shares of " Consoli- 
 
 Lawreuce v. Maxwell, 53 Ib. 19 ; dated " Erie stock cannot be made 
 
 Taussig v. Hart, 58 Ib. 425; Marsten good to the pledger by transferring 
 
 v. Marsten, 69 Ib. 220, 226; Ogden to him fifty shares of "Converted" 
 
 v. Lathrop, 65 N. Y. 158; Levy v. Erie stock. Wilson v. Little, 2 N. 
 
 Loch, 85 N. Y. 370 ; Thompson Y. 443. Lecroy v. Eastman, 10 Mod. 
 
 v. Tolland, 48 Cal. 110; Wood v. 499; Shales v. Seiguoret, 1 Ld. Raym. 
 
 Hayes, 15 Gray. 375 ; Price t. Grover, 440 ; Mocatta v. Bell, 27 L. J. Ch. 237.
 
 492 QUASI-NEGOTIABLE COLLATERAL 
 
 ing the name of the consignor. The commission merchant 
 immediately sold these warehouse receipts, retaining how- 
 ever enough warehouse receipts in his possession to represent 
 the aggregate amount of grain received from his customers. 
 It was established by evidence that, in the transaction of 
 business on Boards of Trade by its members there was 
 a custom and usage, in holding grain consigned to them, or 
 in making sales of it on account of any particular shipper, 
 to pay no attention to the matter of holding or transferring 
 the identical receipts which were received when that cus- 
 tomer's grain was warehoused, but that such receipts 
 were used indiscriminately. The usage was sustained as 
 valid, although sufficient grain receipts had not been 
 retained to meet the claims of all customers. In such a case 
 the question is one of storage and insurance, rather than ar 
 action for conversion. The property of the customer entirelv 
 ceases in the special shipment of grain, by its delivery into 
 a public elevator, the receipts being simply evidence of a 
 debt to the commission merchant holding the receipts, who 
 becomes a debtor to the owner, instead of remaining a bailee 
 of his property. 1 
 
 370. THE BROKER'S USAGES, AS TO FUNDS, CHARGES 
 AND INTEREST. An effort was made to prove a custom 
 among brokers, when dealing with brokers in other cities, 
 to put all transactions into one account, and remit and draw 
 for the general balance. " If there is a custom (said the 
 court) among stockbrokers, when dealing with others, to 
 appropriate money belonging to the principal to the pay- 
 ment of the broker's indebtedness, the sooner it is abolished 
 the better mains usus est abolendus. A custom so iniqui- 
 tous can never obtain the force or sanction of law, and the 
 marvel is, that it should be set up as a defense to this 
 action." 8 The like rule was applied where grain brokers 
 
 1 Bailey v. Bcnsley, 87 111. 556. certain railroad stocks. The broker 
 
 * Evans t>. Wain, 71 Pa. St. 69. placed them in the hands of one 
 
 Wain employed a broker to sell Wister, a broker, who sent them to
 
 USAGES ON EXOHANGES. 493 
 
 entered into an arrangement witn an agent at Baltimore to 
 put all transactions between them "into one general ac- 
 count, and remit or draw for the general balance." The rights 
 of a customer, ignorant of the arrangement, were supported 
 as against the brokers, notwithstanding the account of the 
 brokers and their agent had been closed at a loss to the 
 former. 1 Evidence was received of the custom of the 
 Board of Brokers in the issue of contracts for the sale of 
 mining stock, containing a receipt for the payment of the 
 first instalment, to issue the same without the money hav- 
 ing been actually paid. 2 Upon the insolvency of a stock- 
 broker, and the settlement of his trades, the usage is sup- 
 ported of appropriating the proceeds of his deals by the 
 official assignee of the Stock Exchange first in payment of 
 differences due by the defaulting broker to members, al- 
 though the settlement is not exclusive, as both brokers and 
 creditors can pursue other remedies and suits to obtain sat- 
 isfaction. 3 
 
 A custom of stockbrokers to debit and credit interest 
 monthly, computing interest on balances, is supported. 
 Such a mode of computing interest, although in one contin- 
 gency, it involves compound interest, does not necessarily 
 involve usury, as the balance may be paid at any time ; nor 
 does it affect a contract for the purchase and sale of stocks, 
 being wholly independent of it. 4 But a custom of charging 
 
 the defendants, brokers in New * "Winans v. Hassey, 48 Cal. 634. 
 York. The latter sold the stock, 8 Ex parte Grant, L. R. 13 Ch. D. 
 
 but Wister having failed, indebted 667. By rules 167, 169 & 170 of the 
 
 to them, they insisted upon deduct- London Stock Exchange (1881) cred- 
 
 ing from the proceeds of the stock itors outside the board are allowed 
 
 the balance due them from him on to join, if they wish, in the distribu- 
 
 general account. The like principle tion of the funds held by the official 
 
 was applied in Talmadge v. Third assignee of the board. Ex parte 
 
 Nat. Bank, .91 N. Y. 531 ; Semenza v. Ward, L. R. 20 Ch. D. 356. 
 Brinsley, 18 C. B. N. S. 467 ; Cheap Hatch v. Douglass, 41 Conn. 
 
 v. Cranwood, 4 B. & A. 663. 116. 
 
 1 Scarlett . Van Inwagen, 9 Biss. 
 157.
 
 494 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 customers an arbitrary rate for telegrams, as if a special dis- 
 patch were sent, when in fact several of such messages are 
 sent in one dispatch, at much less expense, is not favored, 
 in the absence of knowledge by the customer. 1 
 
 Evidence was refused when offered to establish a custom 
 to change the rule that on a sale of stock deliverable at a 
 future day at the option of the seller, dividends declared 
 before the day of sale, but not payable until after the day 
 for delivery, belong to the seller, on the ground that the 
 contract was to sell so many shares of stock, and the custom 
 would have passed something more. 4 And in another case, 
 evidence as to the meaning attributed to the words "divi- 
 dends on" and "ex-dividend" by the custom of stock- 
 brokers, was not permitted, as it would have had the effect 
 of changing the contract between the parties.* 
 
 371. THE BROKER'S USAGE AS TO "NAME-DAY." 
 The usage prevailing on the London Stock Exchange, that 
 in transactions between its members, there is an implied un- 
 derstanding that, on the purchase of stock, the buying job- 
 ber shall be at liberty by a given day, called the " name- 
 day," to substitute another person as buyer, and so relieve 
 himself from further liability on the contract, provided such 
 substituted person be one to whom the original seller can- 
 not reasonably except, and that such person accept a trans- 
 fer of the stock, and pay to the original seller the price, is 
 upheld as reasonable. 4 The name given, however, must be 
 that of a person able and willing to purchase, and not that 
 of a non-existent person, lunatic, infant, married woman, or 
 one not consenting thereto. 1 The giving of the name of a 
 
 1 Marye t>. Strouse, 5Fed. Rcp.486. 533; s. c. 7 H. L. 530; disapp.Rcunie 
 
 Spear . Hart, 3 Robt. 420. t>. Morris, L.R.13 Eq. 203, where such 
 
 1 Lombardo v, Case, 45 Barb. 95. a transaction, in the absence of fraud, 
 
 4 Grissell v. Bristowe, L R. 4 C. P. had been supported. Maxted v. 
 
 86, reversing s. c. L. R. 3 C. P. 112 ; Paine, L. R. 4 Ex. 81 ; Heritage . 
 
 Allen v. Graves, L. R. 5 Q. B. 478. Paine, L. R. 2 Ch. D. 594. 
 Nickalls v. Merry, L. R. 7 Ch.
 
 USAGES ON EXCHANGES. 495 
 
 person legally competent to hold the stock but of no means, 
 and who consented to allow the use of his name for a small 
 consideration, was regarded as a sufficient compliance with 
 the usage. 1 Where the vendor, by reason of accidental 
 omission, intervening insolvency of the company, or the 
 giving the name of a mere nominee of the purchaser, remains 
 still subject to liability as a stockholder, he has his action 
 against the purchaser, 9 or against the broker, where the 
 latter has agreed on the sale-note " registration guaranteed." 3 
 
 372. USAGES OF BROKERS, NOT BINDING UPON CUSTO- 
 MERS. A custom of stockbrokers, upon receipts of orders 
 from customers to purchase stocks, to buy such stocks of 
 themselves, is not supported, as it changes the character of 
 the broker and the nature of the transaction. 4 And a usage 
 of brokers to recognize only the party employing them, and to 
 obey his directions in the disposal of the proceeds of a sale, 
 is not upheld, where the brokers are chargeable with notice 
 that the shares dealt in are not the property of the solicitor 
 ordering their sale, but belong to an estate. 6 A customer 
 is not liable for any loss resulting to his broker by reason of 
 the latter's insolvency, notwithstanding any usage on the 
 stock exchange to insist upon such liability;' nor where, by 
 custom of brokers, the dealings of the broker were con- 
 ducted in an invalid manner; 7 nor is he required to submit to 
 an arbitration of any claim, held under the rules of an Ex- 
 change.* A customer of a broker or a commission merchant, 
 
 1 Maxted v. Paine, L. R. 4 Ex. 81. 4 Pickering v. Demeritt, 100 Mass. 
 
 * Castellan v. Hobson, L. R. 10 Eq. 416 ; Robinson v. Mollett, L. R. 7 H, 
 47 ; Shepherd v. Gillespie, 5 Ib. 293; L. 802. 
 
 s. c. 3 Ch. 764 ; Evans v. Wood, L.R. 8 Pearson v. Scott, L. R. 9 Ch. D. 
 
 5 Eq. 9 ; Brown v. Black, L. R. 15 198. 
 
 Eq. 363 ; s. c. 8 Ch. 939 ; Bowring v. Duncan v. Hill, L. R. 6 Ex. 255 ; 
 
 Shepherd, L. R. 6 Q. B. 309 ; Hodg- s. c. 8 Ex, 242. 
 
 kinson v. Kelly, L. R. 6 Eq. 496. A ' Neilson v. James, L. R. 9 Q. B. 
 
 contrary view was taken in Toning- D. 546. 
 
 ton . Lowe, L. R. 4 C. P. 26. Williamson V. Eliis, 12 Phila. 338. 
 
 Cruise v. Paine, L. R. 6 Eq. 641; 
 s. c. 4 Ch. 441.
 
 496 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 sold out for want of margins, has a right to know from the 
 evidence whether the mode of dealing adopted by the com- 
 mission merchant was fair, and free from all fraud, injustice 
 or wrong to him. Commission merchants and brokers have 
 no right to adopt methods in making purchases for their 
 customers that they can refuse to explain, or that are so in- 
 tricate or tortuous that they are incapable of being explained 
 to the full comprehension of ordinarily intelligent men. 1 
 
 In a leading Massachusetts case, Shaw v. Spencer, 9 an 
 offer was made to show, 1, that it was a matter of common 
 occurrence for certificates of stock to be issued in the name 
 of some other person as trustee, when in fact there was not 
 any trust ; 2, whether certificates of stock, issued to a desig- 
 nated person as trustee, were constantly bought and sold in 
 the stock market, by a simple indorsement of the certificate 
 by the person named as the holder, without inquiry as to 
 the authority by which, or the use or purpose for which the 
 transfer was made. As to the first, " the law holds (say the 
 court) that the insertion of the word * trustee ' after the 
 name of a stockholder does indicate and give notice of a 
 trust. No one is at liberty to disregard such notice, and to 
 abstain from inquiry for the reason that a trust is frequently 
 simulated or pretended when it really does not exist. The 
 whole force of this offer of evidence is addressed to the ques- 
 tion whether the word ' trustee ' alone has any significance, 
 and does amount to notice of a trust, and it has been decided 
 that it does." 8 As to the second offer, the court added, "a 
 usage to disregard one's legal duty, to be ignorant of a rule 
 of law, and to act as if it did not exist, can have no stand- 
 ing in the courts." 
 
 1 Oldershaw v. Knowles, 101 111. * Sturtevant v. Jaques, 14 Allen, 
 117. 623. 
 
 100 Mass. 383.
 
 Div. 2. BILLS OF LADING, 
 
 CHAPTER XXXVIII. 
 
 THE BILL OF LADING. 
 
 / 
 
 373. The bill of lading as collateral security. 
 
 374. The bill of lading. 
 
 375. The bill of lading quasi-negotiable. 
 
 376. The foreign view of bills of lading. 
 
 377. Glyn, Mills, Currie & Co. v. East & West India Docks Company. 
 
 378. Bills of lading made negotiable by statute. 
 
 379. The bill of lading a symbol of property. 
 
 373. THE BILL OP LADING AS COLLATERAL SECURITY. 
 Bills of lading were among the earliest documents of title 
 used in the commercial world for the purposes of collateral 
 security. The amounts advanced by those who lend money 
 on the security of bills of lading are enormous. 1 The dis- 
 count by banks of bills of exchange, drawn upon consignees, 
 for the purchase money of goods, the bill of lading being 
 delivered as collateral security for its payment, or loans 
 upon the deposit of bills of lading by the consignee, where 
 they have been forwarded, in order to raise funds to pay 
 the bills of exchange drawn for the purchase price, are 
 common forms of loaning money. A bill of lading in Eu- 
 rope is a negotiable instrument, but in .this country its char- 
 acter, even under statutes providing that transfer shall be 
 made " in the same manner as bills of exchange and prom- 
 
 1 Glyn v. E. &W. India Docks, L. R. 7 App. 613 (Lord Blackburn). 
 
 82 (497)
 
 498 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 issory notes," is quasi-negotiable only. In the absence of 
 other words, snch provisions relate to the manner of trans- 
 fer, and do not give to a bill 1 of lading the privileges be- 
 longing to the favored instruments of commerce. The title 
 of the pledgee for value of bills of lading is preferred as 
 against the lien of the unpaid vendor, although the bills of 
 exchange drawn for the price of the goods are certain to be 
 dishonored, provided the lender is without knowledge or 
 notice of any fact upon which the vendor's right of stoppage 
 in transitu may arise. The pledgee's title is founded upon 
 a right, either general or special, to the property represented 
 by the bill of lading, and to its possession ; and is protected 
 as between the parties to the contract of pledge, and as! 
 against third parties, carriers, pledgees, or purchasers, deal-' 
 ing with the goods tortiously or without authority, or with 
 notice, actual or presumptive, of the indorsement for value 
 as collateral security of the bill of lading. The only limi- 
 tation upon his claim is, that where bills of lading are issued 
 in sets of three, a bona fide delivery by the ship-owner to 
 the person first presenting one of such bills of lading, is a 
 valid discharge of his contract, although other bills of the 
 set are in the hands of a pledgee for value advanced prior 
 to the time of delivery, the ship-owner being without knowl- 
 edge or notice of such transfer. As between successive 
 pledgees, the holder of the bill first indorsed is preferred. 1 
 
 1 Pollard . Vinton, 105 U. 8. 5; Bank v. Logan, 74 N. Y. 568; Marine 
 
 Shaw v. Railroad Company, 101 Ib. Bank v. Fiske, 71 Ib. 353 ; Farmers' 
 
 504; Gibson. Stevens, 8 How. 384; Bank v. Haseltine, 78 Ib. 104; Beck- 
 
 The Thames, 14 Wall. 98 ; Robinson er v. Hallgartcn, 86 Ib. 167 ; Emery's 
 
 C.Memphis Ry. Co. 9 Fed. Rep. 133; Sons v. Irving Nat. Bunk, 25 Ohio 
 
 Loeb v. Peters, 63 Ala. 243; Stone v. St. 360; Holmes v. German Security 
 
 West St. L. Transf. Co. 9 Bradw. Bank, 87 Fa. St. 525 ; Holmes . 
 
 48; Cairo National Bank v. Crocker, Bailey, 92 Pa. St. 57; Meyerstein . 
 
 Ill Mass. 163; Stollenwerck . Barber, L. R. 2 C. P. 57, 675; s. c. 
 
 Thacher, 115 Mass. 224; Forbes . 4 H. L. 325; exparteGolding, L.R. 
 
 Boston & L. Ry. Co., 138 Mass. 13 Ch. D. 624 ; Glyn v. E. & W. Ind. 
 
 154; s. c. 9 Am. & E. R. R. Cas. 76; Docks Co. L. R. 7 App. 591 ; Gurney 
 
 Lee v. Kimball. 45 Me. 172; Tiede- v. Behrend, 8 El. & Bl. 633; in re 
 
 man v. Knox, 53 Md. 612 ; Farmers' Westzinthus, 5 B. & Ad. 817; San-
 
 THE BILL OP LADING. 499 
 
 374. THE BILL OF LADING. A bill of lading is a mem- 
 orandum or acknowledgment in writing signed by the cap- 
 tain or master of a ship or other vessel that he has received 
 in good order on board of his ship or vessel therein named 
 at the place therein mentioned, certain goods therein speci- 
 fied, which he promises to deliver in like good order (the 
 dangers of the sea excepted) at the place therein appointed 
 for the delivery of the same to the consignee therein named, 
 or to his assigns, he or they paying freight for the same. 1 
 A bill of lading issued by a railroad company or other inland 
 common carrier, is a receipt for the property described 
 therein, and a contract to carry the same to a place therein 
 named, and to deliver to a person named, or order, or 
 bearer. 4 As between common carriers on land and common 
 carriers on water, the law draws no distinction. They are 
 each subject, in issuing bills of lading, to the same obliga- 
 tions and liabilities, and to the same duties, and entitled to 
 the same protection. 8 
 
 375. THE BILL OF LADING QUASI-NEGOTIABLE. A 
 bill of lading is primarily a contract between a ship-owner 
 and shipper or inland carrier and shipper for the carriage 
 and delivery of property. As between the parties to the 
 contract, the bill of lading has no elements of negotiability. 
 It is only after a general indorsement or transfer of the bill 
 of lading by the owner, and when it has passed into the 
 hands of a bona fide pledgee or other holder for value, that 
 quasi- negotiability arises. The transfer of such bill of lading 
 is as effective in vesting title to the goods represented as if 
 they were actually in possession of the person loaning 
 
 ders 0. Maclean, L. R. 11 Q. B. D. Ib. 230; Seymour v. Norton, 105 111. 
 
 327. 272; Michigan Cent. R. R. Co. v. 
 
 1 Abbott's Shipp. 216 ; Hibbert v. Phillips, 60 111. 190 ; Taylor v. Tur- 
 Carter, 1 Term, 745 ; Bouvier's Law ner, 87 Ib. 296. 
 
 Diet. Vol. 1, 246 ; Code de Comm. * King v. Shepherd, 3 Story, 349 
 
 art. 281. (Story, J.) "A ship is a common 
 
 2 National Bank v. Dearborn, 115 carrier like any other." Elliott v. 
 Mass. 219 ; Newcomb v. Railroad Co. Russell, 10 Johns. 1.
 
 500 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 money, although such indorsement and delivery of a bill of 
 lading carries with it no such fixed legal results as in the 
 case of negotiable instruments. 1 So long as the bill remains 
 in the hands of an agent entrusted with it for a special pur- 
 pose, as shown upon its face or by indorsement, or not auth- 
 orized to pledge, a holder for value can acquire no title as 
 against the owner, through any act of misappropriation or 
 fraud of the agent, or by an act not authorized. 8 The 
 maker of a bill of lading is riot in the same position as the 
 maker of commercial paper, bound to protect it although 
 misappropriated, when in the hands of an innocent holder 
 for value. 3 Where, however, there has been a general in- 
 dorsement or assignment of the bill of lading by the original 
 holder, any subsequent bona fide pledgee, advancing value 
 thereon, without notice, is protected, although as between 
 the original parties, a secret agreement existed as to the use 
 to be made thereof of which the act of pledge was a breach. 
 A pledgee for value advanced in good faith, without no- 
 tice, obtains, under such indorsement and delivery, a good 
 tide as against the owner. 4 
 
 1 Stone v. West St. Louis Transf. poses in the hands of the holder, it 
 
 Co. 9 Bradw. 48 ; Glyn v. E. & W. is not a negotiable instrument or 
 
 Ind. Docks Co. L. R. 7 App. 591 ; obligation in the sense that a bill of 
 
 Security Bank v. Luttgren, 29 Minn. exchange or a promissory note is. Its 
 
 363; Stollenwerck v. Thacher, 115 transfer does not preclude, as in 
 
 Mass. 224. In Pollard . Vinton, those cases, all inquiry into the 
 
 105 U. S. 8, the United States Su- transaction in which it originated, 
 
 preme Court (Miller, Jus.) describe because it has come into hands of 
 
 a bill of lading as being "an instru- persons who have innocently paid 
 
 ment well known in commercial value for it. The doctrine of bona 
 
 transactions, and its character and fide purchasers only applies to it in 
 
 effect have been defined by judicial a limited sense." 
 
 decisions. In the hands of the 9 Voss v. Robertson, 46 Ala. 483; 
 
 holder it is evidence of ownership, Stollenwerck v. Thacher, supra, 
 
 special or general, of the property Robinson v. Memphis R. R. Co. 9 
 
 mentioned in it, and of the right to Fed. Rep. 133; Farmers' Bank v. 
 
 receive said property at the place of Logan, 74 N. Y. 568. 
 
 delivery. Notwithstanding it is de- * Robinson . Memphis R. R. Co. 
 
 signed to pass from hand to hand. 9 Fed. Rep. 133. 
 
 with or without indorsement, and it 4 Slollenwerck v. Timelier, 115 
 
 is efficacious for its ordinary pur- Mass. 224; Farmers' Bank v. Hazel-
 
 THE BILL OF LADING. 501 
 
 376. THE FOREIGN VIEW OF BILLS OF LADING. The 
 effect of a transfer of a bill of lading was considered in an 
 early English case, by Lord Campbell, and his view of it 
 was followed for some years. He declared that "a bill of 
 lading is not, like a bill of exchange or promissory note, a 
 negotiable instrument, which passes by mere delivery to a 
 bona fide transferee for valuable consideration, without re- 
 gard to the title of the parties who make the transfer. Al- 
 though the shipper may have indorsed in blank a bill of 
 lading deliverable to his assigns, his right is not affected by 
 an appropriation of it without his authority. If it be stolen 
 from him, or transferred without his authority, a subsequent 
 bona fide transferee for value, can not make title under it 
 as against the shipper of the goods. The bill of lading only 
 represents the goods ; and in this instance, the transfer of 
 the symbol does not operate more than a transfer of what is 
 represented." 1 But, in the leading case ofTheMarie Joseph,* 
 the Lord Chancellor (Lord Chelmsford) distinguished the 
 above decision as being very carefully confined in its terms 
 to the original transfer of a bill of lading deliverable to the 
 assigns of the shipper, and that in the cases supposed, as 
 there could be no lawful assigns of the shipper, the bill of 
 lading consequently could have no existence as a negotiable 
 instrument. In the case stated, a bill of lading was in- 
 dorsed as collateral -security, for a valuable consideration, 
 
 tine, 78 K Y. 104, 108; The Argen- the bill of lading by fraudulent mis- 
 
 tina L. R. 1 A. & E 370. representations, and indorsed and 
 
 1 Gurney v. Behrend, 3 El. & Bl. delivered it lo his bankers as secur- 
 
 633. ity for advances already made and 
 
 s L. R. 1 Pr. C. 219. A bill of to be made. Further advances were 
 lading, indorsed by the consignor, afterwards made. Before the arrival 
 was delivered to the purchaser for of the goods the agent became bank- 
 his acceptances of bills of exchange, rupt, and the vendors sought to re- 
 payable at three months. The bill claim the goods. As the advances 
 of lading was immediately delivered of the pledgees were made bona fide, 
 to an agent of the consignor, to hold and without notice of the fraud, the 
 as security for the payment of the right of the vendors to stop the 
 bill of exchange. A member of the goods in transitu was defeated to the 
 firm of purchasers again obtained extent of the advances made.
 
 502 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 without notice of equities arising from an act of misappro- 
 priation, and it was held a bill of lading for the delivery of 
 goods to " order and assigns," is a negotiable instrument, 
 which, by delivery and indorsement, passes the property in 
 the goods to the indorsee, subject only to the right of the 
 unpaid vendor to stop them in transitu. The indorsee may 
 deprive the vendor of this right by indorsing the bill of 
 lading for a valuable consideration, although the goods are 
 not paid for, or bills have been given for the price of them 
 which are certain to be dishonored, provided the indorsee 
 for value has acted in good faith, and without notice. 
 Where a bill of lading omits " or order or assigns " it is not 
 semble a negotiable instrument. 1 The French code recog- 
 nizes the negotiability of bills of lading, 8 and in Germany, 
 and under the Spanish code, they are treated generally as 
 bills of exchange. 8 
 
 377. GLYN, MILLS, CURRIE & Co. v. EAST AND WEST 
 INDIA DOCKS Co. In the latest decision of the English 
 House of Lords arising out of the negotiation as collateral of 
 bills of lading, 4 the Lord Chancellor (Lord Selborne) held 
 
 1 Henderson 0. Comptoir d'Es- for a loan. The goods upon arrival 
 
 compte, L. R. 5 Pr. C. 253. were landed at the clocks of the 
 
 8 Code de Comra. liv. 2, lit. 7, art. defendant, and placed in their ware- 
 
 281. house by the shipowner, with a stop- 
 
 1 Mcyerstein v. Barber, L. R. 2 C. order for freight. The consignees 
 
 P. 57. produced to the dock company the 
 
 4 Glyn, Mills & Co. t>. E. & W. bill of lading marked "second," un- 
 India Docks Co., L. R. 7 App 591. indorsed, the property being deliv- 
 Goods were shipped for London, the erable to them, or their assigns, and 
 master signing a set of three were registered as the owners of 
 bills of lading, marked first, second, the goods upon removal of the stop 
 and third respectively, making the for freight. The dock company, in 
 goods deliverable to the consignees good faith and without notice of the 
 named, or their assigns, " the one of bankers' claim, delivered the proper- 
 which bills being accomplished, the ty to third persons upon delivery- 
 others to stand void." During the orders, signed by the consignees, 
 voyage the consignees indorsed the The trial court found in favor of 
 bill of lading marked "first" to the the pledgee (L. R. 5 Q. B. D. 128); 
 plaintiffs, a banking firm, as security but the judgment was reversed in
 
 THE BILL OF LADING. 503 
 
 that " the primary office and purpose of a bill of lading, 
 although by mercantile law and usage it is a symbol of the 
 right of property in the goods, is to express the terms of the 
 contract between the shipper and the shipowner. It is for 
 the benefit of the shipper that the right to take delivery 
 of the goods is made assignable, and it is for the benefit and 
 security of the shipowner that when several bills of lading, 
 all of the same tenor and date, are given as to the same 
 goods, it is provided that ' the one of these bills being 
 accomplished, the others are to stand void.' It would be 
 neither reasonable nor equitable, nor in accordance with 
 the terms of such a contract, that an assignment, of which 
 the shipowner has no notice, should prevent a bona fide 
 delivery under one of the bills of lading, produced to him by 
 the person named on the face of it as entitled to delivery 
 (in the absence of assignment), from being a discharge to 
 the shipowner. Assignment, being a change of title since 
 the contract, is not to be presumed by the shipowner in the 
 absence of notice, any more than a change of title is to be 
 presumed in any other case when the original party to a 
 contract comes forward and claims its performance, the 
 other party having no notice of anything to displace his 
 right. He has notice indeed that an assignment is possible, 
 but he has no notice that it has taken place. There is no 
 proof of any mercantile usage putting the shipowner, in such 
 a case, under an obligation to inquire whether there has 
 in fact been an assignment or not ; and, in the absence of 
 such usage, I am of opinion that it is for the assignee to 
 give notice of his title to the shipowner, if he desires to 
 make it secure, and not for the shipowner to make any such 
 inquiry." 
 
 378. BILLS OP LADING MADE NEGOTIABLE BY STATUTE. 
 The character and mode of transfer of bills of lading have 
 
 the court of appeals (L. R. 6 Q.B.D. Lords, the latter judgment was af- 
 476). Upon appeal to the House of . firmed.
 
 504 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 been made the subject of statutory enactment in certain 
 states, and the element of negotiability, more or less restrict- 
 ed, conferred upon them. In Maryland, in the case of Bal- 
 timore & Ohio Railroad Company v. Wilkins, 1 a bill of 
 lading was held not to be negotiable in the same sense as 
 bills of exchange and promissory notes, but soon after, the 
 Legislature of that state enacted a public act, 1 declaring 
 that bills of lading should be negotiable instruments and 
 securities (unless provided in express terms to the contrary 
 on the face thereof) " in the same sense as bills of exchange 
 and promissory notes," and in the hands of bona fide holders 
 for value, without notice, be as equally free from all antece- 
 dent equities. This statute was enforced in Tiedman v. 
 Knox. 8 The statutes of Pennsylvania and of Missouri pro- 
 vide that bills of lading shall be negotiable by written 
 indorsement and delivery " in the same manner as bills of 
 exchange and promissory notes." The effect of these stat- 
 utes where the bill of lading negotiated has been lost or 
 stolen without negligence, or the pledgee is chargeable 
 with knowledge that the pledger is not the owner, or that 
 the bill is held as security to pay an outstanding draft, is not 
 to entitle the innocent pledgee, for value, to all the privi- 
 leges which attach to the holder of negotiable instruments 
 for value before maturity in good faith, under circumstances 
 of fraud or misappropriation ; nor is the pledgee charged 
 with the duty of demand, or notice of non-delivery, nor are 
 indorsers liable as on promissory notes or bills of exchange, 4 
 
 1 44 Md. 11. the consignee. Upon presentation 
 
 * Acts of Maryland, 1876, Ch. 262. of the draft for acceptance the con- 
 
 * 53 Md. 612. signee feloniously substituted his 
 4 Shaw v. Railroad Company, 101 duplicate tor the original. This cx- 
 
 U. 8. 564. A time draft, drawn by change of bills was not noticed by the 
 
 a consignor at St. Louis, upon a bank until some time afterwards; 
 
 consignee in Philadelphia, was dis- but on the same day the consignee 
 
 counted by a bank at St. Louis, with re-indorsed the bill of lading, and 
 
 bill of lading, duly indorsed, at- obtained another loan from a thirtl 
 
 tached as collateral security. A person. As the second pledgee was 
 
 duplicate bill of lading was sent to . chargeable with notice that the bill
 
 THE BILL OF LADING. 505 
 
 although the usual indorsement " without recourse " is 
 sometimes made. 1 
 
 379. THE BILL OP LADING A SYMBOL OF PROPEETY. 
 Bills of lading are symbols of the property described therein. 
 They are regarded as so much grain, provisions, cotton, 
 iron, or other articles of property, and the merchandise 
 is very often sold or pledged by the transfer of the symbol, 
 the bill of lading covering the goods. Bills of lading have 
 resulted from the adoption of a mode of dealing by symbols 
 with property the possession of which cannot be immedi- 
 ately delivered. In the case of goods which are at sea, 
 being transmitted from one country to another, actual pos- 
 session of them cannot be delivered, and therefore the bill of 
 lading is considered a symbol of the goods, and its delivery 
 a delivery of them. When the goods have arrived at the 
 dock, until they are delivered to some person who has the 
 right to hold them, the bill of lading still remains the only 
 symbol that can be dealt with by way of assignment, or 
 mortgage, or pledge, or otherwise. As soon as delivery is 
 made, or a warrant for delivery has been issued, or an order 
 for delivery accepted (which in law is equivalent to deliv- 
 ery), then those symbols replace the symbol which before 
 existed. Until that time bills of lading are effective repre- 
 sentatives of the ownership of the goods, and their force does 
 not become extinguished until possession, or what is equiv- 
 alent in law to possession, has been taken on the part of the 
 person having a right to demand it.* 
 
 of lading in the possession of the ' Farmers' Bank v. Hazeltine, 78 
 
 consignee had already been indorsed N. Y. 104; Farmers' Bank v. Atkin- 
 
 a(3 collateral security for the pay- son, 74 Ib. 587. 
 
 ment of an outstanding draft, pur- Gibson v. Stevens, 8 How. 384 ; 
 
 chasers of the property from him Dows v. Nat. Exchange Bank, 91 U. 
 
 could take no greater rights than he S. 618; Shaw <o. Railroad Company, 
 
 himself had as against the bank, the 101 Ib. 564 ; Holbrook v. Wright, 24 
 
 purchase of the property having Wend. 169; Grosvenor v. Phillips, 2 
 
 been made without requiring pro- Hill, 147; Bank of Rochester v. 
 
 duction of the bill of lading or other Jones, 4 N. Y. 497 ; Rawles v. Desh- 
 
 evidence of title. ler, 42 Ib. 572 ; Marine Bank v.
 
 506 QUASI-NEGOTIABLE COLLATERAL SECUK1TIES. 
 
 CHAPTER XXXIX. 
 
 BILLS OF LADING AS COLLATERAL. 
 
 380. The title of the pledgee of bills of lading. 
 
 381. The pledge of bills of lading under indorsement. 
 
 382. The pledge of bills of lading unindorsed. 
 
 383. The pledge of unindorsed bills of lading, as to third parties. 
 
 384. Pledges of bills of lading for antecedent debt and future advances. 
 
 385. And of reversionary interests in bills of lading. 
 
 380. THE TITLE OP THE PLEDGEE OF BILLS OF LAD- 
 iNG.-^-The transfer of a bill of lading as collateral security 
 to a pledgee, who has advanced money, or discounted com- 
 mercial paper, in good faith on the credit of the representa- 
 tions contained therein, without notice, vests in him the 
 legal title to the property and the right of possession, and 
 his title is good against all the world. 1 No distinction is 
 
 Wright, 48 Ib.; First Nat. Bank v. B. 622; Jenkyns v. Brown, 14 Q. B. 
 
 Kelly, 57 Ib. 34; Farmers' etc. Bank 496 ; The Marie Joseph, L. R. 1 Pr. 
 
 v. Logan, 74 Ib. 568; DeWolf . C. 219; The Argentina, L. R, 1 A. & 
 
 Gardner, 12 Gush. 19; Allen v. Wil- E. 370; Shepherd v. Harrison, L. R. 
 
 liams, 12 Pick. 290; First National 5 H. L. 116; Barber v. Meyerstcin, 
 
 Bank v. Dearborn, 115 Mass. 219; L. R. 2 C. P. 33, 661; 4 H. L. 317, 
 
 National Bank v. Crocker, 111 Ib. 329 (Hatherly, Lord Chan.); Sanders 
 
 163; Hathaway v. Haynes, 124 Ib. v. Maclean, L. R. 11 Q. B. D. 327 
 
 811 ; Security Bank D. Luttgren, 29 (Bowen, L. J.). 
 Minn. 363; Michigan Cent. R. R. Co. * Fanners' Nat. Bank v. Logan, 74 
 
 v. Phillips, 60 111. 190; Peters v. El- N. Y. 568; First Nat. Bank v. Kelly, 
 
 liott, 78 Ib. 326 ; Taylor . Turner, 57 Ib, 34 ; Commercial Bank . 
 
 87 Ib. 296; Pettit v. First Nat. Bank, Pfeifer, 22 Hun, 327 ; Forbes . Bos- 
 
 4 Bush, 334; Emery v. Irving Nat. ton & Lowell R. R. Co. 133 Mass. 
 
 Bank, 25 Ohio St. 360, 366; Heury 154; Cairo National Bank . 
 
 c. Philadelphia Warehouse Co. 81 Crocker, 111 Mass. 163; National 
 
 Pa. St. 76; Haille v. Smith, 1 B. & Bank 9. Bailey, 115 Ib. 288; De 
 
 P. 503; Gurney v. Behrend, 6 El. & Wolf v. Gardner, 12 Cush. 19; Erne-
 
 BILLS OF LADING AS COLLATERAL. 507 
 
 drawn between the title of the pledgee who has received a 
 bill of lading as collateral security upon a valuable consider- 
 ation, without notice, and an actual purchaser. The legal 
 title to the property passes to the pledgee as to the pur- 
 chaser ; and to the extent of his advances, the pledgee for 
 value has all the protection afforded the purchaser for value. 1 
 Holding this legal title to the property comprised in the bill 
 of lading, although for the purposes of collateral security 
 only, third persons dealing with the property thus shipped 
 are chargeable with notice, actual or constructive, as the 
 case may be, of the terms of the bill of lading, so that, al- 
 though advancing value, and acting in good faith, in the usual 
 course of business, they can acquire no rights in opposition 
 to those of the pledgee in the property covered by the bills 
 of lading.* The pledgee is also entitled, having the legal 
 property in and at law the right to the possession of the 
 goods described in the bill of lading, to maintain an action 
 against any one who, without justification or legal excuse, 
 wrongfully converts them. 3 Such transfer of a bill of lading 
 operates as a delivery of the goods while in the possession of 
 the carrier, and is as effectual as if the goods having arrived 
 an actual delivery were made, vesting a general or special 
 ownership in such property. 4 The transfer effects an appro- 
 
 ry's Sons v. Bank, 25 Ohio St. 360', ton & L. R. R. Co. 9 Am. & E. R.R. 
 
 Holmes v. Bailey, 92 Pa. St. 57; Cas. 76; Hathaway v. Haynes, 124 
 
 Holmes. Bank, 87 Ib. 525; Gibson Mass. 311; Cairo Nat. Bank v. 
 
 v. Stevens, 8 How. 384; Lee a.Bowen, Crocker, 111 Ib. 163; DeWolf v. 
 
 5 Biss. 154; Glyn v. Docks Co , L. R. Gardner, 12 Cush. 19 ; Glyn E. & 
 
 7 App. 591; Bardick . Sewell, 13 W. Incl. Docks Co. L.R. 7 App. 591. 
 
 Q B. D. 159. 606. 
 
 1 Gibson v. Stevens, 8 How. 384; 4 Pollard v. Vinton, 105 U. S. 3; 
 
 Farmers' Bank v. Logan, 74 N. Y. Dows v. Greene, 24 N. Y. 638; Com- 
 
 568; Commercial Bank v. Pfcifer, 22 mcrcial Bank v. Pfcifer, 22 llun,327; 
 
 Hun, 327. Meyerstein v. Barber, L. R. 2 C. P. 
 
 1 First Nat. Bank v. Kelly, 57 N. 53 (Erics, C. J., Willes, Keating. J. 
 
 Y. 34 ; Farmers' Nat. Bank v. Lo- J.) Ib. 675 (Lush, J.) 4 H L. 325 
 
 gan, 74 Ib. 568. (Hatherly, Ld.Chan.); Glyn v. E. & 
 
 s Dows v. National Exchange "W. Ind. Docks Co. L. R. 7 App. 591, 
 
 Bank, 91 U. S. 618; Forbes v. Bos- 606.
 
 508 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 priation of the goods, and change in their possession, for the 
 benefit of the pledgee advancing money, without notice of 
 equities, on the bills of lading. 1 It has always been consid- 
 ered a pledge of the goods covered by its terras, 5 or a mort- 
 gage of the goods and the returns, subject to be defeated by 
 a performance of the conditions, the holder of the bill being 
 a mortgagee in actual possession.* 
 
 381. THE PLEDGE OF BILLS OF LADING UNDER IN- 
 DORSEMENT. In the absence of statutory enactments mak- 
 ing bills of lading negotiable instruments in the same sense 
 as bills of exchange and promissory notes, the indorsement 
 of a bill of lading is not such a written contract having a 
 fixed, definite meaning in the law, and presumably com- 
 plete in itself, as to exclude from consideration all express 
 parol agreements as to the conditions annexed to their 
 transfer ; nor all inquiry into the transactions out of which 
 they arise. 4 A bill of lading is properly transferable by 
 indorsement, where made to the order of a particular person 
 named, or assigns. When presented by the person actually 
 named, the necessity for indorsement does not exist, and a 
 valid delivery may be made by a shipowner or dock com- 
 pany to such consignee holding the " second" of a set of bills 
 of lading unindorsed, although the *' first " of the same be 
 pledged indorsed for value, upon a bona fide loan, but of 
 which neither shipowner nor dock company are chargeable 
 with notice. 5 The transfer by indorsement where made to 
 order of A, " or assigns," is necessary to pass the title to 
 
 1 Holmes v. Bailey, 92 Pa. St. 57; a Conrad v. Atlantic Ins. Co. 1 Pet. 
 
 Holmes v. German' Security Bank, 447; Bank of Rochester v. Jones, 4 
 
 87 Ib. 525; First Nat. Bank v. Kelly, N. Y. 497; Marine Bank v. Wright, 
 
 57 N. Y. 84; Emery's Sons v. Irving 48 Ib. 1; Farmers' Nat. Bank v. Lo- 
 
 Nat. Bank, -25 Ohio St. 360; Lee v. gan. 74 N. Y. 568. 
 
 Bowen, 5 Biss. 154. * Security Bank v. Luttgren, 29 
 
 * First Nat. Bank v. Kelly, 57 N. Minn. 862; Dows v. Bank, 91 U. S. 
 
 Y. 84; Pettit v. First Nat. Bank, 4 618, 633. 
 
 Bush, 334; Meyerstein v. Barber, L. Glyn c. E. & W. Ind. Docks Co., 
 
 R. 2 C. P. 676 (Martin, B.). L. R. 7 App. 591. .
 
 BILLS OF LADING AS COLLATEEAL. 
 
 509 
 
 the goods. 1 Indorsements in blank are sufficient to pass the 
 legal title,* but an indorsement, without delivery, is a 
 nullity. 8 
 
 Indorsement of the bill of lading is required in England 
 to pass the title to the property represented by it, although 
 where actual possession of the property has been obtained, 
 under an unindorsed bill of lading, the title of the holder of 
 the bill is protected.* Ordinarily, no rights can be acquired 
 under the delivery of an unindorsed bill of lading. In a 
 leading case, at an early day, a consignor of goods sent to a 
 consignee, with the usual invoice, an unindorsed bill of 
 lading, and at the same time, forwarded an indorsed bill of 
 lading to his agent, accompanied by a bill of exchange, to 
 be presented for acceptance, upon the accomplishment of 
 which the indorsed bill of lading was to be delivered. Upon 
 a refusal to accept the bill of exchange, the title to the 
 property remained in the consignor, no interest passing by 
 the mere delivery of an unindorsed bill of lading. 5 In a 
 later case, where no bill of lading was sent to the consignee 
 with the invoice of the goods, but the bill, attached to a 
 bill of exchange drawn upon the consignee, was sent to the 
 
 1 Conrad v. Atlantic Ins. Co. 1 
 Pet. 445; The Thames, 14 Wall. 106; 
 Gibson . Stevens, 8 How. 384; 
 Shaw. Railroad Co. 101 U. S. 564; 
 Walter. Ross, 2 Wash. 283; Michi- 
 gan Central R. R. Co. v. Phillips, 60 
 111. 198; Western Union R. R. Co. 
 v. Wagner, 65 Ib. 198; Skilling v. 
 Bollman, 73 Mo. 665; Thompson v. 
 Dominy, 14 M. & W. 403; Cald- 
 well v. Ball, 1 Term, 205; Wright v. 
 Campbell, 2 Burr. 2051; Kreft v. 
 Thompson, L. R. 10 Ex. 285 ; Short 
 D. Simpson, L. R. 1 C. P. 248; Glyn 
 v. E. & W. I. Docks Co., L.R. 7 App. 
 591 ; Henderson . Comptoir, L. R. 
 5 Pr. C. 253. 
 
 * Shepherd v. Harrison, L. R. 4 Q. 
 
 B. 204; Hobart v. Littlefield, 13 R. I. 
 341. 
 
 3 Bufflngton v. ^Curtis, 15 Mass. 
 528. 
 
 4 Kreft v. Thompson, L. R. 10 Ex. 
 285; Short v. Simpson, L. R. 1 C. 
 P. 248; Shepherd . Harrison, L. R. 
 4 Q. B. 204 ; Coxe v. Harden, 4 East, 
 211, 217; Thompson v. Dominy, 14 
 M. & W. 403; Wait v. Baker, 2 Ex. 
 1 ; Henderson v. Comptoir, L. R. 5 
 Pr. C. 253. 
 
 6 Brandt v. Bowiby, 2 B. & Ad. 
 932. A mere delivery of an unin- 
 dorsed bill of lading is not sufficient 
 to constitute an appropriation of the 
 property. Wait t>. Baker, 2 Ex. 1, 5.
 
 510 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 agent of the consignor at the same place to be delivered 
 upon acceptance of the bill of exchange, Cockburn, C. J. of 
 the Court of Queen's Bench, said : " Here we have not an 
 unindorsed bill of lading sent to the consignee, but no bill of 
 lading at all sent. I see no difference in principle between 
 sending a bill of lading which, not being indorsed, is inoper- 
 ative and amounts to nothing, and not sending a bill of lad- 
 ing at all." 1 
 
 382. THE PLEDGE OF BILLS OF LADING UNINDOHSED. 
 A bill of lading issued by a carrier on land or \vater is, in 
 the United States, in the absence of statutory enactment, 
 transferable by delivery. The effect of such delivery is to 
 vest in the pledgee, who has made a bona fide advance, the 
 like legal title to the property, and the right of possession, as 
 in the case of an indorsement of the bill of lading. The 
 pledgee takes more than the mere equitable title which passes 
 upon the delivery unindorsed of a bill of exchange or prom- 
 issory note. The bill of lading is the only evidence of own- 
 ership of his property which, after delivery to the carrier, 
 the pledgor has. It is the voucher or acknowledgment by 
 which the owner is enabled to show his right to the prop- 
 erty after such delivery, and his only way to transfer such 
 property is by indorsement and delivery, or by delivery 
 alone, of the documents of title which he holds. A delivery 
 of the bill of lading is generally sufficient.* A bill of lading, 
 
 1 Shepherd v. Harrison, L. R. 4 Q. Miss. R. R. Co. v. Kerr, 49 111. 459: 
 
 B. 204. DeWolf v. Gardner. 12 Gush. 19; 
 
 'Michigan Central R. R. Co. v. Hathaway v. Haynes, 124 Mass. 311; 
 
 Phillips, 60 111. 198; Peters B.Elliott, National Bank v. Dearborn, 115 
 
 78 Ib. 327; Allen . Williams, 12 Mass. 219; Forbes v. Boston & L. R. 
 
 Pick. 302 (Shaw, C. J.); Bank of R. Co. 9 Am. & E. R. R. Cas. 76; 
 
 Rochester v. Jones, 4 N. Y. 497 ; Holmes v. German Security Bank, 
 
 Marine Bank v. Wright, 46 Barb. 87 Pa. St. 525; The Thames, 14 Wall. 
 
 45 ; City Bank v. Rome R R. Co. 44 98 ; Dows v. National Exch. Bank, 
 
 N. Y. 136; Merchants' Bank v. Union 91 U. S. 618; Nathan v. Giles, 5 
 
 R. R. Co. 69 Ib. 373; Becker v. Hall- Taunt. 558; Lickbarrow v. Mason, 
 
 garten, 86 N. Y. 167; Farmers' etc. 1 H. Bl. 360: Meyerstein v. Barber. 
 
 Bank . Lognu, 74 Ib. 568; Ohio & L. R. 4 II. L. 325; 2 C. P. 33.
 
 BILLS OF LADING AS COLLATERAL. 511 
 
 however, although symbolical of the property represented 
 thereby, and like the property it represents, may be trans- 
 ferred by delivery, is unlike commercial paper in this, 
 that the assignee cannot acquire a better title to the prop- 
 erty thus symbolically delivered than his assignor had at the 
 time of the assignment. 1 
 
 A bill of lading making the property deliverable to the 
 consignee " or bearer," passes the title to the property de- 
 scribed, upon delivery of such bill by the shipper to a holder 
 for value, without notice, as against everybody but a prior 
 assignee for value of another of the set of bills. 8 The mere 
 insertion of the name of the consignee in the bill of lading 
 passes no right or title to him until delivery of the bill of 
 lading by some one authorized; 3 although the carrier may 
 treat the consignee as the owner of the goods, until notice, 
 either actual or presumptive, that one of the set of bills of 
 lading is held by a pledgee or other holder for value, with- 
 out notice. A delivery to such consignee, upon the produc- 
 tion of an unindorsed bill of lading, is in the absence of such 
 notice, a good discharge to the shipowner, or any one hold- 
 ing the goods, and subject to the same liabilities. 4 Even 
 where such bill of lading is drawn " to order," a delivery 
 thereof unindorsed is sufficient to pass the title to the prop- 
 erty, if such be the intention of the parties to the transfer. 8 
 
 1 Emery . National Bank, 25 4 Stone v. "West St. Louis Transfer 
 
 Ohio St. 360 ; Toledo Ry. Co. v. Gil Co. 9 Bradw. 48 ; O'Dougherty v. 
 
 vin, 81 111. 511. Railroad Co. 1 Thomps. & C. 477; 
 
 * Allen v. Williams, 12 Pick. 297; Sweet v. Barney, 23 N. Y. 335 ; Law- 
 
 Buffington v. Curtis, 15 Mass. 528 ; rence v. Minturn, 17 How. 100 ; 
 
 Marine Banks. Wright, 46 Barb. 45; Glyn . East & W. India Docks Co., 
 
 Nathan v. Giles, 5 Taunt. 558 ; L R. 7 App. 591. 
 
 Meyerstein v. Barber, L. R 4 H. L. * City Bank v. Rome etc. Ry. Co. 
 
 325 ; Skilling v. Bollman, 73 Mo. 44 N. Y. 186 ; Merchants' Bank v. 
 
 665; National Bank v. Wallbridge, Union R. R. Co., 69 Ib. 373 ; Becker 
 
 19 Ohio St. 419 ; Emery D. Irving v. Hallgarten, 86 Ib. 167 ; Walter V. 
 
 Nat. Bank, 25 Ib. 360. Ross, 2 Wash. 283 ; Wiseman v. Van- 
 
 3 Skilling v. Bollman, 73 Mo. 665 ; derpat, 2 Vern. 203. 
 Allen v. Williams, 12 Pick. 297; 
 Bufflngton v. Curtis, 15 Mass. 528.
 
 512 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 383. THE PLEDGE OF UNINDOBSED BILLS OF LADING, 
 AS TO THIRD PARTIES. The pledgee for value, without 
 notice, of a bill of lading, receiving the same by delivery un- 
 indorsed, is vested with a title to the property covered by 
 the bill which is preferred to that of a factor or agent of the 
 consignor to whom the goods were consigned, although the 
 consignor be indebted to him for advances made on previous 
 shipments. 1 And where such factor or agent has obtained 
 possession of the goods, and sold the same, a pledgee for 
 value of the bill of lading, who has advanced funds upon a 
 bill of exchange drawn for the purchase money of the goods, 
 the acceptance of which has been refused by the factor or 
 agent, is entitled to an action as against such factor or 
 agent, for the value of the property, or he may ^ratify the 
 sale, and recover the proceeds.* The pledgee's title, re- 
 ceiving a bill of lading unindorsed, is supported as again a 
 creditor of the pledger who has levied an attachment upon 
 the goods.* And also as against an owner of property cov- 
 ered by a bill of lading, who has made a sale and delivery 
 of it to a third person, although the contract required pa}'- 
 ment before delivery. The third person, having obtained 
 possession, and fraudulently shipped the property, received 
 a bill of lading, which he pledged as collateral security for 
 a bill of exchange, upon which advances were made in good 
 faith, and without notice. 4 The claims of a pledgee for value 
 were supported, where bona tide advances were made before 
 the bill of lading was issued, the property being under con- 
 trol of the pledgee, and the latter subsequently receiving a 
 bill of lading unindorsed.' 
 
 1 Bank of Rochester . Jones, 4 * Michigan Central R. R. Co. t>. 
 
 N. Y. 497; Emery v. Irving Nat. Phillips, 60 111. 190; National Bank 
 
 Bank, 23 Ohio St. 360, 866. v. Dearborn, 115 Mass. 219. 
 
 8 Davenport Nat. Bank . Horn- * Becker v. Hallgartcn, 86 N. Y. 
 
 eyer, 45 Mo. 145; Allen v. Williams, 167; Dunbrowt). McDonald, SBosw. 
 
 12 Pick. 297. 130; Winne v. McDonald, 39 N. Y. 
 
 * Pettit v. Firet Nat. Bank, 4 244 ; Cartwright . Wihncrding, 24 
 
 Bush, 334. Ib. 521.
 
 BILLS OF LADING AS COLLATERAL. 513 
 
 384. PLEDGES OF BILLS FOR ANTECEDENT DEBT AND 
 FCTCTRE ADVANCES. The transfer of bills of lading by the 
 owner as collateral security for an antecedent debt, without 
 more, constitutes the pledgee a holder for value, in the usual 
 course of business. The negotiation of a bill of lading, with 
 or without indorsement, passes the legal title to the prop- 
 erty represented by it, and has the same effect as a delivery 
 of the goods, and is in fact the only delivery which can be 
 made of such property while in transitu ; and as a pledge of 
 personal property, with possession, for a pre-existing debt is 
 valid, a pledge of a bill of lading, vesting constructive pos- 
 session of the property in the pledgee is, under the same 
 circumstances, equally valid. 1 As said by an English judge, 
 " If the pledgee had said, * I cannot take this bill of lading, 
 as the consideration would be past ; do it with the broker 
 next door, and give me his check,' that would be valid ; but 
 is it desirable to introduce such niceties into commercial 
 law ?" 2 A pledgee of a bill of lading for an antecedent 
 debt is supported as against a vendor's right of stoppage in 
 transitu, and as against subsequent purchasers of the prop- 
 erty, for value, without notice, claiming them under a du- 
 plicate bill of lading, indorsed, and with actual delivery of 
 the goods. 8 New consideration is sufficient to support a 
 pledge of a bill of lading for an antecedent debt, as an aban- 
 donment of threatened legal proceedings, or the surrender 
 of other securities, etc. 4 In jurisdictions where the re- 
 stricted rule prevails, the transfer of a bill of lading as col- 
 lateral security for an antecedent indebtedness, without 
 further consideration, will not constitute the indorsee a 
 
 1 Skilling v. Bollman, 73 Mo. 665; 692; Macnee v. Gorst, L. R 4 Eq. 
 
 Tiedman v. Knox. 53 Md. 612; Hal- 315: Portalis v. Tetley, L. R. 5 Ib. 
 
 sey . Warden, 25 Kan. 128; Peters 140. 
 
 v. Elliott, 78 111. 325. * Skilling v. Bollman, 73 Mo. 665; 
 
 s Leask v. Scott, L. R. 2 Q. B. D. Peters v. Elliott, 78 111. 325; Halsey 
 
 376 (Bramwell, J.); overruling on v. Warden, 25 Kan. 128. 
 
 this point Rodger v. Comptoir 4 Leask v. Scott, L. R. 2 Q. B. D. 
 
 D'Escompte, L. R. 2 Pr. C. 405; 37G. 
 Jewan v. Whitworth, L. R. 2 Eq. 
 33
 
 514 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 holder for value so as even to preclude the vendor of the 
 goods from exercising the right of stoppage in transitu. 1 
 
 A pledge of bills of lading was supported upon an agree- 
 ment to furnish future advances as against other pledgees 
 chargeable with notice of such agreement when making 
 their own advances. A shipment of goods was made by 
 the owner, under an agreement by which the consignee had 
 already advanced funds, and agreed to make further ad- 
 vances upon receiving the bills of lading as security. The 
 legal title to the property vesting in the pledgee under the 
 agreement, a third person, receiving another bill of lading 
 of the same goods obtained by fraud, although before the 
 actual delivery of the first bill to the pledgee, but who 
 made no advances until after knowledge of the pledge of the 
 first bill, could acquire no interest in the proceeds of the 
 property, except as subject to the payment of the subse- 
 quent as well as the prior advances of the first pledgee.* 
 
 385. AND OF REVERSIONARY INTERESTS IN BILLS OF 
 LADING. A consignee, or commission merchant, or factor 
 who has pledged a bill of lading as security for a debt 
 which does not exhaust the whole value of the goods, may 
 re-pledge the same for the remainder of its value to a third 
 person, to secure another debt. Notwithstanding the first 
 pledge, the goods or documents of title remain in the con- 
 trol of the consignee or factor being in possession of another 
 person in his behalf, to the extent to which they are not 
 exhausted by such pledge. They are subject to redemption 
 upon the payment of the debt, at maturity, and the princi- 
 pal, after such pledge and re-pledge, cannot withdraw them 
 except upon the equitable terms of discharging the valid 
 claims of the pledgees. Upon a notice of the re-pledge to 
 the first pledgee, and his assent to hold any surplus of the 
 
 1 Loeb v. Peters, 53 Ala. 243; 'Stevens v. Boston R R. Co. 8 
 Harris v. Smith. 17 N. Y. 249; Les- Gray, 262. 
 sassier v. Southwestern R. R. Co. 2 
 Wood's C. C. 35.
 
 THE PLEDGEE AND THE CARRIER. 515 
 
 proceeds for the benefit of the second pledgee, equity can 
 give no relief to the principal as against the pledgees. 
 In the event of intervening bankruptcy, the principal may 
 prove his claim against the estate of the consignee or 
 factor. 1 
 
 CHAPTER XL. 
 
 THE PLEDGEE'S TITLE, AS AGAINST CARRIER 
 
 386. Delivery of goods essential to valid bill of lading. 
 
 387. Bill of lading valid, upon subsequent delivery. 
 
 388. Without delivery, no title acquired by innocent pledgees, 
 
 389. No recovery by pledgee, as against carrier. 
 
 390. The exceptional rule in New York, under equitable estoppel. 
 
 391. The like rule applied in Kansas and Nebraska. 
 
 392. The bill of lading, as a receipt, open to explanation. 
 
 393. Estoppel of carrier to explain receipt as against pledgees. 
 
 394. The pledgee's rights against carrier for non-delivery. 
 
 395. Notice to carrier, when required of pledgee. 
 
 396. The pledgee of the first indorsed of bills preferred. 
 
 386. DELIVERY OF GOODS ESSENTIAL TO VALID BILL 
 OF LADING. The delivery of goods represented by a bill 
 of lading to a carrier by land or water is of essential im- 
 portance to give the bill of lading validity. Without such 
 delivery, in fact, no bill of lading, binding upon the prin- 
 cipal, can be issued by any master of a ship or agent of an 
 inland transportation company. The two-fold character of 
 the bill of lading enforces the rule, as it purports to be a 
 receipt for the property described therein, and a contract 
 to carry and deliver the same, according to its terms. Such 
 contract can have no existence in the absence of an actual 
 receipt of goods. The entire bill of lading in such event is 
 
 1 Portalis v. Tetley, L. R. 5 Eq. 140.
 
 510 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 a nullity and worthless, in the hands of any holder for value. 
 Nor is the issue of such bill of lading supported upon any 
 rule of equitable estoppel as founded upon the acts of the 
 shipmaster or agent of an inland transportation company, 
 clothed with apparent authority to issue the same. Until 
 receipt of the goods, no apparent authority arises to issue 
 bills of lading, and no agency can exist to bind the principal. 
 No duty or liability arises as to the shipowner or inland 
 carrier as to property never received. It is doubtful if a 
 transportation company could, by a vote of its stockholders 
 or directors, issue a valid bill of lading where no goods 
 were received by it. The result follows necessarily from 
 the fact that bills of lading are not negotiable instruments, 
 or representations of money ; but are documents of goods, 
 symbols of property, and their transfer as collateral security 
 for advances is a pledge of the goods. They perform dif- 
 ferent functions from commercial paper. Inquiry may 
 always be made as to the original transaction, and if the 
 issue of the bill of lading is a fraud, by reason of non-deli- 
 very, no rights can be acquired thereunder by any one. 1 
 
 337. BILL OP LADING VALID UPON SUBSEQUENT DE- 
 LIVERY. Where a bill of lading has been issued by a ship- 
 master or agent of an inland transportation company, upon 
 a promise of immediate delivery, a delivery of the goods in 
 accordance with such promise, will validate the bill of lading, 
 
 1 Pollard . Vinton, 105 U. S. 3; Ry. Co. 22 La. Ann. 446; Baltimore 
 
 The Lady Franklin, 8 Wall. 325; & O.R.R.Co. t>. Wilkins, 44 Md. 11; 
 
 The Keokuk, 9 Ib. 517, 519; Ticdman v. Knox, 53 Ib. 612; Dean 
 
 Schooner Freeman v. Buckingham, . King, 22 Ohio St. 118. A bill of 
 
 18 How. 182; Robinson v. Memphis lading signed in blank by the master 
 
 R.R.CO. 9 Fed. Rep. 129; The Loon, is void, even in the hands of a bona 
 
 7 Blatchf. 244; The Joseph Grant, 1 fide holder. The Joseph Grant.supra. 
 
 Biss. 193 ; The Marengo, 6 McLean, Lickbarrow v. Mason, 1 Smith's L. 
 
 487; The Mayflower, 3 Ware, 300; Cas. 1205, m. p. 900; Jessel v. Bath, 
 
 King v. Shepherd, 3 Story, 349, 360; 2 Ex. 267; Brown v. Powell etc. 
 
 Stone v. West St Louis Transfer Co. Co. 10 C. P. 562 ; Grant v. Norway, 
 
 9 Bradw. 48; Hunt v. Mississippi 10 C. B. 665.
 
 THE PLEDGEE AND THE CARRIER. 517 
 
 although there be no goods actually received at the time of 
 its issue, and the bill of lading has been pledged as collateral 
 security for an advance, prior to the actual delivery of the 
 property. The receipt of the goods by the carrier has a re- 
 troactive effect, as if the delivery of the goods and the exe- 
 cution of the bill of lading had been concurrent acts. 1 
 There is no element of illegality or any such vice in the 
 contract that it is void or incapable of confirmation by acts 
 of the parties ; and the old bill of lading is as good as a new 
 one issued on delivery of the goods, upon the consent of the 
 parties. 2 Nor where the issue of bills of lading, where no 
 goods had been delivered for shipment, is made a statutory 
 offense, with a view to prevent frauds, will the statute be 
 so construed as to render inoperative a subsequent delivery 
 of the goods. If this were allowed, the act itself would be 
 made an aid to fraud. 8 
 
 388. WITHOUT DELIVERY, NO TITLE ACQUIRED BY 
 INNOCENT PLEDGEE FOR VALUE. The invalidity of a bill of 
 lading issued by a shipmaster or agent of an inland trans- 
 portation company, where no goods have in fact been re- 
 ceived for carriage, affects the title of third persons acquir- 
 ing interests in such bills of lading as it does the title of the 
 immediate parties. A lender of money, although acting in 
 good faith, and without notice of the fraud, who advances 
 upon a bill of lading thus illegal and void, can acquire no 
 better title than is possessed by the person from whom he 
 receives the same as collateral. Nor is such ship-owner or 
 inland transportation company estopped, as against such 
 innocent person, to show the facts, as the act of the agent 
 is absolutely void. 4 The rights of a pledgee of bills of 
 
 1 Halliday v. Hamilton, 11 Wall. Co. 16 Fed. Rep. 57 (Hammond, 
 
 560; The Idaho, 93 U. S. 575; The J.). 
 
 L. J. Farwell, 8 Biss. 61; Robinson ' The Idaho, 93 U. S. 575, 582. 
 
 . Memphis Ry. Co. 16 Fed. Rep. 57; 4 Pollard v. Vinton, 105 U. S. 5 ; 
 
 Rowley . Bigelow, 12 Pick. 314. Schooner Freeman v. Buckingham, 
 
 * Robinson v. Memphis & C. Ry. 18 How. 182; The L. J. Farwell, 8
 
 518 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 lading advancing money thereon in good faith and without 
 notice of the fraud that no goods had been delivered, and 
 that the bill of lading was void, were considered by the 
 United States Supreme Court, in Schooner Freeman v. 
 Buckingham, 1 the decision being characterized as *' conclu- 
 sive" in a late case in the same court. 9 The court say: 
 " The taker [of a bill of lading] assumes the risk, not only 
 of the genuineness of the signature, and of the fact that the 
 signer was the master of the vessel, but also of the apparent 
 authority of the master to issue the lull of lading. We say 
 the apparent authority, because any secret instructions by 
 the owner, inconsistent with the authority with which the 
 master appears to be clothed, would not affect third persons. 
 But the master of a vessel has no more apparent authority 
 to sign bills of lading than he has to sign bills of sale of the 
 ship. He has an apparent authority, if the ship be a general 
 one, to sign bills of lading for cargo actually shipped ; and 
 he has also authority to sign a bill of sale of the ship when, 
 in case of disaster, his power of sale arises. But the au- 
 thority in each case arises out of and depends upon a par- 
 ticular state of facts. It is not an unlimited authority in 
 one case more than in the other ; and his act in either case 
 does not bind the owner even in favor of an innocent pur- 
 chaser, if the facts on which his power depended did not 
 exist; and it is incumbent upon those who are about to 
 change their condition upon the faith of his authority, to 
 ascertain the existence of all the facts upon which his au- 
 thority depends." 
 
 Biss. 61; The Loon, 7 Blatchf. 246; Hunt v. Miss. Ry. Co. 29 Ib. 446; 
 
 Robinson v. Memphis R. 11. Co. 9 Brown v. Powell etc. Co. L. R. 10 C. 
 
 Fed. Rep. 129, 140; 8 c. 16 Ib. 57; P. 562; Jesscll . Buth, L. R. 2 Ex. 
 
 Sears . Wingate, 3 Allen, 103; Stone 267; Grant v. Norway, 10 C. B. 
 
 . W. St. L. etc. Co. 9 Brad w. 48; B. 104; Hubbersty . Ward, 8 Exch. 
 
 &O.R.R. Co. v. Wilkins, 44 Md. 11; 330; Coleman v. Riches, 16 C. B. 
 
 Tiedman t>. Knox, 53 Ib. 612; Nat- 104. 
 
 ional Bank . Lavielle, 52 Mo. 380; ! Schooner Freeman v. Bucking 
 
 Dean v. King. 22 Ohio St. 118; Fel- ham, 18 How. 182. 
 
 lows t>. Powell, 16 La. Ann. 316; * Pollard v. Vinton, 105 U. S. 5.
 
 THE PLEDGEE AND THE CARRIER. 519 
 
 389. NO RECOVERY BY PLEDGEE, AS AGAINST CAR- 
 RIER. The rule under which, as stated, pledgees of bills of 
 lading, fraudulently issued by agents or shipowners, with- 
 out any receipt of goods, although paying value, in good 
 faith, and without notice, can acquire no right of action as 
 against the carrier or shipowner, was applied in the leading 
 case of Schooner Freeman #. Buckingham. Two bills of 
 lading were issued by the shipmaster, certifying that the 
 property described had been received upon the vessel, and 
 stating the contract of carriage and the point of delivery. 
 These bills of lading were offered by the consignee as col- 
 lateral security for an advance, and a bona fide loan was 
 made. It subsequently appeared that no such property, as 
 stated in the bills of lading, had ever been received on board 
 the vessel, the issue of the bills of lading being a fraud on the 
 part of the person having control of the ship. The pledgee 
 libelled the boat, but as against the shipowner, no recovery 
 was allowed. 1 Upon a shipment of cotton by railroad, a 
 cotton merchant in New York accepted and paid a draft 
 drawn by a buyer of cotton in Memphis, a bill of lading of 
 the cotton being attached to the draft as collateral security. 
 The merchant demanded the cotton of the railroad company, 
 but it was shown that the bill of lading had been issued 
 fraudulently by its agent, no cotton having in fact been 
 received ; and that the agent had no authority to sign bills 
 of lading until property had been delivered by the con- 
 signor.* The rule as stated was applied in a case where it 
 was sought to charge the owner of a steamboat engaged in 
 carrying cotton from a southern port, upon a bill of lading 
 for which no cotton had in fact been received. A bill of 
 lading, however, had been issued, describing certain bales 
 of cotton as being shipped upon the steamboat, to which a 
 bill of exchange was attached and forwarded to the con- 
 signees, who, before the arrival of the steamboat, paid the 
 draft, and received the bill of lading. Upon arrival of the 
 
 1 Schooner Freeman v. Bucking- * Robinson v. Memphis Ry. Co, 9 
 ham, 18 How. 182. Fed. Rep. 129 ; s. c. 16 Ib. 57.
 
 520 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 steamboat, it appeared that no cotton, as stated in the bill 
 of lading, had ever been delivered on the steamboat, nor on 
 the wharf, nor to the agents of the boat. The act of issuing 
 a bill of lading under such circumstances being clearly 
 beyond the authority of the officer, no recovery was per- 
 mitted as against the shipowner. 1 
 
 390. THE EXCEPTIONAL RULE IN NEW YORK, UNDER 
 EQUITABLE ESTOPPEL. Under the influence of decisions 
 founded on the rules of equitable estoppel as applied to 
 bon a fide holders for value, without notice, of certificates of 
 stock and other indicia of title,* and the consideration that 
 the issue by a shipmaster or agent of a railroad company of 
 a bill of lading under a general authority to issue such doc- 
 uments, is the act of the shipowner or eompany~for which 
 the latter are responsible, the courts of two or .three states, 
 including New York, have declined to follow the rule 
 announced in Grant v. Norway, 8 which is generally approved 
 both in this country and in England. Where a bill of lad- 
 ing, indorsed where required, is in the hands of a third 
 person, a pledgee for value advanced on the faith of the 
 
 1 Pollard v. Vinton, 105 U. S. 5. value advanced in good faith and 
 
 * New York & N. H. R.R. Co. v. without notice, was chargeable with 
 
 SchuyJer. 34 N. Y. 73; McNeil v. notice of the express limitation of 
 
 Tenth Nat. Bank, 46 Ib. 325; Moore the authority of the shipmaster that 
 
 V. Metropolitan Nat. Bank, 55 Ib. no valid bill of lading could be 
 
 41; Griswold v. Haven, 25 Ib. 595; issued where no delivery of goods 
 
 Brown v. Bowen, 30 Ib. 519; Shap- had been made. The fact that the 
 
 ley v. Abbott. 42 Ib. 443. representations of the carrier were 
 
 8 10 C. B. 665. In Grant . Nor- made directly to the assignee, in 
 
 way, a bill of lading was issued by a Armour v. Railroad Co., infra, was 
 
 master of a ship for goods never re- considered as distinguishing the 
 
 ceived, and was pledged as collateral case from Grant . Norway, where 
 
 security for a bill of exchange on the assignee simply acquired the 
 
 the consignees discounted by the title of the fraudulent consignee. In 
 
 money lender, in good faith, and such case, the assignee of a chose in 
 
 without notice. Payment of the action takes no better title than that 
 
 bills being refused, the pledgee sued of the person from whom he buys, 
 
 the shipowner. No recovery, how- Griswold . Haven, 25 N. Y. 604, 
 
 ever, was allowed, as any person 606. 
 taking a bill of lading, even for
 
 THB PLEDGEE AND THE CARRIER. 521 
 
 representations stated in the bill of lading, without notice 
 of equities, the carrier is not permitted to set up any fraud 
 of the shipper, or the non-delivery of the goods, or even 
 forgery in the original transaction, where the bill of lading 
 is not itself tainted with forgery. The decisions are founded 
 upon the rule of estoppel by conduct, applied as well to 
 corporations as individuals, that where one of two innocent 
 persons must suffer by the fraud or deceit of a third, the 
 loss should fall upon the one who has enabled the third 
 person to commit the fraud or deceit. 1 
 
 The rule was applied in a case in New York where an 
 agent of a railroad company issued two bills of lading deliv- 
 erable to the order of A, the consignee, the agent being 
 informed at the time of delivery, that it was the intention of 
 the person to use them at a bank. This was done, a bank ad- 
 vancing money to the shipper, upon discount of drafts drawn 
 upon the consignee, the bills of lading being attached. Upon 
 presentation to the consignees, the drafts were paid upon 
 the faith and credit that the property had been shipped as 
 stated in the bills of lading. In fact, no goods had been 
 delivered at the time of issuing the bills of lading, although 
 a warehouse receipt for them was handed to the agent. The 
 warehouse receipt, however, was a forgery, and the shipper 
 had no property such as was pretended to be specified by 
 such receipt. The act of the agent in issuing the bills of 
 lading, being within his apparent authority, the railroad 
 company were estopped as against an innocent person 
 advancing value on the credit of the representations con- 
 tained in the bill, to set up the fraud, and the plaintiffs, the 
 consignees, were allowed to recover.* In another, and 
 later case, a bill of lading was issued by a railroad agent, 
 stating that the goods described were shipped by A, and 
 
 'Hem 1). Nichols, 1 Salk. 289; Ib. 189; Sioux City Bank c. First 
 
 Savings Bank . Railroad Co. 20 Nat. Bank, 10 Neb. 556. 
 
 Kan 529; Armour v. Mich. Cen. R. 8 Armour v. Michigan Cen. R. R. 
 
 R. Co. 65 N. Y. Ill; Farmers' and Co. 65 N. Y. 111. 
 Mechanics' Bank v. Erie Ry. Co. 72
 
 522 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 were to be delivered to the order of a bank, the plaintiff. 
 Upon presentation of the bill of lading, the bank advanced 
 money thereon in good faith, and upon the arrival of the 
 goods at their destination, caused their sale, and re-imbursed 
 itself for its advances. It appeared that the property was 
 not owned by A, but by B, who had already obtained a 
 loan upon the credit of the goods, before A obtained posses- 
 sion of them, and misappropriated them. The first pledgee 
 recovered the value of the property from the second pledgee, 1 
 who then brought an action against the railroad company. 
 Applying the rule that a company is responsible for the 
 wrongful torts and negligence of its agents, the railroad 
 company was required to pay the pledgee the full value of 
 the property, as the agent was chargeable with ^knowledge 
 that A was not the owner of, nor a purchaser of the goods.* 
 
 391. THE LIKE RULE APPLIED IN KANSAS AND 
 NEBRASKA. The rules of equitable estoppel were also 
 enforced as against a railroad company in favor of a bona 
 fide pledgee for value, without notice, in a case in Kansas, 
 where an agent, having authority to issue bills of lading, 
 was induced by fraudulent statements of the consignor to 
 issue first one, and then a second bill of lading, both pur- 
 porting to be originals. One of the bills was sold to a bona 
 fide purchaser for value, who subsequently obtained the 
 goods. The other, issued shortly afterwards, was deposited 
 as collateral security with a bank for an advance of money 
 made upon the faith of the representations contained in the 
 bill of lading, in good faith, and without notice. Evidence 
 was given to show a custom of railroads to issue but one 
 bill of lading, and the bill offered as collateral security pur- 
 porting to be an original, the carrier was estopped to dispute 
 its terms as to the receipt of the property. The pledgee was 
 
 1 Manufacturers' Bank v. Farm- * Fanners' Bank c. Erie Ry. Co. 
 era' Bank, 60 N. Y. 40. 72, N. Y. 189.
 
 THE PLEDGEE AND THE CARRIER. 523 
 
 allowed to recover from the railroad company the amount of 
 his advances. 1 
 
 In another case, in Nebraska, where bills of lading were 
 issued by an agent of a railroad company, for several car- 
 loads of grain which were never shipped, and the bills, with 
 other bills for actual shipments, were attached as collateral 
 security for the payment of drafts discounted by a bank 
 for the full value of such supposed shipments, and forwarded 
 for payment. The drafts being protested, and the shipper 
 having absconded leaving no property, the railroad company 
 was estopped to deny the representations on the bills of 
 lading, made by its authorized agent, as against a bona fide 
 pledgee, holding the same for value advanced upon the 
 credit of such representations, and without notice of the 
 fraud or other equities. 8 
 
 392. THE BILL OF LADING, AS A RECEIPT, OPEN TO 
 EXPLANATION. A bill of lading is both a contract and a 
 receipt. As a contract, it is an agreement safely to carry 
 the property ; as a receipt, it is a representation that the 
 goods have been received, and of their apparent condition. 8 
 If the shipment be made by vessel, and as usual in such 
 cases the bill of lading is issued in a set of three, one being 
 retained by the shipmaster, the actual contract, in 
 case of dispute, is gathered from the bills of lading delivered 
 by the shipmaster to the consignor. The ship's bill is 
 designed only for the information and convenience of the 
 master ; and not for evidence between the parties of what 
 the agreement is. Should it differ from the others, the 
 latter are considered as the true and only evidence of the 
 contract. 4 So far as a bill of lading is a receipt, and as be- 
 tween the original parties, it is always open to explanation, 
 
 1 Wichita Savings Bank v. Rail- 3 Pollard v. Vinlon, 105 U. S. 3, 8; 
 
 road Co. 20 Kan. 529. Relyea v. N. H. Rolling Mill Co. 42 
 
 9 Sioux City Nat. Bank v. First Conn. 577. 
 
 Nat. Bank, 10 Neb. 556. 4 The Thames, 14 Wall. 98.
 
 524 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 and any mistake or fraud in the statement of the goods 
 shipped may be shown by parol proof. 1 
 
 In England, under the act now in force, the statements 
 contained in bills of lading relating to the goods are con- 
 clusive evidence of such shipments, where the bill is in the 
 hands of a consignee or indorsee for valuable consideration, 
 unless the holder of the bill has actual notice, at the time of 
 receiving the same that the goods had not been in fact laden 
 on board, or that such misrepresentation is caused with- 
 out default on the part of the shipmaster, and wholly by the 
 fraud of the shipper, or of the holder,- or some person under 
 whom the holder claims. But even under this act it may be 
 shown that the cargo actually received differs in weight 
 from that signed for in the bill of lading, where .the weight 
 mentioned is mere matter of measurement. 9 
 
 393. ESTOPPEL OF CARRIER TO EXPLAIN RECEIPT, AS 
 AGAINST BONA FIDE PLEDGEE FOR VALUE. The rule per- 
 mitting an explanation of so much of a bill of lading as is a 
 receipt is not enforced as against a consignee, who is not a 
 party to the contract, nor an indorsee of a bill of lading, 
 holding the same in good faith as collateral security for an 
 advance made upon the faith of the representations on the 
 the face of the bill. The shipowner or inland transporta- 
 tion company is estopped to deny the truth of the state- 
 ments in the bill of lading to which credit has been given, 
 
 1 Scars v. Wingate. 3 Allen, 103 ; Sprague's Dec. 309 ; Schooner Free- 
 Portland Bank v. Stubbs. 6 Mass, man v. Buckingham, 18 How. 182; 
 422; Ellis P. Willard, 9 N. Y. 529; Pollard v. Vinton. 105 U. S. 3; 
 Meyer . Peck, 28 Ib. 590 ; Dicker- Berkeley v. Watling, 7 Ad. & E. 
 son v. Seelye, 12 Barb. 102; Hunt v. 29 ; Howard v. Tucker, 1 B. & Ad. 
 Mississippi Central Ry. Co. 29 La. 712. 
 
 Ann. 446 ; O'Brien v. Gilchrist, 34 Bills of Lading Act, 18 and 19 . 
 
 Me. 554; Dean v. King, 22 Ohio St. Viet. c. Ill, s. 3; Blanchett v. Pow- 
 
 118 ; Relyea v. N. H. Rolling Mill ell's Co. L. R. 9 Ex. 74; McLean . 
 
 Co. 42 Conn. 577 ; Bates v. Todd, 1 Fleming, L. K. 2 H. L. Sc. 128 ; 
 
 M. & Rob. 106 ; In re Brown, 1 Brown v. Powell Coal Co. L. R. 10 
 
 Biss. 76; Bradstreet v. Heran, 2 C. P. 562 ; Carr v. London & N. W. 
 
 Blatchf, 116 ; Button v. Kettoll. Ry. Co. L. R. 10 C. P. 307.
 
 THE PLEDGEE AND THE CARRIER. 525 
 
 so far as such matters are or ought to be within the knowl- 
 edge of the officers issuing such bills of lading. 1 The issue 
 of a bill of lading acknowledging the receipt of a certain 
 quantity of merchandise, enables the shipper to go upon the 
 market and obtain money, either upon the deposit of such 
 bills of lading as collateral security for an advance, or as the 
 purchase price of the property purporting to be represented 
 thereby. As against a bona fide pledgee, for money ad- 
 vanced, in the usual course of business, and without notice, 
 the want of care of the shipmaster or carrier in issuing a re- 
 ceipt in such bill of lading for an amount of goods exceeding 
 that actually received, forms no defense to an action for 
 the wrong. 9 
 
 The rule mentioned as to the limitations to which explan- 
 ations by a carrier of statements contained in his bill of 
 lading are subject, was enforced in another case, where the 
 owner and master of a vessel signed a bill of lading for a 
 certain quantity of iron, upon a representation of the 
 shippers that the weight was correct. The bill of lading 
 was attached to a draft, and both sent to the consignees, 
 who remitted the amount of the bill after the arrival of the 
 ship, but before the cargo was discharged. It was found 
 afterwards that the iron was short several tons of the 
 amount called for, and payment of freight was refused. 
 The owner of the ship was estopped by his representations 
 in the bill of lading, and in a suit for the freight the con- 
 signees were allowed to set off the amount of their loss, not 
 exceeding the aggregate of .their particular claim. The terms 
 of the bill of lading were not open to explanation as against 
 a deceived consignee,- as it was the duty of the master to 
 ascertain the true weight, or to refuse to sign a clear bill of 
 
 1 Dickerson v. Seelye, 12 Barb, ing Mill Co. supra ; Bradstreet . 
 
 102; Sears a.Wingate, 3 Allen, 103; Heran, 2 Blatchf. 116. And an ac- 
 
 Dows v. Perrin, 16 N. Y. 325; Meyer lion against the master issuing such 
 
 v. Peck, 28 Ib. 590; Bates v. Todd, receipt may be maintained. Tindall 
 
 1. M. & Rob. 106; Dean v. King 22 v. Taylor, 4 El. & BL 210. 
 Ohio St. 118; Relyea . K H. Roll- Meyer v. Peck, 28 K Y. 590
 
 526 QUASI-NEGOTIABLE COLLATERAL, SECURITIES. 
 
 lading, and he knew or had the means of knowing the state- 
 ments were false. 1 
 
 394. THE PLEDGEE'S BIGHTS AGAINST CARRIER FOR 
 NON-DELIVERY. A bill of lading although not possessing all 
 the attributes of a negotiable instrument, is a representative 
 of the property described therein, and its delivery to a 
 pledgee, upon a bona fide advance, in the usual course of 
 business, places such property under his control, to the same 
 extent as if the same were actually delivered. Holding the 
 legal title and right of possession, the pledgee of a bill of 
 lading by indorsement and delivery, where indorsement is 
 required, or by delivery, is entitled to bring an action in his 
 own name against a carrier, who has undertaken the car- 
 riage of such property, for non-delivery, in whole or in part, 
 or for loss or damage to the goods,or for delivery with- 
 out the production of the bill of lading, or any other action 
 based upon the right of possession.* Where there has been 
 a total non-delivery of the property, the pledgee of the bill 
 of lading may sue the carrier in an action of trover for a 
 wrongful conversion, after a proper demand for the goods. 1 
 A bill of lading remains in full force until the engagement 
 of the carrier has been completely fulfilled by a delivery of 
 the property to some person, having the right to claim 
 
 1 Relyea v. N. H. Rolling Mill Co. N. Y. 373 ; First Nat. Bank <o. 
 
 42 Conn. 577 ; Bradstreet v. Heran, Northern Ry. Co. 58 N. H. 203. 
 2 Blatclif. 116; Scars v. Wingate, 3 'Maguire v. Dinsmore, 70 N. Y. 
 
 Allen, 103. 410; Viner v. N. Y. etc. Ry. Co, 50 
 
 * Robinson v. Memphis etc. Ry. Ib. 23 ; Hawkins v. Hoffman, 6 Hill, 
 
 Co. 9 Fed. Rep. 129. 141; s.c. 16 Ib. 586; Wright v. Northern Cent. Ry. 
 
 57; The Thames, 14 Wall. 98; s. c. Co. 8 Phila. 19; Winslow v. Vermont 
 
 7 Blatchf. 226 ; The Vaughan, 14 Ry. Co. 42 Vt. 700 ; Forbes v. Boston 
 
 Wall. 258; Pollard v. Vinton, 105 & L. Ry, Co. 13:i Muss. 154, 158; 
 
 U. S. 7 ; Forbes v Boston & L. Ry. Rosetifield v. Express Co. 1 Woods, 
 
 Co. 133 Mass. 154; Newcomb 0. 131; The Thames, 14 Wall. 98; 
 
 Boston etc. Ry. Co. 115 Mass. 230; Southern Exp. Co. v. Dickson, 94 
 
 Merchants' Bank v. Miss. R. Co. 69 U. S. 549.
 
 THE PLEDGEE AND THE CARRIER. 527 
 
 delivery and possession. 1 Where bills of lading issued by 
 the shipmaster state that the goods are shipped by a certain 
 firm, to be delivered " to order or assigns," delivery to any 
 one who has not the order of the shipper is not a good de- 
 livery. 8 A custom, however, was allowed to be proved, 
 where railroad companies issued bills of lading deliverable 
 to a named person, and not " to order, or assigns," to deliver 
 the goods to the consignee without production of the bill of 
 lading, but merely upon the direction of the way-bill. A 
 bill of lading, thus worded, was pledged upon an advance, 
 made in good faith, but upon demand for the goods, it was 
 found the company had already delivered them to the person 
 named in the way-bill. The pledgee's action of trover 
 against the company, in view of the custom proved, was not 
 sustained. 1 
 
 Where valid legal process has been issued from a court 
 having jurisdiction of the carrier, demanding delivery of 
 property in its possession, a delivery to the officer who 
 presents the writ, operates as a discharge of the carrier, 
 provided immediate or at least reasonable notice of the at- 
 tachment or execution is given to the consignee or other 
 person entitled to delivery. 4 Carriers, or their agents are 
 required to act in good faith, for if there be any collusion or 
 fraud, they are bound to establish the title of the adverse 
 claimant to be better than that of the pledgee or other 
 holder for value of the bill of lading. Money was advanced 
 in good faith by a consignee upon a bill of lading forwarded 
 to him, but after delivery of the goods to the carrier, and 
 when about to be shipped, a claimant, under an order 
 
 1 Barber v. Mcyerstein, L. R. 2 C. Co. 16 Fed. Rep. 57; Stiles v. Davis, 
 
 P. 38 (Willes and Keating J. J), s. 1 Black. 101 ; Rosenfield v. Express 
 
 c. L. R. 4 H. L. 332 (Hatherley, Lord Co. 1 Woods, 131 ; Burton v. Wil- 
 
 Chan.); Glyu v. E. & W. India kinson, 18 Vt. 187; Ohio & Miss, 
 
 Docks Co. L. R. 7 App. 690. R.R. Co. v. Yohe, 51 Ind. 181 ; 
 
 8 The Thames, 14 Wall. 93. Bliven v. Hudson River R. Co. 36 
 
 8 Forbes v. Boston & L. Ry. Co. N. Y. 403; Kiff . Old Colony R.R. 
 
 133 Mass. 154. Co. 117 Mass. 591. 
 
 4 Robinson v. Memphis & C. Ry.
 
 528 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 from the consignor who had fraudulently re-assigned the 
 property as security for an overdrawn account, demanded 
 the goods. The agent refused to deliver, but acting upon 
 a promise made to such claimant, delayed shipment until 
 legal process could be served. The consignee recovered 
 from the carrier the value of the property thus illegal!}?- de- 
 tained, to the full amount of his advances. 1 
 
 395. NOTICE TO CARRIER WHEN REQUIRED OF 
 PLEDGEE. A pledgee for value of a bill of lading, holding 
 the legal title to the property as though an actual delivery 
 had been made, is not bound by any strict rules of notice of 
 his interest or claim to carriers, or other persons dealing 
 with the goods ; nor is he required upon the arrival of the 
 goods at their destination to proceed immediately to take 
 possession of the same. It is no excuse for a wroug deliv- 
 ery by a carrier that the pledgee of a bill of lading, holding 
 under indorsement, is unknown to the carrier, and that no- 
 tice of the arrival of the goods cannot apparently be sent to 
 him. If, after diligent inquiry, such pledgee and indorsee 
 cannot be found, then the carrier is required to hold the 
 goods until claimed, or to store them for their owner. Deliv- 
 ery to a stranger under any circumstances is not a dis- 
 charge of the carrier. 1 Nor is a pledgee for value of a bill 
 of lading, indorsed and delivered, required to give notice to 
 any warehouseman or wharfinger to whom the property rep- 
 resented by such bill, has been delivered, under a stop for 
 freight. He is under no obligation to give notice to any- 
 one. 8 A delay of nearly two months by a pledgee for value 
 of a bill of lading, indorsed and delivered, in giving notice 
 of his interest and claiming possession of the goods, will not 
 constitute laches so as to defeat his legal title, although in 
 
 I Robinsonc.R.R.Co.,16Fei1.R.57. 568; Barber v. Meyerstein, L. R. 4 
 
 The Thames, 14 Wall. 98; Forbes H. L. 317 ; Glyn v. E. & W. India 
 
 t>. Boston & L. Ry, Co, 133 Mass. Docks Co. L. R. 7 App. 635. 
 
 154; s. c. 9 Am. & E. R. R. C:is. 76; Barber v. Meyerstein, L. R. 4 II. 
 
 Farmer's Bank c. Logan, 74 N. Y. L. 337 (Westbury, Lord Chan).
 
 THE PLEDGEE AND THE CARRIER. 529 
 
 the meantime the consignee who had pledged the bill of lad- 
 ing, obtained the goods from the carrier, upon the false rep- 
 resentation that he held the bill of lading, and shipped them 
 abroad. The pledgee was allowed to recover from the car- 
 rier the market value of the goods at the time of the conver- 
 sion, less the freight, with interest. 1 - 
 
 A bona fide pledgee, advancing money upon the indorse- 
 ment and delivery of a bill of lading which shows upon its 
 face that it is issued in a set of bills of more parts than one 
 should require all the bills of the set except the shipmaster's 
 . bill, to be produced, indorsed and delivered, before making 
 an advance, for the reason that other of the series may al- 
 ready have been indorsed and delivered for value advanced 
 in good faith. Possession of two of a set of three bills of 
 lading, being the first and second, was considered sufficient 
 in the leading cases of The Thames and Barber v. Meyer- 
 stein, the fraud being committed in each case by the use of the 
 third or shipmaster's bill as collateral security for advances. 
 Where money is advanced upon one only of a set of three 
 bills of lading it is advisable for the pledgee to be on the 
 alert so that he may give notice of his claims to the shipmas- 
 ter upon the arrival of the vessel.* The pledgee holding 
 indorsed the "first" only of a set of three bills of lading 
 upon a bona fide advance to the consignee, " one of which 
 bills being accomplished, the others to stand void," is not 
 entitled, under the latest decision of the English House of 
 Lords, to recover any damages from the shipowner or wharf- 
 inger where, before notice of his claims, or any knowledge 
 of the negotiation for value of other bills of the set, a bona 
 fide delivery of the property is made upon the "second" 
 bill, presented by the consignee, unindorsed, the property 
 being deliverable by the bills of lading to him " or assigns."* 
 
 1 Forbes v. Boston & L. Ry. Co. L. R. 6 Q. B. D. 504 ; s. c. L. R. 7 
 
 133 Mass. 154. App. 600. 612, 615; Meyerstein v. 
 
 9 Glyn t>. E. & W. India Docks Co. Barber, L. R. 4 H. L. 317 (Lord 
 
 L. R. 7 App. 600, 605. Westbury). Criticising earlier cases, 
 
 * Glyn v. E. & W. India Docks Co. in which, notwithstanding notice to 
 34
 
 530 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 The rule announced, however, is declared, in a later case, 
 not to limit the recognized effect, as against all parties, ex- 
 cept the shipowner, acting in good faith, of an indorsement 
 of a bill of lading to a holder for value, without notice. 1 
 
 396. THE PLEDGEE OF THE FIRST INDORSED OF BILLS 
 PREFERRED. The utility of continuing the usage of issuing 
 bills of lading in sets of three or more, which had its partic- 
 ular value before electricity, giving almost instant com- 
 munication with all parts of the world, was utilized, is ques- 
 tionable. Much litigation would be avoided, and fraudulent 
 dealings prevented, if only one bill of lading should be'used, 
 nor would the interests of commerce be restricted thereby. 4 
 As between two bona fide pledgees each receiving a bill of 
 lading of the set of three, "one of the bills being accom- 
 plished, the others to stand void," the third being retained 
 by the shipmaster as the "ship's bill," the pledgee who is 
 first in time in receiving one of the set properly indorsed, 
 
 the shipmaster of the true title, he ing the title of the indorsee to full 
 
 was allowed, in case of dispute be- possession thereof, the bill of lad- 
 
 tween rival claimants, to deliver to ing, until complete delivery of the 
 
 the one he thought entitled, and by cargo has been made on shore to 
 
 this would be fully discharged, some one rightfully claiming under 
 
 Fearon v. Bowers, 1 H. Bl. 364 ; s. c. it, remains in force as a symbol, 
 
 1 Sm. L. Cas. 8th Ed. 782 ; Lickbar- and carries with it not only the full 
 
 row v. Mason, 1 II. Bl. 357; The ownership of the goods, but also all 
 
 Tigress, Br. and L. Adm. 38 ; 32 L. rights created by the contract of 
 
 J. (P. and A.) 97. carriage between the shipper and 
 
 1 Sanders v. Maclean, L. R. 11 the shipowner. It is a key which in 
 
 Q. B. D. 327. As said by the Court the hands of a rightful owner is in- 
 
 of Appeal: "The property in the tended to unlock the door of the 
 
 goods passes by the indorsement warehouse, floating or fixed, in 
 
 and delivery of the bill of lading, which the goods may chance to be." 
 
 whenever it is the intention of the (Bowen, L. J.) 
 
 parties that the property should * Glyn, Mills & Co. v. E. & W. 
 
 pass, just as under similar circum- India Docks Co. L. R. 7 App. 605 
 
 stances, the property would pass by (Earl Cairns and Lord Blackburn) ; 
 
 an actual delivery of the goods. Sanders v. Maclean, L. R. 11 Q. B. 
 
 And for the purpose of passing such D. 327. 
 property in the goods and complet-
 
 THE PLEDGEE AND THE CARRIER. 531 
 
 and upon a valuable advance, is preferred, although the 
 pledgee receiving the second of the series has advanced value 
 thereon, in good faith, without notice of the previous hy- 
 pothecation. 1 Nor is the pledgee who is prior in time, hav- 
 ing both the right of property and possession required to 
 give notice to the shipowner of his title and right to posses- 
 sion, but may, if the goods are obtained and sold upon an- 
 other of the set of bills of lading negotiated subsequently to 
 his own, bring an action against the second pledgee, either 
 for the proceeds of the goods as for money had and received 
 for his use, waiving the tort, or for a wrongful conversion. 5 
 The tender of one of a set of three bills of lading, duly in- 
 dorsed, is an effectual tender of the goods, although the 
 others be not produced. Where, by the terms of the con- 
 tract, pa3 r ment is to be made of bills of exchange upon de- 
 livery of bills of lading attached as collateral security, upon 
 presentation, the purchaser who refuses to accept and pay, 
 upon the presentation of a duly indorsed bill of lading, does 
 so at his own risk as to whether it may turn out to be the 
 fact or not that the bill of lading tendered was an effectual 
 one, or whether therewas another of the set which had been 
 so dealt with as to defeat the title of the purchaser as 
 indorsee of the one tendered. 8 
 
 1 Barber v. Meyerstein, L. R. 4 H. fusing to sustain an action of trover 
 L. 337; The Thames, 14 Wall. 98. by a pledgee of the "first" of a set 
 In which cases the respective pled- of bills of lading as against a ship- 
 gees received two of the set of three owner or wharfinger delivering to 
 bills of lading, believing the "ship's the consignee on the "second," un- 
 bill " to be in possession of the indorsed, say (Blackburn, Lord) that 
 master, but delivery was in fact ob- " so far as the decision in Barber v. 
 tained upon the third bill. The first Meyerstein extends, the law must be 
 two of the set were delivered in taken to be settled," and another 
 Skilling v. Bollman, 73 Mo. 665; but law lord (Fitzgerald) said there was 
 one was stolen by a partner of the no intention "to modify or depart 
 firm, and negotiated, and the contest from " the decision mentioned, 
 was as to priority. The court ap- * Barber v. Meyerstein, and The 
 proves the rule of Meyerstein v. Thames, supra. 
 Barber. In Glyn v. E. & W. India 8 Sanders v. Maclean, L. R. 11 Q. 
 Docks Co. L. R. 7 App. 605, the B. D. 327. In the Court of Appeal 
 English House of Lords, while re- of the Queen's Bench (Bowen, L.
 
 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 CHAPTER XLIX. 
 
 THE PLEDGEE'S RIGHTS, UNDER ESTOPPEL. 
 
 397. Estoppel as applied to bills of lading negotiable or quasi-negotiable, 
 
 398. Estoppel of owner, where third person holds bill indorsed. 
 
 399. The pledge of void or fraudulent bills of lading. 
 
 400. Application of estoppel as between successive pledgees. 
 
 401. The pledge of bills of lading upon unauthorized shipments. 
 
 402. And where pledgee has notice of prior equities. 
 
 403. The pledgee's claims, subject to terms of bill of lading. " 
 
 404. The pledgee's remedies for misappropriation of property. 
 
 405. The unpaid vendor's right of stoppage in transitu. 
 
 406. The pledgee a holder for value, as against unpaid vendor. 
 
 397. ESTOPPEL AS APPLIED TO BILLS OF LADING NE- 
 GOTIABLE, OR QUASI -NEGOTIABLE. In countries and states 
 where bills of lading are made negotiable by statute, they 
 are in the hands of third persons loaning money upon them 
 in good faith, without notice, as free of antecedent equities 
 as bills of exchange or negotiable promissory notes. 
 The holder of an indorsed bill of lading, where negotiable, 
 may, in the course of commercial dealing, transfer a greater 
 right than he himself has, the exception being founded on 
 the negotiable character of the document. It is confined to the 
 cases where the person who transfers the right is himself in 
 
 J.), referring to the rule that the themselves, and one upon which 
 
 first indorsee of bills is entitled to they probably would be guided by 
 
 the property, as against everybody their faith in or distrust of their 
 
 but the shipowner, said: "People customer. But I do not believe that 
 
 who lend money upon or who pur- such suspicion, when it exists, is the 
 
 chase bills of lading can make their natural or necessary consequence of 
 
 own terms. Whether they will the presentation of the two bills 
 
 trust to the current bills of lading without the third." 
 produced in any case is a matter for
 
 THE PLEDGEE, UNDER ESTOPPEL. 533 
 
 actual and authorized possession of the document, and the 
 transferee gives value on the face of it, without having 
 notice of any circumstances which would render the trans- 
 action neither fair nor honest. In such case, one of two 
 innocent parties must suffer by the act of a third ; and it is 
 reasonable that he who, by misplaced confidence, has ena- 
 bled such third person to occasion the loss, should sustain 
 it. 1 The rules of equitable estoppel are applied in favor of 
 pledgees of bills of lading indorsed who have advanced 
 money on bills sent by the vendor to the vendee and con- 
 signee, as against the right of stoppage in transitu of the 
 unpaid vendor, if at the time of making the advance the 
 pledgee is without notice of any cause upon which such 
 right might arise. 8 
 
 The rules of equitable estoppel are applied in cases 
 where bills of lading, while not negotiable, are quasi- 
 negotiable, under indorsement for value. A transfer of 
 a bill of lading, by indorsement where required or by 
 delivery, vests the legal title to the property and the right 
 to possession in a pledgee for value advanced in good faith, 
 without notice of equities. The pledgee may rely upon the 
 possession and apparent ownership of a holder of a bill of 
 lading, where the same is received in the usual course of 
 business. As where a vendor has allowed a vendee to assume 
 possession and apparent ownership of bills of lading, so as to 
 be able to deal with thorn as his own, third persons may rely 
 upon such possession and apparent ownership of the indicia 
 of title. The vendor is estopped to dispute such title as 
 against persons innocently making advances in the belief 
 that the apparent title is the real title and the ownership 
 
 1 Rodger v. Comptoir D'Escompte, In re Westzintlms, 5 B. & Ad. 
 
 L. R 2 Pr. C. 393, 405 (Sir Joseph 817; Berndtson v. Strang, L. R. 4 
 
 Napier); The Argentina, L. R. 1 A. Eq. 486; on app. L. R. 4 Ch. 588; 
 
 and E. 370 ; Gurney . Behrend, 3 Coventry v. Gladstone, L. R. 6 Eq. 
 
 El. and Bl. 622; Lickbarrow v. 44; ex parte Golding, L. R. 13 Ch. 
 
 Mason, 2 Term, 70. D. 624; Kemp v. Falk, L. R. 14 Ch. 
 
 1 Spalding c.Ruding, 6 Beav. 376; D. 446; on app. L. R. 7 App. 573.
 
 534 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 absolute. 1 No secret agreement between a vendor and ven- 
 dee in relation to the obtaining and use of bills of lading can 
 affect the title of a bona fide pledgee, who has made an ad- 
 vance of money upon such bills of lading, without notice. 1 
 The rules of equitable estoppel applied in cases where the 
 bill of lading is negotiable, is also invoked in favor of the 
 innocent pledgee for value, where the bill of lading is rather 
 quasi-negotiable than actually so, that where one of two 
 innocent parties must suffer from the wrongful acts of a 
 third person, the law casts the burden or loss upon him 
 by whose act, omission, or neglect, such third party was 
 enabled to do the wrong, or occasion the loss. 3 
 
 398. ESTOPPEL OF OWNER, WHERE THIRD PERSON 
 HOLDS BILL INDORSED. The owner of property, repre- 
 sented by a bill of lading, may, by his affirmative acts or 
 neglects, in and about such bill of lading, estop himself to 
 set up any defenses or equities as against an innocent holder 
 for value. Where a bill of lading is delivered indorsed by 
 the owner to a third person so as to vest the legal title and 
 apparent ownership in the holder, and an innocent pledgee 
 is deceived into advancing money upon the faith and credit 
 of such title and apparent ownership, and a loss results, it 
 is placed upon the owner who, with mistaken confidence, 
 has placed an indorsed bill of lading in the hands of another, 
 thus enabling the latter to deal with it as if he were the 
 
 'Dows v. Kidder, 84 N.Y. 121; 35 N. Y. 556; Wyne v. Macdonald, 
 
 Saltus v. Everett, 20 Wend. 267 ; 39 Ib. 233. 
 
 Fleeman v. McKcan, 25 Barb. 474 ; Savings Bank v. Railroad Co. 20 
 
 Beavers v. Lane, 6 Duer, 238; Smith Kan. 519; In re Brown, 1 Biss. 76; 
 
 . Lynes, 5 N. Y. 41; Crocker v. Bradstreet v. Heran, 2 Blatchf. 116; 
 
 Crocker, 31 Ib. 507 ; Wait v. Green, Michael v. Ware, 3 Neb. 229 ; Relyea 
 
 36 Ib. 556 ; Paddon v. Taylor, 44 Ib. v. N. H. Railway Co. 42 Conn. 579; 
 
 871; Rawles v. Deshler, 42 N. Y. Armour v. Michigan Cent. R.R. Co. 
 
 572; Comper . Coningham, 77 Ib. 65 N. Y. Ill; Bowles v. Deshler, 43 
 
 891. Ib. 572 ; Carr v. London Ry. Co. L. 
 
 * Western Union R. R Co. v. R. 10 0. P. 307 ; Lickbarrow v. Ma- 
 Wagner, 65 111. 197; Wait v. Greene, son, 2 Term, 63.
 
 THE PLEDGEE, UNDER ESTOPPEL. 535 
 
 actual owner. 1 The title of a bona fide pledgee for value, 
 without notice, of a bill of lading, was recognized in the 
 case of the Farmers and Mechanics' Bank v. Hazel- 
 tine, in the New York Court of Appeals, 1 arising out of 
 the frauds committed by an agent named Brown, and 
 in which, and in other cases, the rights of pledgees as 
 against persons dealing in an unauthorized manner with 
 property shipped under bills of lading bearing restrictive 
 indorsements, were adjudicated. In all of these cases, the 
 court (Andrews, J.) say: " The court did not question the 
 well established doctrine that a general indorsement and 
 delivery of a bill of lading vests in the indorsee the title to 
 the bill, and the property thereby represented, so as to en- 
 able him to transfer to a bona fide purchaser, for value, a 
 good title, whatever secret arrangement may have existed 
 between the original parties ;" and that if the delivery under 
 the bill of lading had " vested the title to the property in 
 Brown, and the trust contained in the instrument was a 
 trust affecting the proceeds to be realized from. a sale, then, 
 upon well-settled principles, a bona fide purchaser from 
 Brown would acquire a good title which would not be di- 
 vested or disturbed by a misappropriation by Brown of the 
 proceeds of the sale in contravention of the trust." 
 
 The possession of property by a broker or agent, upon 
 which is obtained from the carrier when shipping the goods 
 to his principal, a bill of lading deliverable to his own order, 
 enables such broker or agent to bind the owner by a trans- 
 fer of the bill of lading to a pledgee to secure an advance, 
 when made on the faith of such indicia of title, and with- 
 out notice of equities, as that the principal had already paid 
 for the goods, 1 or that the indorsement and transfer of the 
 bill of lading was procured by a fraudulent misrepresenta- 
 tion. 4 The rights of bona fide pledgees of bills of lading 
 
 1 Gurney v. Behrend, 3 El. & 'Henry B.Philadelphia Warehouse 
 
 Bl. 622 ; The Argentina, L. R. 1 A. Co. 81 Pa. St. 76. 
 
 & E. 370. 4 Dows v. Greene, 24 N. Y. 638. 
 
 78 N. Y. 104, 108.
 
 536 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 indorsed, receiving the same as collateral security for ad- 
 vances, without notice of equities, were sustained as against 
 a consignor in one case and a shipowner in another, where 
 the same were drawn and indorsed in fraud of the consignor 
 and shipowner. 1 A vendor obtained discount of bills of 
 exchange drawn against a consignment, and attached bills 
 of lading as collateral security, the pledgee agreeing to give 
 tip the bills of lading upon receipt of satisfactory accept- 
 ailces of the bills of exchange, or upon failure, to sell the 
 goods and apply the proceeds to the payment of the bills. 
 The proceeds of a sale of the bills of lading were misappro- 
 priated by a broker to whom they had been entrusted. The 
 pledgee sued the parties upon the bills of exchange, and 
 was allowed to recover, the misappropriation by the broker 
 constituting no defense. 8 
 
 399. THE PLEDGE OF VOID on FRAUDULENT BILLS 
 OF LADING. The rules of estoppel in pais were enforced in 
 Armour v. Michigan Central Railroad Company, 3 decided 
 by the New York Court of Appeals. In that case, an agent 
 of the railroad company issued, upon the delivery of a forged 
 warehouse receipt, two bills of lading, acknowledging the 
 receipt of property, consigned to the plaintiff at New York. 
 Advances were made upon bills of exchange drawn against 
 the fictitious shipment, the bills of lading being attached as 
 security, and the plaintiff paid the same upon presentation, 
 on the faith and credit of the railroad bills of lading. No 
 merchandise was in fact ever shipped. Suit was brought 
 by the holder of the bills of lading against the company. 
 As the acts of the agent were within the apparent scope of 
 his authority, an estoppel arose against the company to 
 deny the receipt of the property, and it was required to pay 
 the plaintiff damages. A bill of exchange, drawn upon A 
 by a foreign correspondent, with bills of lading attached, 
 
 1 Gabarron v. Krecft, L. R. 10 Ex. * Magoun v. Sinclair, 66 N. Y. 30. 
 274 ; Kreeft v. Thompson, Ib. 274, 65 N. Y. 111. 
 282.
 
 THE PLEDGEE, UNDER ESTOPPEL. 587 
 
 was sent to a banker for collection, who presented the bill 
 of exchange for acceptance with the memorandum, " The 
 bank holds bill of lading and policy for 251 bales of cotton, 
 per William Cummings." The plaintiff accepted the bill 
 and afterwards paid the money, but the bill of lading proved 
 to be a forgery. An action was brought to recover the mon- 
 ey, but as the memorandum of the bank did not amount tp 
 a representation that the bill of lading was genuine, nor 
 to a guaranty of its validity, the plaintiff had no equity 
 to recover the money. 1 A bill of lading, fraudulent 
 or fictitious, or simply evidence to establish a criminal 
 offense, is void as a security for an advance, irrespective of 
 the knowledge or want of knowledge of the indorsee.* 
 Such indorsee of a fictitious bill of lading, or of one fraudu- 
 lently transferred, has no remedy against an indorser, unless 
 for special wrong. 8 
 
 400. APPLICATION OF ESTOPPEL, AS BETWEEN SUCCESS- 
 IVE PLEDGEES. The rule that in order to create an estoppel 
 as against an owner of property, which has come, through 
 the fraudulent acts of a third person, into the hands of a 
 bona fide purchaser for value, the former must have enabled 
 the wrongdoer to commit the fraud, and that a tortious act 
 of a third person, to which the owner was not a party, and 
 in no way aided, will not defeat his title to the property, is 
 applied in favor of a pledgee of bills of lading as against 
 subsequent pledgees. The rule was applied in favor of a 
 pledgee of a bill of lading indorsed, upon the security 
 of which a note was discounted, as against a pledgee of 
 bills of lading, falsely issued, upon which no goods were 
 delivered, as security for drafts accepted and paid for the 
 
 1 Leather v. Simpson, L. R. 11 Eq. Schooner Freeman v. Buckingham, 
 
 398; Robinson . Reynolds, 2 Q. B. 18 How. 182; Grant v. Norway, 10 
 
 196, 202. C. B. 665. 
 
 'Bassettfl. Spofford, 45 K Y.587; 'Maybee v. Tregcut, 47 Mich. 
 
 Brower v. Peabody, 13 Ib. 121; 495. 
 Saltus v. Everett, 20 Wend. 267;
 
 538 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 pledger and general owner. The pledger, without the 
 knowledge of the first pledgee, caused the property repre- 
 sented by the genuine bill of lading to be shipped and 
 delivered to the pledgees holding such fictitious bills, who 
 upon demand refused to surrender it to the first pledgee, 
 and afterwards sold the same. The first pledgee, having a 
 special ownership in and possession of the property, any 
 dominion exercised over the same by the general owner 
 without his consent, was tortious, and transferred no title. 1 
 As the pledgee had not clothed the general owner with any 
 apparent title or authority to dispose of the property, or in 
 any way aided in the fraud practiced on the second pledgees, 
 no estoppel arose as against him to reclaim his property.* 
 A like rule was applied in favor of a pledgee of a bill of 
 lading, where through the fraudulent conduct of a proposed 
 vendee of the property from its agent, holding under a 
 restricted title, a second bill of lading for the same property 
 was obtained from a railroad company, under which the 
 goods were sold by a pledgee.* Subsequently, the pledgee 
 of the second bill, having paid the judgment, was allowed to 
 recoup itself ill a suit against the railroad company. 4 
 
 401. THE PLEDGE OF BILLS OF LADING UPON FRAUD- 
 ULENT SHIPMENTS. The use of bills of lading, with or 
 without indorsement, as collateral security for loans or dis- 
 counts of commercial paper, places the pledgee in possession 
 of the property described in the bills, as if the same were 
 actually delivered to him. The bill of lading, whether 
 issued by a shipmaster or by an agent of a railroad company, 
 is the only evidence of title and ownership of the goods 
 shipped, after delivery to the carrier, that the owner has ; it 
 
 1 Marine Bank t>. Fiske, 71 N. Y. Barnard c. Campbell, 55 N. Y. 450, 
 
 853 ; State Bank . Jones, 4 N. Y. 462. 
 
 497; Dows v. Nat. Bank, 91 U. S. 'Mechanics' Bank v. Farmers' 
 
 618 ; Jenkyns . Brown 14 Q. B. Bank, 60 N. Y. 40. 
 
 496. * Farmers' Bank v. Eric R.R. Co. 
 
 Marine Bank v. Fiske, supra ; 72 N. Y. 188.
 
 THE PLEDGEE, UNDER ESTOPPEL. 539 
 
 is a voucher, issued by the carrier, whether by land or 
 water, that, upon payment of freight the goods will be 
 delivered to the owner of the bill of lading, or to his 
 assigns. The bill, as a symbol of property, is not a promise 
 to pay money, nor a representative of money, and the holder 
 is not charged with the duties of the indorsee of commercial 
 paper. The title acquired by the pledgee by indorsement 
 of a bill of lading is that of the indorser ; or such rights as 
 the original holder of the bill of lading had. 1 Where a 
 bill of lading is obtained by a person from a carrier for 
 goods which are not his property, or which he has no author- 
 ity from the owner to ship, or for which he has not paid the 
 purchase price, as agreed, neither the holder of such bill 
 nor his transferee, though lie be an innocent pledgee for 
 value, without notice, can acquire any rights or title as 
 against the true owner, unless the latter is within some 
 of the recognized rules of estoppel in pais. 2 
 
 402. AND WHERE PLEDGEE HAS NOTICE OF PRIOR 
 EQUITIES. The title of the owner of property is notdefeated 
 as to third parties who have made advances on bills of lading 
 representing such property in good faith and without notice 
 of an agreement that payment should be made before the ti- 
 tle to the property should pass, where the vendor has noti- 
 fied the pledgee of his claim to the property, and the pledgee, 
 although the property has been sold, still retains in his hands 
 funds of the fraudulent vendee sufficient to repay the vendor. 
 Such proceeds are regarded as taking the place of the prop- 
 
 1 Canadian Bank . McCrea, 106 * Shaw v. National Bank, 101 U. 
 
 111.281 ; Forbes . Boston & L. R.R. S. 564; Bradner v. Campbell, 55 N. 
 
 Co. 133 Mass. 154 ; Farmers' Bank Y. 456 ; Saltus v. Everett, 20 Wend. 
 
 v, Logan, 74 N. Y. 568 ; Saltus 267 ; Farmers' Bank v. Logan, 74 N. 
 
 0. Everett, 20 Wend. 269; Burton v. Y. 568; Coggill . Hartford R.R. Co. 
 
 Curyea, 40 111. 320; Hunt . Miss. 8 Gray, 545; State Bank v. Gardner, 
 
 Central Ry. Co. 29 La. Ann. 446 ; 15 Ib. 362 ; Maybee v. Tregent, 47 
 
 Fellows v. Powell, 16 Ib. 316 ; Evans- Mich. 495; Evansville etc. R.R. Co. 
 
 ville etc. R. R. Co. v. Erwin, 84 Ind. v. Ervin, supra. 
 457.
 
 540 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 erty, and the vendor is entitled to recover the same, although 
 for any sums paid to the vendee before notice, the pledgee 
 is entitled to a credit. Nor is the right of the unpaid ven- 
 dor affected by the fact that other moneys have been mingled 
 with the proceeds of his property. 1 The holder of one of 
 a set of three bills of lading as collateral security for an ad- 
 vance to the consignee, where* chargeable with notice that 
 others of the set have already been transferred by the con- 
 signor as collateral security for advances, can acquire no 
 rights in opposition to those of the first pledgee. 2 An agree- 
 ment to advance $3,000 was made upon certain specified 
 property, the lender paying $1,500 at the time, and $1,500 
 upon the indorsement and delivery of a bill of lading. Prior 
 to the receipt of such bill, another bill of lading .covering the 
 same goods was obtained by fraud, and pledged to secure 
 another proposed advance, which was, however, not made 
 until after the second pledgee had notice of the transfer of 
 the first bill of lading. The title of the first pledgee was 
 preferred to the extent of his whole advances. 3 
 
 403. THE PLEDGEE'S TITLE SUBJECT TO TERMS OF BILL 
 OP LADING. Where property is in transitu or remains in the 
 possession of a carrier or wharfinger undelivered, a presump- 
 tion arises that bills of lading are in existence, and all per- 
 sons dealing with such property, although advancing value, 
 do so at their peril, in the absence of such bill of lading. 
 The production of the bill of lading which is the indicia or 
 muniment of title so long as the goods remain in the posses- 
 sion of the carrier or wharfinger, may disclose that its face 
 shows some special clause or notation or restriction upon de- 
 
 1 Dows 0. Kidder, 84 N. Y. 121 ; nell v. Doff ell, 4 DcG. M. & G. 
 
 Van Alen v. American Nat. Bank, 372. 
 
 52 Ib. 1; Caussidere v. Beers, 41 Ib. 8 Guilbcrt v. Guiguon, L. R 8 Ch. 
 
 198; Cobb v. Dows, 10 Ib. 341; 16; Shaw v. National Lank, 101 U. 
 
 United States t>. State Bank, 96 U. S. 564. 
 
 S. 30; Merrill v. Bank, 18 Pick. 32; Stevens . Boston R R Co. 8 
 
 Voil v. Mitchell, 4 Wash. 105; Frith Gray, 262. 
 c. Cortland, 2 IJ. & M. 417; Pen-
 
 THE PLEDGEE, UNDER ESTOPPEL. 
 
 541 
 
 livery of the property, or there may be indorsed upon it a 
 contract of pledge under which the proceeds of the sale of 
 the property are devoted to the payment of a certain advance, 
 or some other specific indorsement. Purchasers or pledgees 
 of property described in a bill of lading, so indorsed, although 
 without notice and paying value, are subject to defenses 
 arising from the instrument. Their duty is to call for its 
 production, since upon neglect so to do, any rights acquired 
 in the property are subject to the equities and liens of which 
 they have constructive knowledge or notice. 1 This rule 
 was enforced in the cases of purchasers of property covered 
 
 1 Bank of Rochester v. Jones, 4 N. 
 Y. 497 ; Bank of Commerce v. Bis- 
 sell, 72 Ib. 615; Marine Bank v. 
 Fiske, 7t Ib. 353; First Nat. Bank 
 v. Shaw, 61 Ib. 283; s. c. 71 Ib. 353; 
 Mechanics' Bank v. Farmers' Bank, 
 60 Ib. 40 ; Farmers' Bank v. Logan, 
 74 Ib. 568 ; Farmers' Bank v. Hazel- 
 tine, 78 Ib. 104 ; Dows v. Perrine, 
 16 Ib. 325. In Farmers' Bank v. 
 Logan, supra, p. 585-6, sustaining 
 the rights of a bank, which had 
 discounted a draft, upon the security 
 of a bill of lading, upon which it 
 placed a restrictive indorsement, as 
 against purchasers from an agent 
 whose sale was a fraud upon the 
 pledgee, the Court of Appeals of 
 New York (Folger, JY) say: "It ap- 
 pears that there were infirmities in 
 the title which the appellants [the 
 purchasers] got from Brown [the 
 agent], or rather they got no title 
 from him ; for there had never been 
 a contract de facto which purported 
 to pass the property from the owner 
 to him. All that the appellants had, 
 upon which they had a right to rely, 
 was the fact of the possession of 
 the wheat by Brown, and the pur- 
 chase of it by them, in accordance 
 
 with the usual course of business on 
 the produce exchange. * * * The 
 purchaser of chattel property buys 
 at his risk of the title, and if he 
 would be safe, must make inquiry. 
 He may not, with certainty, stop at 
 the fact of possession, but must 
 learn how the possession has been 
 acquired. In every such case as 
 this, the muniments of a real title 
 are easy to be produced. When the 
 property is, in fact, in the carrier's 
 hands, the bill of lading will show 
 to whom alone he has the right to de- 
 liver it. And if the directions of 
 that document are relied upon, there 
 cannot be much risk. A reliance 
 upon it, and a prior inspection of it, 
 may delay transactions, but they 
 will protect all innocent and well- 
 meaning parties, and thwart seri- 
 ously only those who mean to do 
 wrong or are too reckless to try to 
 do right. The appellants were not 
 protected by the fact of possession 
 in Brown, because possession alone 
 does not give the power to pass a 
 valid title. Hence when they bought 
 of him they got no greater right 
 than he had in the wheat."
 
 542 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 by a bill of lading with a restrictive indorsement ;' and 
 upon the default of one of the purchasers in payment of the 
 judgment the pledgee obtained a further judgment as against 
 a warehouseman, chargeable with notice of the restricted 
 terms of a bill of lading and who had delivered the goods. 3 
 And a judgment was obtained against a carrier, also charge- 
 .able with like knowledge, who had been guilty of a wrong- 
 ful delivery, although claiming protection under a custom to 
 deliver to parties to whom notice was requested to be sent 
 by the bill of lading, as in the case in question.* 
 
 404. THE PLEDGEE'S REMEDIES FOR MISAPPROPRIA- 
 TION OF PROPERTY. The indorsement and delivery of a bill 
 of lading as collateral security for a loan or discount of com- 
 mercial paper, vesting the legal title in the property and the 
 right of possession in the pledgee, entitles him to an action 
 of replevin where the consignor or any other person has at- 
 tached the goods. 4 Where goods covered by a bill of lad- 
 ing indorsed and in the hands of a pledgee for value, have 
 been sold under legal process, the pledgee may appear in the 
 proceedings, and will be allowed to recover so much of the 
 
 1 Farmers' Bank V. Logan, 74 N. * Farmers' and Mechanics' Bank 
 
 Y. 568; Farmers' Bank . Atkinson, v. Hazeltine, 78 N. Y. 104. 
 
 74 N. Y. 587. The special indorse- 8 Bank of Commerce . Bissell, 72 
 
 ment on these bills of lading read: N. Y.615. In Ontario Bank v. New 
 
 " To E. S. BUOWN: Jersey Steamboat Co. 59 Ib. 510, the 
 
 "The property mentioned in this bank was not permitted to object in 
 bill of lading, with insurance on the an action against the carrier, to a 
 same, is pledged to the Farmers and delivery to the party directed to be 
 Mechanics' Bank of Buffalo as notified by reason of the long-con- 
 security for the payment of the ac- tinued custom so to treat like ship- 
 companying draft for $7,791.77, and ments between the same parties, 
 the property is placed in your cus- where no restrictive indorsements 
 tody in trust for that purpose, and appeared on the bill of lading, 
 is not to be diverted to any other 4 Alderman v. Eastern Ry. Co. 
 use until the draft is paid; and upon 115 Mass. 233; Stone v. W. St. Louis 
 your accepting and paying the draft etc. Co. 9 Bradw. 48; Mich. Cen. K. 
 the claim of the bank will cease. R. Co. v. Phillips, 60 111. 190 ; Peters 
 Without recourse. v. Elliot, 78 Ib. 336. 
 F. SIDWAY, cashier."
 
 THE PLEDGEE, UNDER ESTOPPEL. 543 
 
 proceeds as against the creditor, as is equal to the amount of 
 his advances. 1 The pledgee of a bill of lading may bring an 
 action of trover for the conversion of the property against 
 anyone who does not show a better title ; s and may recover 
 the full value of the goods, holding any surplus beyond the 
 amount of his own advance for the general owner. 3 Trover, 
 however, will not lie as against a commission merchant who 
 has sold grain consigned to him for sale, the bills of lading 
 of which had been pledged for advances, and who retains 
 the proceeds on account of the indebtedness of the shipper 
 to him under a previous agreement. The action should be 
 for money had and received. 4 Where there has been a 
 wrongful delivery of goods by a shipmaster, an indorsee of a 
 bill of lading providing for delivery "to order or assigns," 
 is entitled to libel the vessel on which such goods were 
 shipped for failure to deliver them. Nor is it material that 
 the indorsee is only an agent or trustee for others, as a cashier 
 of a bank which has made advances bona fide on such bill of 
 lading. 5 Instructions were given to a bank to indorse a bill 
 of lading only upon payment of the draft to which it was 
 attached, which, having been paid with borrowed money, 
 the bill of lading upon delivery was at once indorsed as col- 
 lateral security to the lender. The legal title to the goods 
 having passed to the pledgee by such indorsement as against 
 a previous vendee of the goods " to arrive," an action for 
 conversion against a railroad company delivering the goods 
 to the vendee was sustained, although, being a connecting 
 line, it had no knowledge of the bill of lading. 6 
 
 405. THE UNPAID VENDOR'S RIGHT OF STOPPAGE IN 
 TRANSITU. Stoppage in transitu is a right which an unpaid 
 
 1 Hathaway v. Haynes, 124 Mass. Adams v. O'Connor, supra ; Harris 
 311. v. Birch, 9 M. & W. 391. 
 
 2 Adams c. O'Connor, 100 Mass. 4 Taylor v. Turner. 87 111. 296. 
 515 ; Burke v. Savage, 13 Allen, 5 The Thames, 14 Wall. 98. 
 
 405 ; Dows v. Nat. Bank, 91 U. S. Alderman 'v. Eastern R. R. Co. 
 618; Tiedman v. Knox, 5:> Md. 612. 115 Mass. 243. 
 * Allman e. Barnard, 7 Gray, 554;
 
 541: QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 vendor has, when selling goods on credit, to resume control 
 and possession of property while in the custody of a carrier 
 or middleman, in transitu to the vendee, and before deliveiy, 
 in the event of the insolvency of the latter, occurring sub- 
 sequently to the sale of the goods. 1 The right exists only 
 as between vendor and vendee, or consignor and consignee. 1 
 The delivery of goods, sufficient to defeat the vendor's right 
 of stoppage in transitu, may be at a place from which the 
 consignee intends to order them to a new destination.* 
 The right of stoppage in transitu by the unpaid vendor op- 
 erates, not as a rescission of the contract of sale, but as an 
 assertion of the unpaid vendor's right to enforce a lien for 
 the purchase money. The effect of its exercise is to revest 
 the consignor in his rights as an unpaid vendor as against the 
 vendee, but not to rescind the contract of sale between the 
 parties. 4 
 
 The right of stoppage in transitu of the unpaid vendor, 
 however, is defeated by an indorsement and delivery of the 
 bill of lading, to a bona fide pledgee, for a valuable consid- 
 eration, without notice of any facts upon which a right of 
 stoppage in transitu might arise. To the extent of the 
 pledgee's advances, the owner is not permitted to insist upon 
 his right to intercept the goods consigned to the insolvent 
 consignee. 5 The rights of a pledgee are sustained where 
 
 'Newhall v. Targes, 15 Me. 314; 307; Stanton r>. Eager, 16 Ib. 467, 
 
 Eaton v. Cook, 32 Ib. 58; Railroad 475; Arnold v. Delano, 4 Cush. 33, 
 
 Co. v. Freed, 38 Ark. 614 ; Cabeenc. 39; Newhall v. Varges, 13 Me. 93; 
 
 Campbell, 30 Pa St. 254; Calahan v. a. c. 15 Ib. 314 ; Rogers v. Thomas, 
 
 Babcock, 21 Ohio St. 281. 20 Conn. 83; Ellis v. Jones, 5 Ohio, 
 
 Kinlocko. Craig, 3 Term, 781. 88, 98; Harris v. Pratt, 17 N. Y. 
 
 *Covell v. Hitchcock. 23 Wend. 263; Kemp v. Falk, L. R. 7 App. 
 611; Harris t>. Pratt, 17 N. Y. 249; 573. 581 (Lord Blackburn). 
 Becker v. Hallgarten, 86 Ib. 167, 'Becker v. Hallgarten, 86 N. Y. 
 174; Biggs v. Barry, 2 Curtis, 259 ; 167; Rawleg . Deshlcr, 42 Ib. 572; 
 Valpy v. Gibson, 4 C. B 837; Dixon Dows v. Greene. 32 Barb. 490; Loeb 
 t>. Baldwin, 5 East, 175: Bolton v. *>. Peters. 63 Ala. 243; Lc:; c. Kim- 
 Railroad Co. L. R. 1 C. P. 439. ball, 45 Me. 172; Audenried v. Ran- 
 
 4 Babcock v. Bonncll, 80 N. Y. dall. 3 Cliff. 93; Walter . Ross. 2 
 
 244; Rowley v. Bigelow, 12 Pick. Wash. 283; Chandler v. Fulton, 10
 
 THE PLEDGEE, UNDER ESTOPPEL. 545 
 
 a bill of lading is taken in his own name, or of persons act- 
 ing in his behalf as agents. Receiving a bill of lading so 
 drawn, the pledgee is entitled to the same rights as against 
 an unpaid vendor as if he had received as collateral security 
 a bill of lading to the order of the consignee and vendee, 
 indorsed and delivered. 1 The hypothecation of a bill of 
 lading by a vendee as collateral security for a loan made in 
 good faith, where the amount is less than the actual value 
 of the goods covered by the bill of lading, is not sufficient 
 in equity to defeat the right of stoppage in transitu of the 
 unpaid vendor, so far as the property is of value in excess 
 of the valid claims of the pledgee, or his recovery of the 
 proceeds of the goods held by the pledgee after reimburse- 
 ment of his advances.* The pledgee is not allowed, under 
 such circumstances, to appropriate a balance remaining in 
 his hands, to the liquidation of a general account with the 
 pledger, as against such unpaid vendor. 8 
 
 406. THE PLEDGEE A HOLDER FOR VALUE, AS AGAINST 
 UNPAID VENDOR. In the leading case of Kemp v. Falk, 
 recently decided by the English House of Lords, a purchaser 
 of goods on credit, shipped by the vendor, indorsed the bill 
 of lading to a bank as security for an advance. Before the 
 arrival of the ship, the consignees sold the goods " to arrive " 
 to sub-purchasers. The vendee became bankrupt, and 
 before delivery and payment by the sub-purchasers, the 
 vendor gave notice of a stop to the shipmaster. The con- 
 signees remitted the proceeds of the sub-sales to the pledgee, 
 which, after repaying itself, handed the balance to the trus- 
 tees in bankruptcy of the vendee. The right of stoppage 
 
 Tex. 2 ; Vertue v. Jewell, 4 Camp. 624; Coventry v. Gladstone, L. R. 6 
 
 31 ; Lickbarrow v. Mason, 2 Term, Eq. 44 ; Berndtson . Strang, L. R. 
 
 63. 4 Eq. 486; s. c. L. R. 3 Ch. 588; In 
 
 1 Becker v. Hallgarten, 86 N. Y. re Westzinthus, 5 B, & Ad. 817; 
 
 167. Spalding v. Ruding, 6 Beav. 376. 
 
 * Kemp v. Falk, L. R. 7 App. 573, 3 Spalding v. Ruding, 6 Beav. 376; 
 
 577; affirming s. c.L.R. 14 Ch.D. 446; aff. 15 L. J. Ch. 374; Halsey . 
 
 ex parte Golding, L. R. 13 Ch. D. Warden, 25 Kan. 128. 
 35
 
 546 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 in transitu of the unpaid vendor was not at an end when 
 the notice to the master was given, so that the vendor was 
 entitled to the balance after payment of the pledgee's ad- 
 vances. Lord Blackburn, in the House of Lords, held that 
 such a negotiation of a bill of lading as collateral security 
 was clearly a transfer for value, and as such, so far as it 
 went, it defeated the right of stoppage in transitu, but left 
 it to apply to everything that was not covered by the 
 pledge. 1 Lord Selborne (Lord Chancellor) also approved 
 this view, adding, " Against what is this right of stoppage 
 in transitu? Not against some imaginary interest of the 
 purchaser, but against the goods themselves. It is a right 
 to stop the goods, when they are still in transitu in contem- 
 plation of law. It is a qualified right in this case, because 
 it cannot be asserted as against the holder of the bill of 
 lading without paying him off ; but the instant his claim is 
 discharged, it is exactly the same right as if there had been 
 no security, as against the original purchaser and as against, 
 in my opinion, every one claiming under him." 9 The case 
 decided, as stated by Lord Fitzgerald, " that the claim of 
 the unpaid vendor against the surplus produce of his own 
 goods, after providing for all prior rights, is superior to that 
 of the creditors of the vendee who had not paid for the 
 goods." 8 
 
 1 Kemp v. Falk, L. R. 7 App. 573, * L. R. 7. A pp. 577. 
 582. L. R. 7 App. 590.
 
 THE FACTOB AS PLEDGOB. 547 
 
 CHAPTER XLII. 
 
 407. At common law, the factor cannot pledge, but may assign lien. 
 
 408. The character and extent of the factor's lien. 
 
 409. The factor, making advances, becomes a pledgee. 
 
 410. The pledgee, with notice, subject to equities. 
 
 411. The pledgee's title protected, as against owner, factor, etc. 
 
 407. AT COMMON LAW, THE FACTOR CANNOT PLEDGE, 
 BUT MAY ASSIGN LIEN. At common law, a factor has no 
 authority to pledge the goods of his principal for advances 
 made to him on his own account, or to secure his individual 
 debts, 1 nor is it under the common law, material that the 
 pledgee making such advances is ignorant that the factor is 
 not the owner of the goods. 3 The authority of the factor, 
 under the common law, being only to sell, the right to 
 
 1 Paterson v. Tash, 2 Strange, 1178; Mason, 440; Evans t>. Potter, 2 Gall. 
 
 Newsora . Thornton, 6 Ib. 17 ; Me- 13 ; Rodriguez v. Hefferman, 5 Johns. 
 
 Combie v. Davies, 7 Ib. 5 ; Daubigny Ch. 429 ; Kennedy v. Strong, 14 
 
 t>. Duval, 5 Term R. 604; Navul- Johns. 28. The like rule prevailed 
 
 shaw v. Brownrigg, 1 Sim. N. S, in Louisiana prior to the act of 1876. 
 
 573. Kelly v. Smith 1 Blatchf. 290; Stetson 0. Gurney, 17 Lou. 166; 
 
 Davis v. Russell 52 Cal. 611; Wright Millers. Schneider, 19 La Ann. 300; 
 
 c. Solomon, 16 Cal. 72; Newbold v. Young v. Scott, 25 Ib. 313, ;md the 
 
 Wright, 4 Rawle 195 ; Lansatt v. factor is now restricted to pledging 
 
 Lippincott, 6 Ib. 391; First Nat. to the amount only of his interest. 
 
 Bank v. Nelson, 38 Ga. 391 ; Bott . Insurance Co. v. Kiger, 103 U. S. 
 
 McCoy, 20 Ala. 578; Odiorne . 352. 
 
 Maxey, 13 Mass. 178; Shaw v. Stone, * Gray v. Agnew, 95 111. 315, 320; 
 
 1 Cush. 228; Bonito v. Mosquiero. 2 Rodriguez v. Hefferman, 5 Johns. 
 
 Bosw. 401 ; McCreary v. Gaines, 55 Ch. 429 ; Martin v. Cowles, 1 M. & 
 
 Tex. 485; Gray v. Agnew, 95 111. S. 140 ; Newsom v. Thornton, 6 East, 
 
 815; Van Amrige v. Peabody, 1 17.
 
 C48 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 pledge was refused to him, even for the purpose of raising 
 funds to meet bills of exchange drawn against the goods 
 offered as security, and in cases where the proceeds of the 
 loan were applied to the use of the principal in other ways. 1 
 The common law rule as to the absence of power of the 
 factor to pledge goods of his principal being recognized, a 
 change in the law relating to factors, if desirable for the 
 protection of third persons, lies rather within the province 
 of legislatures than of the courts. 8 The factor, however, 
 under the common law, may deliver the property of his 
 principal into the custody of a third person for an advance, 
 with notice of his lien, and upon such transfer, the pledgee 
 becomes entitled to retain the property to the extent of the 
 factor's lien.* If such a transfer has been made bonu fide, 
 the principal must pay or tender the amount of such ad- 
 vances and lien before an action to recover the goods can be 
 sustained. 4 But no rights can be acquired by a transfer of 
 the property where circumstances of fraud have intervened, 
 and neither the factor nor his assigns are permitted to re- 
 tain possession of such property, even for the payment of 
 the liens and charges of the factor.' 
 
 408. THE CHARACTER AND EXTENT OF THE FACTOR'S 
 LTEN. The factor can only claim a lien on the goods in his 
 possession. Such possession must be lawful, and not 
 obtained by any illegal or tortious act,' while authority to 
 an agent to sell goods will not authorize him to pledge 
 
 1 Bonito v. Mosquiero, 2. Bosw. Daubigny . Duval. 5 Term, 604; 
 
 401; Ncwsora v. Thornton, 6 East. Warner v. Martin, 11 How. 225. 
 
 17; McCombie v. Davis, 7 East. 5. ' Daubigny t>. Duval, supra ; Pat- 
 
 9 McCreary v. Gaincs, 55 Tex. 485. terson v. Tash, 2 Strange, 1187; 
 
 Mann v. Shiffncr, 2 East. 523, Gray v. Agncw, 95 111. 815, 320; 
 529; McCombie . Davis, 7 Ib. 6 ; Newbold . Wright, 4 Ilavvle, 195; 
 Urquhart v. Mclver, 4 Johns. 103; Davis v. Biglcr, 62 Pa. St. 242; Rod- 
 Rodriguez v. Hefferman, 5 Johns, gers v. Grothe, 58 Ib. 414. 
 Ch. 429. Bank of Rochester v. Jones, 4 
 
 * Hartop o. Hoare, Stra. 1187; N. Y. 497.
 
 THE FACTOR AS PLEDGOE. 549 
 
 them. 1 Bad faith on the part of the person receiving goods, 
 or a prohibition by the owner against pledging them, will 
 invalidate an act of pledge by a factor.* A factor or com- 
 mission merchant, in the absence of statute, is not author- 
 ized to pledge the goods of his principal for his own use; * 
 and the pledgee, although he takes the goods, or the docu- 
 ments of title, without notice that the pledger is a factor or 
 agent, has no better title than the factor. 4 And the same 
 rule is applied as to pledges by factors for antecedent 
 debts. 5 
 
 The factor who has made advances upon shipments by 
 his principal, is given a lien on the property to the amount 
 of the advance. The lien thus given is of a special charac- 
 ter and does not affect the general ownership of the princi- 
 pal in the property. The owner, by forwarding goods to a 
 factor for sale, and receiving advances, does not thereby 
 abandon his title, but may at any time before sale by the 
 factor reclaim possession, upon the equitable terms of repay- 
 ing the factor's advances and other proper charges. If the 
 factor sell the property to reimburse himself for his advan- 
 ces, the surplus, if any, will enure to the benefit of the prin- 
 cipal.' And a court of equity will take jurisdiction, and 
 enforce performance of a trust in favor of the holder of any 
 
 1 Davis v. Russell, 52 Cal. 611; Macnee v. Gorst, L. R. 4 Eq. 315; 
 
 VOSSB. Robertson, 46 Ala. 483; Bott Jewan v. Whitworlh, L. R. 2 Eq. 
 
 v. McCoy, 20 Ala. 578; Bonito v. 692; Fuentis v. Montis, L. R. 3 C. 
 
 Mosquiero, 2 Bosw, 401 ; Henry v. P. 268 ; s. c. 4 Ib. 93. A debtor 
 
 Marvin, 3 E. D. Smith, 71 ; Easton shipping goods to his factor for sale, 
 
 v. Clark, 35 N. Y. 225 , ex parte Als- and to apply the proceeds to the 
 
 ton, L. R. 4 Ch. 168; Broadbent v. payment of an antecedent debt, and 
 
 Barlow, 3 DeG. F. & J. 570. forwarding the bill of lading, may 
 
 s Navulshaw v. Brownrigg, 1 Sim. afterwards change the shipment to 
 
 N. S. 573; 2 DeG. M. & G. 441. another person, without making the 
 
 1 Bott v. McCoy, 20 Ala. 578; Eas- common carrier liable to the factor. 
 
 ton t>. Clark, 35 K Y. 225. Craft v. Miss. & T. R. R. Co. 59 
 
 * Bott t>. McCoy, 20 Ala. 578. Miss. 182. 
 
 'Warner. Martin, 11 How. 209. 'United States v. Villalonga, 23 
 
 Kelly v. Smith, 1 Blatchf. 290; Wall. 35. 
 Henry v. Marvin, 3 E. D. Smith, 71 ;
 
 550 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 note or draft entitled to the proceeds of the goods, as against 
 a factor receiving the same to sell for the benefit of such 
 holder. 1 Even a statute extending the factor's lien to all 
 balances on general account, and to the proceeds of sale of 
 goods as to the goods, merely gives a lien protected by pos- 
 session.* 
 
 409. THE FACTOR, MAKING ADVANCES, A PLEDGEE. 
 The relation of the factor and principal, where the former 
 has made advances on the goods entrusted to him, is barely 
 distinguishable from that of the pledger and pledgee. 1 A 
 wrongful sale or pledge of property by the factor, while it 
 will not leave the contract of pledge intact, does not 
 destroy it. 4 Upon an action by a principal against a pledgee 
 to recover the property, his claim is subject to the equitable 
 deduction of the amount for which the factor had a valid 
 lien, although as against the wrongful pledger, the principal 
 may recover his damages, nominal or special, as the case 
 may warrant. 5 The measure of damages in an action of tort 
 is the value of the property, less the amount of the advance;* 
 and interest on the balance may be added. 1 In an action of 
 
 1 DeWolf v. Gardner, 12 Gush. Shaw t>. Ferguson, 78 Ind. 547 ; 
 
 19 ; Rodriguez v. Hefferman, 5 First Nat. Bank of Louisville v. 
 
 Johns. Ch. 417; Warner v. Martin, Bryce, 78 Ky. 42; Fowler v. Oilman, 
 
 11 How. 224; Patterson v. Tash, 2 13 Met. 267; Briggs v. Boston R. R. 
 
 Stra. 1178; Guerriero v. Peile, 3 B. Co., 6 Allen, 246; Clarke. Dearborn, 
 
 & Aid. 616; Newsom v. Thornton, 103 Mass. 335; Whitney v. Beckford. 
 
 6 East. 17. 105 Ib. 267; Belden v. Perkins, 78 
 
 * United States v. Villalonga, 23 111. 449 ; Chinncry v. Vial!, 5 H. & 
 Wall. 35. N. 287; Brierly t>. Kendall, 17 Q. B. 
 
 Donald v. Suckling, L. R. 1 Q. 937 ; Donald v. Suckling, L. R. 1 
 B. 597; Steiger v. Third Nat. Bank, Q. B. 597; Johnston . Stear, supra; 
 2 McCrary, 491. Halliday v. Holgate, L. R. 3 Ex. 
 
 * Johnston v. Stear, 15 C. B. (N. 299. 
 
 S)., 330. ' Fowler r. Gilman, 13 Met. 269; 
 
 First Nat. Bank c. Bryce, 78 Ky. Briggs v. Boston R. R. Co., 6 All. 
 42; Donald v. 'Suckling, L. R. 1 Q. 246. 
 
 B. 599; Johnston v. Stear, 15 C. B. 
 (N. S)., 330.
 
 THE FACTOE AS PLEDGOR. 551 
 
 trover, a tender of advances and charges of the factor must 
 be made before suit is commenced. 1 Where the act of 
 pledge by the factor is in excess of his advances and charges, 
 the owner of the goods may recover from the pledgee, who 
 has converted the same, the damages actually sustained by 
 the wrongful pledge and conversion of the property, being 
 the fair value of the goods, if sold in the usual course of 
 business, after deducting commissions, and any payments of 
 the factor in connection with the special goods covered by 
 the illegal pledge. 9 A bill in equity will not lie to enforce 
 the payment by a factor of proceeds of his sale, upon the 
 ground that the moneys constitute a trust fund, there being 
 ample remedy at law. 1 
 
 410. THE PLEDGEE, WITH NOTICE, SUBJECT TO EQUI- 
 TIES. Bales of cotton were consigned to factors, with 
 instructions not to sell, but to hold for further directions 
 and better prices, and the firm stored the cotton in a ware- 
 house. The factors at the time were considerably in debt 
 to their principal, and had no pecuniary interest in the par- 
 ticular shipment. Shortly afterwards the factors obtained 
 an advance from an insurance company giving the cotton- 
 press receipts, made deliverable to the order of the company, 
 as collateral security. Before the maturity of the notes for 
 which the receipts were given as collateral, the factors 
 failed. In a suit to settle claims to the property pledged, to 
 vvhich all were parties, judgment was entered for the con- 
 signor. 4 Goods consigned to a factor or agent for sale, 
 were pledged to a bank aware of the principal's owner- 
 ship, together with certain notes made by the principal 
 to the factor which it was understood should be paid 
 from the proceeds of the goods. The bank, being charge- 
 
 1 Steiger v. Third Nat. Bank, 2 Navulshaw v. Brownrigg, 1 Sim. (N. 
 
 McCrary, 494. S.) 573; 2 DeG. M. & G. 441. 
 
 * Alabama etc. Manf. Co. v. Third 4 Insurance Co. . Kiger, 103 U. S. 
 Nat. Bank, 12 Mo. App. 352. 
 
 * Taylor v. Turner, 87 111. 303;
 
 552 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 able with notice, was required to apply the proceeds 
 of the property to the payment of the notes ; and the 
 defense thus arising was available to an action upon the 
 notes by the pledgee as indorsee. 1 No rights or title can be 
 acquired by a pledgee, chargeable with negligence, under a 
 pledge by a consignee, not being a factor, and having no 
 indicia of title nor possession of the property.* 
 
 Under statutes giving validity to the claims of pledgees 
 receiving warehouse receipts and other indicia of property 
 from factors or agents as collateral security for advances, the 
 like rule as to notice prevails. It is an essential requisite 
 that the pledgees, in cases of misappropriation of such prop- 
 erty as bills of lading, indicia of title, should have received 
 the same in good faith and without knowledge of the want 
 of authority of the factor or agent so to use the same. 
 Where a pledgee is chargeable with notice of such facts, he 
 is not a holder for value of the property, nor of the docu- 
 ments of title, although he may have paid value therefor.' 
 The goods may be recovered by the principal or owner in an 
 action of replevin, or other appropriate action, without ten- 
 dering repayment of the loan. 4 The lien of the factor for 
 his charges is not deducted from his demand, only in cases 
 where a demand for such charges has been made. 1 
 
 411. THE PLEDGEE'S TITLE PROTECTED, AS AGAINST 
 OWNER, FACTOR, ETC. If the owner of property, or of doc- 
 uments of title or of property, entrusts the same to a third 
 person, a factor, so that he appears to have a good title to 
 the same and an apparent ownership, he enables such factor 
 
 'St. Louis Nat. Bank v. Ross, 9 Banks. Nelson, 38 Ga. 391; St. Louis 
 
 Mo. App. 399. Nat. Bank v. Ross, 9 Mo. App. 399. 
 
 1 Chicago Taylor, etc. Co. v. Low- 4 Macky v. Dillingcr, 73 Pa. St. 85; 
 
 ell, 60 Cal. 454. Stevens c. Wilson, 6 Hill, 512. 
 
 Macky v. Dillinger, 73 Pa. St. Merchants' Nat. Bank v. Trcn- 
 
 85 ; Easton v. Clark, 85 N. Y. 225 ; holm, 12 Hcisk. 520 ; Macky t>. Oil- 
 
 Wilson v. Nason, 4 Bosw. 40; Ste- linger, 73 Pa. St. 85. 
 vens c.Wilson, 6 Hill, 512 ; First Nat.
 
 THE FACTOR AS PLEDQOR. 553 
 
 by fraud and deceit, to obtain from a pledgee an advance of 
 money upon the credit of such property or indicia of 
 property. If a loan has been made in good faith, and without 
 notice, the principal is without defense as against the 
 pledgee, although the act of pledge be a misappropriation 
 and fraud, and not included in the secret agreement of the 
 parties. 1 An indorsement and delivery of the documents of 
 title, symbols of property, must be made at the time of the 
 advance. 9 And where other securities besides the bill of 
 lading are pledged by the factor for advances made by a 
 third person to himself, the principal is entitled to require 
 in the event of the factor's insolvency, that the other secu- 
 rities shall be first resorted to, or that he shall be given a 
 lien thereon for the balance due upon the special consign- 
 ment. 3 The rights of a bona fide pledgee for value, of doc- 
 uments of title to goods, held in a warehouse by a factor, 
 and receiving a warehouse receipt acknowledging the 
 pledgee's title to the cotton, were protected as against a 
 subsequent fraudulent sale thereof by the factor, and deliv- 
 ery to the purchaser by the warehouseman, notwithstand- 
 ing part of the proceeds were paid by the factor to the 
 pledgees on account of a debt antecedent to that for which 
 the cotton was pledged, but without their knowledge. 4 
 And a pledge made by a factor of a warehouse receipt, the 
 funds being advanced on the credit of the representations 
 contained in the receipt, and of the pledger's possession, 
 was sustained, although the invoice of the goods would have 
 shown that the goods belonged to the principal. 5 
 
 1 Cartwright v. Wilmerding, 24 N. Broadbent v. Barlow, 3 DeG. F. & J. 
 
 Y. 521; Botts v. McCoy, 20 Ala. 570. 
 
 578 ; Bonito v. Mosquero, 2 Bosw. 4 Bott 0. McCoy, 20 Ala. 578. 
 
 401 ; Gray v. Agnew, 9-> 111. 320. * Cartwright . Wilmerding, 24 N. 
 
 * Bonito v. Mosquero, 2 Bosw. 410. Y. 521. 
 
 1 Ex parte Alston, L. R. 4 Ch. 168;
 
 Div. 3. WAREHOUSE RECEIPTS. 
 
 CHAPTER XLV. 
 
 WAREHOUSE RECEIPTS AS COLLATERAL. 
 
 412. The warehouse receipt quasi-negotiable. 
 
 413. Transfer in pledge, with or without indorsement. 
 
 414. The pledgee of warehouse receipts, a holder for value. 
 
 415. Estoppel of owner, where third person holds apparent title. 
 
 416. Estoppel of warehouseman, by terms of receipts. 
 
 417. No title acquired by pledgee, with notice of fraud or felony. 
 
 418. Pledges supported, upon delivery of receipt and possession. 
 
 419. Possession, actual or implied, necessary to valid pledge. 
 
 420. Pledge by warehouseman of receipts for his own property. 
 
 421. The warehouseman as pledger, under statutory enactments. 
 
 412. THE WAREHOUSE RECEIPT QUASI-NEGOTIABLE. 
 Except in the rare cases where statutory enactments have 
 made warehouse receipts negotiable as bills of exchange or 
 promissory notes, a warehouse receipt is not a negotiable 
 instrument, and its indorsement and delivery, or delivery 
 merely where payable to " holder," carries none of the 
 effects as to cutting off the defenses of the warehouseman 
 against the original holder, nor is there any certain time at 
 which it matures, nor is the title of the person loaning 
 money upon it protected when lost or stolen, as in the case 
 of commercial paper. Nor is the warehouseman a guarantor 
 of the title of property held by him, and for which he has 
 issued a receipt Issued, however, " subject to the order 
 
 (554)
 
 WAREHOUSE RECEIPTS AS COLLATERAL. 555 
 
 hereon" of the person depositing the property, " and the 
 surrender of this receipt," it becomes a representation on the 
 part of the warehouseman to every successive holder for 
 value, under indorsement in blank, that he has the property 
 in store, and by a transfer of it the title to the property 
 and right to its possession pass to the indorsee as if the 
 property were actually delivered. The title thus acquired, 
 as between the parties to the transfer, is such a title as if 
 the property itself were delivered, no better and no worse. 
 The warehouseman may, by his direct representations on . 
 the face of the receipt, when in the hands of an innocent 
 holder for value advanced upon the face of its statements, 
 estop himself to show that he has not the property or to set 
 np any fraud, or wrongful delivery procured by misrepre- 
 sentation. In such cases, and generally by reason of its 
 negotiability by transfer from hand to hand under blank 
 indorsement, the warehouse receipt comes within the class 
 of quasi-negotiable instruments, equally with certificates of 
 stock, and bills of lading. 1 
 
 The transfer of warehouse receipts, by indorsement and 
 delivery carries with it, in exceptional cases, under statu- 
 tory enactments, the privileges of negotiability. The re- 
 ceipt, in the hands of third persons, holders for value ad- 
 vanced, without notice of equities, is given the same free- 
 dom from antecedent equities as the favored instruments of 
 commerce, bills of exchange and promissory notes. Any 
 defense the warehouseman might have had as against the 
 original holder of the receipt is cut off as against an indorsee 
 for value, without notice. 1 Where the provision is, that 
 
 1 Insurance Co. v. Kiger, 102 U. S. Stewart v. Phoenix Ins. Co., 9 Lea, 
 
 352 ; Canadian Bank v. McCrea, 106 104 ; Davis v. Russell, 52 Cal. 611. 
 
 111. 281 ; Burton v. Curyea, 40 Ib. * Gibson . Stevens, 8 How. 384 ; 
 
 320 ; First Nat. Bank v. Bates. 1 Fed. Erie & P. Disp. Co. . Compress Co., 
 
 Uep. 702; McNeil v. Hill, 1 Woolw. 6 Mo. App. 175; People's Banks. 
 
 96 ; Allen v. Maury, 66 Ala. 10 ; Gayley, 92 Pa. St. 518 ; s. c. 12 Phila. 
 
 Gibson v. Chillicothe Bank, 11 Ohio 183 ; First Nat. Bank . Bryce, 78 
 
 St. 311 ; Yenni v. McNamee, 45 N. Y. Ky. 42 ; Greenbaum v. Megibben, 10 
 
 614; Whitlock v. Hay, 58 Ib. 484; Bush, 419.
 
 5-")G QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 warehouse receipts "shall be transferable by the indorse- 
 ment of the party to whose order such receipt may be issued, 
 and such indorsement shall be deemed a valid transfer of 
 the property represented by such receipt, and may be made 
 either in blank or to the order of another," the element of 
 negotiability does not follow. The provisions of such 
 statutes are regarded, as in the case of like statutes relating 
 to bills of lading, as relating to the mode of transfer only, 
 and neither authorize nor imply that the indorser can 
 convey a title to the property represented by the receipt 
 which he does not possess. 1 
 
 413. TRANSFER IN PLEDGE, WITH OR WITHOUT IN- 
 DORSEMENT. The transfer for value as collateral -security 
 of warehouse receipts, by indorsement and delivery, or by 
 delivery only, where such receipts are made payable to 
 "holder" or "only upon the return of this receipt," vests 
 the legal title and possession of the property in the pledgee, 
 and is equivalent to an actual delivery of the property. 
 The warehouseman at once, without notice, becomes the 
 bailee of the lender of money upon the receipt lie has issued. 
 The title to the property passes by such transfer to the 
 pledgee under the law merchant, independent of any statute.* 
 A formal assignment of the document is not required, as the 
 
 1 Shaw v. Railroad Co. 101 U. S. Cartwright v. Wilmerding, 24 N. Y. 
 
 557; Canadian Bank v. McCrea. 106 5?1; St. Louis Nat. Bank v. Ross, 9 
 
 111. 281 ; Burton v. Curyea, 40 111. 320. Mo. App. 399 ; Fourth Nat. Bank v. 
 
 * Cool v. Phillips, 66 111. 217 ; Broad- Compress Co., 11 Ib. 333 ; Stewart v. 
 
 well v. Howard, 77 Ib. 305; Burton v. Phoenix Ins. Co., 9 Lea. 104 ; Gibson 
 
 Curyea, 40 Ib. 320; Lehman v. Mar- v. Stevens, 8 How. 384; Insurance 
 
 shall, 47 Ala. 362 ; Allen v. Maury, Co. v. Kiger, 103 U. S. 353, 357 ; 
 
 66 Ib. 10; Horn v. Baker, 8 Cal. 614; Harrist;. Bradley, 2 Dill. 285; McNeil 
 
 Davis v. Russell, 52 Ib. Gil; Gibson v. Hill, 1 Woolw. 96 ; Bank of Brit- 
 
 . Chillicothe Bank, 11 Ohio St., ish Columbia v. Marshall, 11 Fed. 
 
 811 ; National Bank v. Walbridge, 19 Rep. 19 ; Hice v. Cutler, 17 Wis. 351; 
 
 Ib. 424; Motliam . Hoyer, 5 Denio. Whitney v. Tibbitts, Ib. 359 ; Lick- 
 
 629 ; Gardner v. Suydam. 7 N. Y. barrow v. Mason, 1 Sm. L. C. pt. 2, 
 
 857; Wilkes v. Ferris, 4 Johns. 355 ; 1197. 
 Waldron c. Romaine, 22 Ib. 368 ;
 
 WAREHOUSE RECEIPTS AS COLLATERAL. 557 
 
 indorsement of itself sufficiently indicates the intention of 
 the pledger to pass the title and possession. 1 Such indorse- 
 ment and delivery transfers the general property in the 
 goods to the pledgee as absolutely as would a bill of sale. 9 
 When once indorsed in blank, such receipts pass from hand 
 to hand by delivery merely. 8 The delivery of a warehouse 
 receipt, without indorsement, as collateral security, is suffi- 
 cient to transfer the title and possession of the property re- 
 presented, if such be the intention of the parties. 4 Even 
 where in the language of a statute such receipts " may be 
 transferred by indorsement," the provision is regarded as 
 permissive only, and is without effect upon the right to 
 transfer by delivery existing independently of the statute. 5 
 Mere delivery under a statute requiring indorsement may 
 constitute a pledge, but none of the advantages of negotia- 
 bility will attach to such transfer, although the receipt be 
 payable to " bearer.'" No privilege is conferred upon a 
 pledgee under the civil code of Louisiana by the assignment 
 of a warehouse receipt, in the absence of an express contract 
 that the property is given in pledge to secure the payment 
 of a specified debt, the amount of which is stated ; 7 and, 
 although warehouse receipts are made " negotiable " under 
 the Civil Code, a warehouseman is not regarded as assuming 
 the liabilities of a guarantor of the title of the property 
 described in receipts issued over his signature. 8 
 
 414. THE PLEDGEE OF WAREHOUSE RECEIPTS, A 
 HOLDER FOR VALUE. The pledgee of warehouse receipts, 
 
 1 Gibson v. Stevens, 8 How. 384. St. Louis Nat. Bank v. Ross, 9 
 
 (Taney, C. J.) Mo. App. 399. Indorsement is re- 
 
 * McNeil v. Hill, 1 Woolw. 96. quired in Alabama under Code 
 
 * Davis. Russell, 52 Cal. 611. 2099. Allen v. Maury, 66 Ala. 10; 
 4 Whitney v. Tibbetts, 17 Wis. 359 ; Lehman v. Marshall, 47 Ib. 362. 
 
 Merchants Bank v. Hibbard, 48 Mich. T Martin v. Creditors, 15 La. Ann. 
 
 118 ; Herr v. Zarker, 8 Cal. 603 ; Gib- 165 ; Cater v. Merrill, 14 Ib. 375. 
 
 son v. Stevens, 8 How. 384 ; Rice v. Insurance Co. v. Kiger, 103 U. S. 
 
 Cutler, 17 Wis. 351. 352, 356. 
 4 Rice v. Cutler, 17 Wis. 351.
 
 558 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 receiving the same, with or without indorsement, as collat- 
 eral upon a bona fide loan or discount of commercial paper, 
 stands in the same privileged position as a bona fide pur- 
 chaser for value of like receipts. An indefeasible title to 
 the property represented by the receipts is vested in the 
 bona fide pledgee for value, and he is entitled to its posses- 
 sion. His title thus acquired in good faith, for value 
 advanced upon the faith and credit given to the apparent 
 legal title and right to possession of the pledger, is protected 
 even as against the real owner, although the act of pledge 
 by the person entrusted with the indicia of title represent- 
 ing the property, be a fraud as against an unpaid vendor. 
 Such innocent pledgee is a bona fide holder for value, in the 
 usual course of business ; and has something more than a 
 mere lien for his advances, taking the title to the^property 
 and the right to its actual possession. An equitable interest 
 only in the property remains in the pledger, who is entitled 
 to a surrender of the indicia of title upon payment of the 
 loan or debt, and to any surplus arising from the sale of the 
 property, upon default, after payment of the debt. 1 The 
 pledgee of warehouse receipts is under no obligation to 
 notify the warehousemen of the transfer to him of such 
 receipts as collateral security. The representation is usually 
 made upon the face of warehouse receipts that the prop- 
 erty described will not be delivered until the surrender of 
 the receipt and its cancellation. The rule applies to third 
 persons, creditors of the pledger, seeking by legal process to 
 obtain possession of property represented by such receipts, 
 when the same have passed into the hands of pledgees for 
 value advanced in good faith upon the credit of such repre- 
 sentations.* 
 
 1 Gibson . Stevens, 8 How. 384 ; 841 ; Root v. French, 13 Wend. 573 ; 
 
 Barnard v. Campbell, 58 N. Y. 73 ; Hoffman . Noble, 6 Met. 68. 
 
 Disbrow v. McDonald, 5 Bosw. 130 ; First Nat. Bank . Bates, 1 Fed. 
 
 Winne t>. McDonald, 39 N. Y. Rep. 702; 19 A. L. R. (N. S.) 565. 
 233; Culdvvcll v. Bartlett, 3 Duer,
 
 WAREHOUSE RECEIPTS AS COLLATELAL. 559 
 
 415. ESTOPPEL OP OWNER, WHERE THIRD PERSON 
 HOLDS APPARENT TITLE. The rules of equitable estoppel 
 are invoked in favor of the innocent pledgee of warehouse 
 receipts, receiving the same from a vendee of the property, 
 for a valuable consideration, advanced on the credit of such 
 receipts, in the usual course of business. The rule is applied 
 where the vendor, although desirous of retaining a lien, 
 has been induced by misrepresentations to entrust the 
 vendee with the indicia of title and possession, so that the 
 latter is able to act as the apparent absolute owner of the 
 property, the pledgee not being chargeable with notice of 
 the equities of the owner. Under such circumstances " there 
 is no principle upon which it can be held that the loss, 
 which must fall somewhere, should fall upon an innocent 
 pledgee, rather than upon the vendor who put it in the power 
 of the pledgor to hold himself out as the sole owner, and 
 alone entitled to the possession of the goods, under circum- 
 stances which must have deceived the most vigilant." ! The 
 like rule of equitable estoppel in favor of innocent pledgees, 
 receiving warehouse receipts, or other indicia of title, to 
 property and its possession, from an apparent owner, in 
 good faith, in the usual course of trade, for value and with- 
 out notice, is incorporated into the California code. A bona 
 fide pledgee, holding for value, without notice, under an 
 unauthorized use of warehouse receipts, indorsed in blank, 
 as collateral security for an antecedent debt by one entrusted 
 with the indicia of title so as to appear as the owner of the 
 property and entitled to its possession, is protected. 9 A 
 pledgee himself may, by his neglect or through misplaced 
 confidence, bring himself within the rules of equitable estop- 
 pel, as where he has permitted the pledgor to take posses- 
 sion of the property, and to obtain warehouse receipts for 
 the same. In such cases the pledgee is estopped to set up 
 his title as against a subsequent pledgee, receiving the 
 
 'Fourth Nat. Bank v. Compress Davis 0. Russell, 52 Cal. 611. Civ. 
 Co. 11 Mo. App. 333, 343. Code, Cal. 2991.
 
 560 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 receipts in good faith for value advanced on the credit of his 
 title and possession. 1 The like rule applies where the 
 owner of property allows a party to take warehouse receipts 
 in his own name, being deceived by his fraudulent conduct, 
 and the receipts are negotiated as collateral security to a 
 bona fide pledgee, for value, without notice of the fraud.* 
 
 416. ESTOPPEL OF WAREHOUSEMAN, BY TERMS OP 
 RECEIPTS. A warehouseman, who has issued a receipt stat- 
 ing that certain goods therein mentioned are in store at his 
 warehouse, and deliverable only upon surrender of the 
 receipt, is not permitted to deny such statements, where, 
 upon the credit of the representations contained in such 
 receipt, a pledgee has advanced value, in good faith, with- 
 out notice. 8 The rules of equitable estoppel were enforced 
 where, in fact, no property had ever been received by the 
 warehouseman as stated in the receipt, but after issue, as 
 collateral security, the receipt was transferred by indorse- 
 ment and delivery to a third person for a bona fide advance 
 made on the credit of the representations contained in the re- 
 ceipt, and without notice of the real transaction, as between 
 the original parties. The pledgee was allowed to recover from 
 the warehouseman the value of the goods as recited in the 
 fraudulent receipt. 4 Nor will a warehouseman be permitted 
 to explain the issue of a receipt, where there has been a 
 failure to deliver the property described, on demand, as 
 against a bona fide pledgee for value advanced upon the 
 credit of such representations, without notice of any equities. 
 The pledgee, receiving the receipt by indorsement and 
 delivery, has a right to act upon the stipulation contained 
 on the face of the receipt that delivery of the property will 
 be made only upon its surrender. The receipt becomes, as 
 
 1 Allen . Maury, 66 Ala. 10. 96 ; Whitlock v. Hay, 58 N. Y. 484 ; 
 
 * Hazard t>. Fiske, 83 N. Y. 287, Stewart v. Phoenix Ins. Co. 9 Lea, 
 296. 104. 
 
 * First Nat. Bank v. Bates, 1 Fed. McNeil . Hill, 1 Woolw. 96. 
 Rep. 702 ; McNeil 9. Hill, 1 Woolw.
 
 WAREHOUSE RECEIPTS AS COLLATERAL. 561 
 
 between the pledgee, advancing money on the faith of its 
 representations, and the warehouseman, a contract not to be 
 explained or contradicted by parol, but to be enforced, upon 
 breach, in favor of the innocent pledgee for value, who 
 otherwise wilJ suffer loss. 1 A warehouseman issued and 
 delivered a receipt , " Received of A 5,000 bushels No. 2 
 white mixed corn, to be loaded into sacks, tickets for which, 
 when loaded, will be sent down promptly." A took the 
 receipt to a bank, and borrowed money on it as collateral. 
 He then ordered the grain to be shipped, which was done 
 by the warehouseman, who delivered the receipt received 
 from the carrier to A, upon which he obtained a bill of lad- 
 ing. He again went to the same bank, and obtained a dis- 
 count of a draft, attaching the bill of lading as collateral 
 security, the bank having no notice that the same grain was 
 covered by the receipt and bill of lading. The fraud being 
 discovered, and the goods appropriated to meet the bill of 
 lading, the warehouseman was estopped to set up any 
 defense as to the receipt issued, to the injury of the pledgee 
 advancing money in good faith upon the credit of the repre- 
 sentations contained in the receipt.* 
 
 417. NO TITLE ACQUIRED BY PLEDGEE, WITH NOTICE 
 
 OF FRAUD OB FELONY. The real owner of property who 
 has been induced to deliver the actual possession of such 
 property, or of the indicia of title, as a warehouse receipt, to 
 a vendee, by reason of his fraudulent misrepresentations, 
 may recover such property or indicia of title from one who is 
 chargeable with notice of the fraud, or who has not made an 
 advance or parted with consideration upon the faith of such 
 possession of property or of documents of title, provided 
 such owner or vendor asserts his title within a reasonable 
 time, before the rights of innocent persons, pledgees for 
 
 1 Stewart v. Phoenix Ins. Co. 9 Lea, * Union Savings Assn. v. St. Louis 
 104. Grain Elev. Co. 11 Mo. App. 596.
 
 562 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 value, have intervened. 1 The indefeasible title of the ven- 
 dor of property represented by warehouse receipts, is not 
 defeated, where the same are received by a bank as collat- 
 eral for an overdrawn account, where* the pledgee, a bank, 
 is chargeable with notice that the sale of the property cov- 
 ered by such receipts had been made for cash, and there was 
 enough to put a prudent person upon inquiry as to the title 
 of the pledgor to the property. Where a check of the 
 pledgor is given in payment, and payment is refused in the 
 Clearing House, and upon the same day, upon another pre- 
 sentation by the vendor, a second refusal to pay is made, or 
 to return the receipts, the unpaid vendor may bring an action 
 of trover against the pledgee. Nor is it material that the 
 pledgee holds only the indicia of title, the warehouse re- 
 ceipts, and not the property, as the receipts stand in the 
 place of the property which they represent. The unpaid 
 vendor is entitled to his action of trover against the pledgee, 
 the damages to be the value of the goods. 1 
 
 A pledgee of warehouse receipts can acquire no title, 
 where he receives the same chargeable with notice, express 
 or implied, that the use of such receipts as collateral security 
 is a misappropriation by the person intrusted with the doc- 
 uments of title, or that the property described has never 
 been received into the warehouse issuing such receipt, al- 
 though such pledgee has advanced value. Under such cir- 
 cumstances, as where the unpaid vendor seeks to recover 
 from a pledgee chargeable with notice of the non-payment 
 of the purchase money, the pledgee takes only the title of 
 his fraudulent assignor, which is, in fact, no title at all. 3 
 Nor can an innocent pledgee for value, who advances money 
 upon a warehouse receipt which has been feloniously ob- 
 tained by robbery or larceny, acquire any rights or title, 
 where such receipts are not negotiable, as against the real 
 
 1 Barnard v. Campbell, 58 N. Y. 73; Canadian Bank . McCrea, 108 
 
 Root t>. French, 18 Wend. 573; 111.281. 
 
 Mowry v. Walsh, 8 Cow. 238 ; Hoff- Merchants' Bank t>. Colt, 15 Barb, 
 
 man v. Noble, 6 Met. GS. 506 ; Whitlock v. Hay, 58 N. Y. 484.
 
 WAREHOUSE RECEIPTS AS COLLATERAL. 563 
 
 owner. Receipts were issued payable to " bearer," and the 
 pledgee inquired of the party issuing the same if they 
 were good, and was told they were. The receipts were 
 unindorsed, and therefore not negotiable under a statu- 
 tory provision requiring indorsement in every case. The 
 receipts were pledged by a clerk who had stolen the 
 same, and in an action for the possession of the goods, 
 as between the real owner and the pledgee, the title of the 
 former was preferred. 1 Nor is a pledge of warehouse re- 
 ceipts by a factor, unauthorized and in violation of his duty, 
 supported, as against his principal, although the recovery 
 will be subject generally to a recoupment in favor of the 
 pledgee to the extent of the valid lien of the factor." The 
 pledgee of warehouse receipts, except where the same are 
 made negotiable, can acquire no greater rights than his as- 
 signor, where the transfer is made by one without authority 
 or in violation of a statute. 8 And a pledgee of warehouse 
 receipts, the goods being unidentified, and part of a much 
 larger quantity, is entitled to no preference over holders of 
 other receipts. 4 
 
 418. PLEDGES SUPPORTED UPON DELIVERY OF RECEIPT 
 AND POSSESSION. Where goods are stored in the warehouse 
 of a third person, the indorsement and delivery of the re- 
 ceipt therefor by the owner to a pledgee, and notice of the 
 transfer to the warehouseman (especially if the latter as- 
 sents), makes him agent for the pledgee, and is a good con- 
 structive delivery, because it changes the possession and 
 dominion. 5 A warehouse entry having been made at a cus- 
 
 I Erie &Pac. Dispatch Co. v. Com- 183; aff. 92 Pa. St. 518; Erie & Pac. 
 press Co. 6 Mo. App. 175; Fourth Disp. Co. v. Compress Co. 6 Mo.App. 
 Nat. Bank v. Compress Co. 11 Ib. 175; Fourth Nat. Bank v. Compress 
 333. Co. 11 Ib. 333. 
 
 II First Nat. Bank v. Bryce, 78 Ky. 4 Sawyer v. Taggart, 14 Bush, 727; 
 42 ; Merchants' Nat. Bank v. Tren- May v. Hoagland, 9 Ib. 172. 
 
 .holm, 12 Heisk, 520. DeWolf v. Gardner, 12 Cush. 19. 
 
 1 People's Bank v. Gayley,12 Phila.
 
 564 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 torn house, a receipt was issued entitling the holder to with- 
 draw the goods. The transfer of the receipt as collateral 
 security vested the title to the property and the right of 
 possession in the pledgee. Receiving the indicia of title in 
 good faith, for value and without notice, the pledgee is not 
 chargeable with notice of the contents nor required to in- 
 spect the warehouse registry before advancing his money 
 upon the faith of the representations of the receipt. 1 Plac- 
 ing goods in a cellar of the warehouse of the pledger, hired 
 for the purpose by the pledgee, is a sufficient delivery.* 
 Where property is stored in a warehouse, and receipts issued 
 therefor, to a person who advances money in good faitli under 
 a special contract, providing, among other things, that the 
 property shall in case of flood be at the risk of the "owner," 
 the transaction is a pledge, and not a mortgage, there being 
 no transfer of the title. The pledgee is not the "owner," 
 nor the goods at his risk.* The title of a pledgee of ware- 
 house receipts, taken as collateral security for advances, 
 who had entered into possession of the property, surrender- 
 ing the receipts, and then left the same with the pledgor so 
 that the property might be shipped at once on account of 
 the pledgee, is not affected by an attempt of a creditor of the 
 pledgor to levy upon the property while in process of ship- 
 ment. Having obtained actual possession, the re-delivery 
 of the receipts for the purpose of shipment, or other special 
 purpose, was allowable. 4 
 
 419. POSSESSION, ACTUAL OR IMPLIED, NECESSARY TO 
 VALID PLEDGE. A factor, having property belonging to his 
 principal stored in his building, obtained a loan from a bank 
 for his own purposes, upon giving a receipt stating that 
 such property had been placed " in the control and posses- 
 sion of said bank, to be used by said bank as its property for 
 
 1 Cartwright v. Wilmcrding, 24 N. * Bank of B. Columbia v. Marshall, 
 
 Y. 521. 11 Fed Rep. 19, 26. 
 
 * Sharp v. Philadelphia Ware- 4 Nelson v. Mclntyre, 1 Bradw. 
 
 bouse Co. 9 Rep. 572. 603.
 
 WAREHOUSE RECEIPTS AS COLLATERAL. 565 
 
 the re-imbursement of the loan, and if paid when due, or be- 
 fore said property is disposed of by the said bank for its re- 
 imbursement, then to be returned unto " the pledger. As 
 against the owner, the pledge was not sustained, there being 
 a want of possession, and the pledgee being chargeable with 
 constructive notice that the pledgor was a factor, whose 
 duty was to sell, and who had no authority to pledge for a 
 loan to himself individually. 1 And where a receipt was is- 
 sued by a custodian, without authority so to do, and the 
 same, indorsed, was delivered by an agent to a person who 
 advanced funds in good faith, upon the representations of 
 such receipt, the transfer, although sustained as against the 
 principal, was defeated as against bona fide purchasers for 
 value from the principal who had obtained possession of the 
 goods upon valid receipts.* Where indorsement of ware- 
 house receipts to transfer title is required by a statute, a 
 mere equitable title is received by a pledgee receiving re- 
 ceipts unindorsed, as though he were a pledgee without pos- 
 session. Such title is subject to be defeated by a sale to a 
 bona fide purchaser for value, without notice of the pledge.* 
 And where a pretended warehouse receipt is executed by a 
 debtor to his creditor of property as security, the property 
 remaining in the possession of the debtor, who is not a ware- 
 houseman, the receipt is void as against other creditors ob- 
 taining liens by legal process. 4 
 
 420. PLEDGE BY WAREHOUSEMAN OF RECEIPTS FOR 
 HIS OWN PROPERTY. In the absence of statutory enact- 
 ment, a warehouseman having property of his own in his 
 warehouse, may issue receipts therefor, as in other cases, 
 and vest title to the property in other persons by the trans- 
 fer of such receipt, by indorsement and delivery, or by the 
 delivery of receipts made directly in the name of the person 
 
 1 First Nat. Bank v. Nelson, 38 z Troutman . People's Bank, 12 
 
 Geo. 391. Phila. 276; People's Bank v. Gayley, 
 
 9 People's Bank v. Gayley, 12 12 Ib. 183; s. c. 92 Pa. St. 518. 
 
 Phila. 183 ; aff. 92 Pa. St. 518. * Thome v. Bank, 37 Ohio St. 254.
 
 566 QUASI-NEGOTIABLE COLLATERAL SECURITIES. 
 
 to whom the property is to be transferred. A warehouse- 
 man may use such receipts as collateral to secure the pay- 
 ment of loans to himself or his own indebtedness. 1 It is no 
 objection that the warehouse receipt thus issued is the ven- 
 dor's or pledger's own receipt, or that he still remains in 
 possession of the property. The fact of giving such receipt 
 converts the vendor into a warehouseman, and such holding 
 of possession in another capacity is a good delivery. The 
 title of a pledgee for value advanced upon a receipt so 
 issued, is sustained as between the parties. 9 A receipt for 
 property stored in the yard of the debtor, not strictly a 
 warehouse receipt within the terms of the law, was given as 
 collateral for a loan, made in good faith. The pledgee sub- 
 sequently learning of the impending insolvency of the debtor, 
 took actual possession of the property, and the legal title 
 thus obtained was sustained as against the pledger, and his 
 assignee in bankruptcy. 1 
 
 421. THE WAREHOUSEMAN AS PLEDGOR, UNDER 
 STATUTORY ENACTMENTS. The right of a warehouseman to 
 issue receipts for collateral security upon his own property, 
 is made the subject, in a few states, of statutory regulation. 
 In cases arising in these states, the terms of the statutes 
 control. Such receipts are required generally to be issued 
 only " fora consideration," which is construed as prohibiting 
 the issue of receipts by warehousemen upon their own prop- 
 erty. The warehouseman remaining in possession of the 
 rn'operty, no contract of pledge can be made. Such receipts, 
 not being within the statute, and being invalid, their use as 
 collateral security for a loan to the warehouseman is not 
 supported, as against judgment creditors, or assignees in in- 
 
 1 Merchants' Bank v. Hibbard, 48 Horn v. Barker, 8Cal. 614; National 
 
 Mich. 118 ; Cochran v. Rippcy. 13 Bank v. Walbridge, 19 Ohio St. 424; 
 
 Bush, 495; Greenbaum v. Megibben, Shcphardson v. Gary, 29 Wis. 24, 4:>. 
 
 10 Ib. 419; Broadwcll v. Howard, 79 * DeWolf v. Gardner. 12Cush. 19. 
 
 111. 305; Cool v. Phillips, 66 Ib. 270; Sherman v. Traders' Nat. Bank. 
 
 Parshall v. Eggert, 54 N. Y. 18, 21 ; 9 Biss. 216.
 
 WAREHOUSE RECEIPTS AS COLLATERAL. 567 
 
 solvency. 1 This rule was applied where the owner of prop- 
 erty stored in a manufactory of which he was the owner, 
 but which had its distinctive name, procured the superin- 
 tendent to issue a receipt for property, upon the indorse- 
 ment of which as collateral a loan was obtained from a bank. 
 No possession was taken, nor was the receipt recorded ; and 
 an execution was levied upon the property by a creditor of 
 the owner. He subsequently sold some of the property, on 
 account of the bank, to a purchaser for value without notice ; 
 but the property was re-taken by the officer. Upon an ac- 
 tion against the officer, the levy was sustained. As between 
 the parties the receipt was a nullity ; and as against third 
 parties, the want of change of possession, notwithstanding 
 a pretended secret change of ownership, and the failure to 
 record the assignment, defeated the title of the pledgee. 5 
 In Iowa, a warehouseman is not allowed, by statutory enact- 
 ment, to issue receipts upon his own property for the pur- 
 pose of using the same as collateral security. 8 The same 
 statute is in force in Ohio, but a distinction as to its appli- 
 cation was taken where advances had been made, under a 
 contract, made previously and still subsisting, for the 
 purchase by a warehouseman of property, to be stored in his 
 warehouse, the warehouse receipts being issued in the name 
 of the party advancing the money, who upon the sale of the 
 property was to retain the amount of his advances and com- 
 missions. Warehouse receipts issued in good faith under 
 such a contract, are supported as against legal process by 
 creditors of the warehouseman. The legal title and right 
 to possession having passed to the party making advances 
 in good faith, the merely equitable interest of the warehouse- 
 man in the proceeds was not subject to legal process. 4 
 
 1 Adams v. Merchants' Nat. Bank, Iowa code, 2171 ; Tenni v. McNa- 
 
 9Biss. 396; In re Gurney, 7 Ib. 414 ; mee, 45 N. Y. 614, construing the 
 
 Miller v. Jones, 15 N. B. R. 150; Al- New York statute to like effect, 
 
 len . Massey, 17 Wall. 351. 4 Gibson v. Chillicothe Bank, 11 
 
 * Yenni . McNamee, 45 N.Y. 614. Ohio St. 811. 
 
 8 Sexton v. Graham, 53 Iowa, 181;
 
 PART V. 
 
 NON-NEGOTIABLE COLLATERAL SECURITIES. 
 
 CHAPTER XLIV. 
 
 CHOSES IN ACTION AS COLLATERAL. 
 
 422. Non-negotiable choses and equitable assignments as collateral secu- 
 rity. 
 
 423. Equitable assignments of funds as collateral. 
 
 424. Assignments in part of such securities. 
 
 425. The pledge of non-negotiable collaterals, with or without indorse- 
 
 ment. 
 
 426. The assignment in pledge of insurance policies. 
 
 427. The pledgee's lien, upon payment of premiums. 
 
 428. Pledges of non-negotiable collaterals, without notice to debtor. 
 
 429. Priority of assignees of funds, upon giving notice. 
 
 430. The debtor's liability, with notice of assignment. 
 
 431. No title acquired by pledgees, with notice of fraud. 
 
 422. NON-NEGOTIABLE CHOSES AND EQUITABLE AS- 
 SIGNMENTS AS COLLATERAL SECURITY. The use of non- 
 negotiable choses in action and equitable assignments of 
 funds as collateral securit}', including the pledge of insur- 
 ance policies, leases, interests under wills, orders on funds, 
 equitable assignments of part interests, city and other certi- 
 ficates, savings bank books, chattel mortgages, memberships 
 of stock exchanges, unpaid calls on stocks, interests under 
 
 (568)
 
 CHOSES IN ACTION AS COLLATERAL. 569 
 
 contract, and other choses in action, affords the pledgee less 
 available security than either negotiable or quasi-negotiable 
 collateral securities. Unless the pledger or owner has, by 
 his affirmative acts or omissions, or neglects, brought him- 
 self within established rules relative to equitable estoppel, 
 a pledgee receiving such non-negotiable choses in actions 
 or equitable assignments of funds as collateral security, for 
 a valuable consideration, in good faith, holds them subject 
 to all equities existing at the time of the transfer, 1 and to 
 all defenses valid as to the original parties. 9 The non-nego- 
 tiable chose in action itself is open to all equities, and sub- 
 ject to all defenses growing out of the original transaction, 
 in the hands of any assignee, however remote. 3 
 
 The pledgee of a non-negotiable chose in action is, how- 
 ever, not subject to equities or rights arising subsequently 
 to its assignment ; 4 nor to equities arising from other and 
 independent transactions between the original parties; 5 nor 
 in a case of an assignment of a judgment, will an equity be 
 allowed when not asserted by one of the parties to such 
 judgment, or his assignee or representative.' The only 
 fraud, as to the instrument, permissible to be shown at law 
 
 1 Harter v. Coleman, L. R. 19 Ch. K Y. 442 ; Combes v. Chandler, 33 
 
 D. 630, 634 ; Watson v. Mid Wales Ohio St. 178; Burtis v. Cook, 16 la. 
 
 Ry. Co. L. R. 2 C. P. 593; Cowdrey v. 194; Isctt . Lucas, Ib. 507 ; In re 
 
 Vandenbrough, 101 U. S. 522 ; Jud- Agra Bank, L. R. 2 Ch. 39, 397 ; 
 
 son v. Corcoran, 17 How. 612; Wick- Graham v. Johnson, L. R. 8 Eq. 36 ; 
 
 ham?;. Morehouse, 16 Fed. Rep. 324; Piper v. Piper, L. R. 1 Ch. D. 90 ; 
 
 Bush v. Lathrop, 22 N. Y. 535 ; In- Ord v. White, 3 Beav. 357. 
 
 graham v. Disborough. 47 Ib. 421 ; 3 Trustees of Union College v. 
 
 Baker v. Bishop Hill Colony, 45 111. Wheeler, 61 N. Y. 114 ; Cutts v. 
 
 264 ; Irish t>. Sharp, 89 Ib. 26; Chick- Guild, 57 Ib. 229; Combes v. 
 
 cring v. Fullerton, 90 Ib. 520 ; Jasper Chandler, supra; Ord v. White, 3 
 
 County v. Tavis, 76 Mo. 13; Cutts v. Beav. 357. 
 
 Gould, 57 N. Y. 229 ; Storey v. Dut- 4 George v. Tail, 102 U. S 564 ; 
 
 ton, 46 Mich. 539 ; Davis v. Beck- Harter v. Coleman, L. R. 19 Ch. D. 
 
 stein, 69 N. Y. 442. 630. 
 
 9 Moore v. Metropolitan Nat. Bank. s lsett v. Lucas, 19 Iowa, 507; 
 
 55 N. Y. 41 ; Wickham v. Morehouse, Clark v. Roberts, 25 Hun. 26. 
 
 16 Fed. Rep. 324 ; People v. Johnson, Isett v. Lucas, supra. 
 100 111. 537 ; Davis v. Beckstein, 69
 
 570 NON-NEGOTIABLE COLLATERAL SECURITIES. 
 
 against a bona fide pledgee for value, without notice, is 
 fraud touching the execution, such as misreading, the sur- 
 reptitious substitution of one paper for another, or the 
 obtaining by some other trick or device of an instrument 
 different from that intended by the party executing the 
 same ; ' and an equitable defense, founded upon the original 
 transaction, may be defeated as against an innocent pledgee 
 for value, by negligence even less than gross, if it be the 
 cause of his advance. 1 
 
 423. EQUITABLE ASSIGNMENTS OF FUNDS AS COLLAT- 
 ERAL. Equitable assignments of funds or choses in action 
 are supported. Where certain property was pledged to secure 
 the holders of bills of exchange, and upon sale tojbe applied 
 in their payment, the letters which passed between the 
 parties, without a formal contract, being sufficient as an 
 appropriation to entitle the holders of the bills of exchange 
 to maintain an action for the proceeds. 8 The like rule was 
 applied where an equitable assignment of debts due by third 
 persons to the acceptor was made to secure the holders of 
 bills of exchange. Notice was given of the assignment, and 
 the bills were discounted, the acceptor subsequently becom- 
 ing insolvent. The proceeds of the debts thus equitably 
 assigned were paid to the holders of the bills of exchange/ 
 A voluntary equitable assignment ot a chose in action, 
 with delivery, when made in good faith, and creditors are 
 unaffected, cannot be defeated by a subsequent assignee, 
 although paying value. 6 Insurance policies having been 
 deposited as collateral security, and a sub-pledge made of 
 the policies and other securities upon a bona fide advance, 
 an equitable assignment by the pledgee of any balance of 
 the proceeds of such policies and securities for the benefit 
 
 George v. Tait, 108 U. S. 564 ; * Feltz v. Walker, 49 Conn, 93. 
 
 Hartshorn . Day, 19 How. 211 ; Rankin v. Alford, L. R. 5 Ch. D. 
 
 Osterhout v. Shoemaker, 3 Hill, 513; 786. 
 
 Belden v. Davis, 2 Hall, 433; Fran- In re Mann, L. R. 5 Ch. D. 367. 
 
 chot c. Leach, 5 Cow. 506. Beal c. Warren, 2 Gray, 447.
 
 CHOSES IN ACTION AS COLLATERAL. 571 
 
 of a bank making advances thereon, with notice to the sub- 
 pledgee, created a valid lien in favor of the bank upon the 
 surplus of the proceeds from the insurance policies and 
 other collaterals. 1 
 
 A letter to the effect that " I hereby undertake that I 
 will, when and as received, pay over to you all dividends 
 coming to me in respect of my proof upon the estate of X," 
 when accepted, and consideration given, is a good equitable 
 assignment of the entire dividends. The assignor himself 
 became bankrupt, and the assignee then gave notice of his 
 claim to the trustees in the bankruptcy in which the divi- 
 dends were to be declared. His claims were preferred to 
 the trustees in bankruptcy of the assignor. 2 But a bank- 
 rupt while undischarged, having no interest in the surplus 
 beyond a mere hope or expectancy, cannot give an assignee 
 of such surplus any right to interfere in the administration 
 of the estate. 8 A mere promise in writing, or parol, to pay 
 a debt out of a distinctive fund, although it be of the clear- 
 est and most solemn kind, will not give the promisee an 
 equitable lien on the fund nor be sufficient to operate as an 
 equitable assignment. Where the holder retains control so 
 that he may collect the fund or recall his promise, the right 
 to a present and complete control does not exist on the part 
 of the assignee, and no benefit can accrue to him. 4 
 
 424. ASSIGNMENTS IN PART OP SUCH COLLATERALS. 
 The claims of a pledgee of non-negotiable choses in action or 
 of equitable assignments of funds, where but a part or por- 
 tion is assigned, is supported in equity. All persons inter- 
 ested in such choses in action or funds should be made parties 
 
 1 Meyers v. United Guaranty Co. 7 Jackson, 20 Pick. 197 ; Rogers v. 
 
 DeG. M. & G. 112. Hosack, 18 Wend. 319; Williams v. 
 
 * In re Irving, L. R. 7 Ch. D. 419. Ingersoll, 89 N. Y. 518 ; Christmas 
 8 Ex parte Sheffield, L. R. 10 Ch. v. Griswold, 8 Ohio St. 558 ; Hop- 
 
 D. 434. kins v. Beebe, 26 Pa. St. 85; Malcolm 
 
 * Christmas v. Russell, 14 Wall. 69; v. Scott, 3 Hare, 46; Field v. Megaw, 
 Trist v. Child, 21 Ib. 441 ; Hull v. L. R. 4 C. P. 660.
 
 572 NON-NEGOTIABLE COLLATERAL SECURITIES. 
 
 thus avoiding a multiplicity of suits by different claimants 
 and enabling the debtor to obtain a judicial distribution of the 
 securities and funds in his possession. The equity of the 
 assignee of part only of an equitable fund or chose in action 
 is as deserving of protection in a court of chancery as where 
 an absolute assignment of the whole has been made, subject 
 to the equitable rule that such part claim can be separately 
 protected and enforced without injury or loss to the debtor. 1 
 An order given granting a part assignment of a fund to be 
 settled by arbitration and pledged as collateral security, al- 
 though the amount of the fund had not then become defin- 
 itely settled, operated as an equitable transfer, although 
 the fund had a potential existence only at the time of 
 the assignment.' Such part assignment should be drawn 
 against a particular fund, and not against a debtor in general 
 terms.* But for special reasons, the rule is not semble applied 
 to part assignments of non-negotiable choses in action issued 
 by municipalities. 4 
 
 In courts of law, no recovery can be had upon part assign- 
 ments of non-negotiable choses in action or equitable funds. 
 The creditor if he were allowed to split up his cause of ac- 
 tion into parts, or as might be the case, sub-divide it in- 
 
 1 Christmas v. Russell, 14 Wall. 69; parte South, 8 Swanst. 392 ; Thomp- 
 Triflt v. Child, 21 Ib. 441 ; Dowell son v. Simpson, L. R. 5 Ch. 659; Ad- 
 t>. Cardwell, 4 Sawyer, 217 ; Daniels dison v. Cox, 8 Ib. 76 ; Ranken v. 
 v. Menihard, 53 Ga. 359; Lapping v. Alfaro, L. R. 5 Ch. D. 786; Ex partc 
 Duffy, 47 Ind. 51 ; Wood v. Wallace, Hall, 10 Ib. 615 ; and at law, Brown 
 24 Ib. 226; Etheridge v. Vernoy, 74 *. Bateman, L. R. 2 C. P. 272; Field 
 N. C. 809 ; Exchange Bank v. Me- t. Megaw, 4 Ib. 660 ; Price v. Ban- 
 Loon, 73 Me. 498; Whitney v. Cow- nister, L. R. 3 Q. B. D. 569; Tibbetts 
 an, 55 Miss. 626; Christie v. Sawyer, v. George, 5 A. & E. 107. 
 44 N. H. 298 ; Public Schools . Wellsburg Bank v. Kimberlands, 
 Heath, 15 N. J. Eq. 22 ; Morton v. 16 W. Va. 555. 
 Naylor, 1 Hill, 583 ; Bradley v. Root, * Exchange Bank v. McLoon, 73 
 5 Paige, 632 ; Risley c. Phoenix Bank, Me. 498. 
 
 88 N. Y. 318; City of Philadelphia's * City of Philadelphia's App., 86 
 
 App. 86 Pa. St. 79 ; Claflin v. Kim- Pa. St. 179; Jermyn v. Mofflt, 75 Pa. 
 
 ball, 52 Vt. 6 ; Wellsburg Bank v. St. 899 ; Mandeville . Welch. 5 
 
 Kimberlanda, 16 W. Va. 555 ; Ex Wheat. 277.
 
 CHOSES IN ACTION AS COLLATERAL. 573 
 
 definitely, might subject his debtor to embarassments and 
 responsibilities not contemplated by the original contract. 
 Nor will the debtor be required to ascertain and decide at 
 his peril as to the relative title and rights of part assignees 
 of any equitable fund, or of any cliiim arising out of or to a 
 chose in action. The assignee of a non-negotiable chose in 
 action is at the common law, and still is, in law courts, unless 
 the rule has been changed by statutory or code enactments, 
 required to sue in the name of his assignor. 1 
 
 425. THE PLEDGE OF NON-NEGOTIABLE COLLATERALS, 
 WITH OR WITHOUT INDORSEMENT. The transfer of non-ne- 
 gotiable choses in action as collateral security for a loan or 
 discount is valid, whether with or without indorsement. In- 
 dorsement is not generally required in order to vest in the 
 pledgee for value all the title that he can acquire in such 
 choses in action. Except where required by the terms of 
 the instrument, indorsement is not usually necessary. The 
 intention of the parties to pass the title to choses in action 
 will control, although no indorsement has been made. An 
 equitable lien may be created by parol.* The delivery of a 
 savings bank without indorsement or assignment, as collat- 
 eral security, conveys an equitable title to the deposits, 
 which is preferred as against legal process subsequently is- 
 sued by a creditor. 8 A delivery of a certificate of deposit 
 issued by a bank and made payable to a certain named per- 
 son, "or his order, upon the return of this certificate prop- 
 erly indorsed," is sufficient, under provisions of statutes 
 
 1 Mandeville v. Welch, 1 Wheat. Thayerc. Daniels, 113 Mass. 129; 
 
 233; s. c. 5 Wheat. 277; Tierman v. Kingman v. Perkins, 105 Ib. Ill; Dix 
 
 Jackson, 5 Vt. 580 ; Creighton v. v. Cobb. 4 Ib. 508, 512 ; Williams v. 
 
 Hyde Park, 6 Bradw. 273 ; Bobbins Ingersoll, 89 N. Y. 518 ; Stout . Yae- 
 
 D. Bacon, 3 Greenl. 346 ; Stanberry ger Co., 13 Fed. Rep. 832. 
 
 v. Smythe, 13 Ohio St. 495 ; Gibson 8 Taft v. Bowker, 132 Mass. 277 ; 
 
 0. Cooke, 20 Pick. 15 ; Palmer v. Pierce v. Boston Savings Bank, 129 
 
 Merrill, 6 Cush. 282 ; Tnpp v. Brown- Ib. 425; Kingman v. Perkins, 105 Ib. 
 
 ell, 15 Ib. 376; Bullard t>. Randall, 1 111. 
 Gray, 605.
 
 574 NON-NEGOTIABLE COLLATERAL SECURITIES. 
 
 relating to suits being brought by the real parties in interest, 
 to entitle the person advancing money upon such securities 
 to bring an action in his own name. 1 Such certificates of 
 deposit issued by banks assimilate to negotiable paper, the 
 legal title only passing upon indorsement and delivery ; and 
 in the absence of statutory enactment, the security is made 
 more effective by indorsement than by delivery merely. 9 
 A written assignment and delivery of profits of a con- 
 tract for building a public road was required for the same 
 reason, the rendering of the security the more available to 
 satisfy the debt upon default. 8 And a legal title was ac- 
 quired to deposits in a savings bank by an indorsement on 
 the book, as against an equitable title obtained by delivery 
 without indorsement. 4 A pledgee advancing money upon 
 the credit of the apparent ownership of a person holding 
 scrip certificates for money indorsed in blank, without notice 
 of equities, obtains a good title against the owner. 8 The 
 delivery of choses in action is an essential condition of a 
 pledge thereof. 6 
 
 426. THE ASSIGNMENT IN PLEDGE OF INSURANCE POL- 
 ICIES. Indorsement as well as delivery is required of insur- 
 ance policies, either fire or life, where payable to a certain 
 named person " or assigns," in order to render them 
 effectual as collateral security for an advance. 1 Where a de- 
 posit had been made of an insurance policy as collateral se- 
 curity for a loan, upon an agreement to make a formal 
 indorsement, but the pledger died before its execution, 
 
 1 Cassidy v. First Nat. Bank, 30 4 Cornbes v. Chandler, 33 Ohio St. 
 
 Minn. 86; Pease v. Rush, 2 Ib. 107; 178; "Weirick . Bank, 16 Ib. 296. 
 
 Beal v. Warren, 2 Gray, 447. 6 Baldwin <o. Ely, 9 How. 580. 
 
 8 International Bank v. German Wliipple v. Whipple, 109 111. 418; 
 
 Bank, 71 Mo. 883; Cassidy v. First Hart v. Forbes, 60 Miss. 746. 
 
 Nat. Bank, supra; Klauber v. Big- 7 Shearman . Niagara Fire Ins. 
 
 gerstaff, 47 Wis. 551 ; Pardee v. Fish, Co. 46 N. Y. 526; Merrifield v. 
 
 60 N. Y. 265. Baker, 11 Allen, 43; City Bank . 
 
 Gay v. Moss, 86 Cal. 125; Dewey Ass. Co. 32 W. R. 658. 
 v. Bowman, 8 Ib. 151.
 
 CHOSES IN ACTION AS COLLATEKAL. 575 
 
 equity relieved the pledgee by a decree for the payment by 
 the company to him of the amount due with interest, with- 
 out a formal assignment. 1 An equitable title is acquired to 
 policies of insurance pledged as collateral security by 
 delivery merely, such being the mutual intention of the 
 parties : 2 and an equitable pledge of a surplus arising from 
 a policy is sustained, upon notice to the pledgee. 8 The use 
 as collateral security of insurance policies, upon bona fide 
 loans, vests in the pledgee the legal title, as upon an abso- 
 lute assignment. Receiving such title, he may enforce the 
 security to its full amount, holding any surplus after pay- 
 ment of his advances, premiums and assessments paid, for 
 the pledgor or persons equitably entitled thereto. 4 But no 
 enforcement is allowed the pledgee, although advancing 
 value, upon assignments of policies obtained merely for 
 speculative purposes, such policies being illegal and void. 6 
 A clause in a policy prohibiting assignments without the 
 consent of the insurance company does not apply to a 
 pledge. 6 A creditor, who had been promised an insurance 
 policy as collateral security for an advance, and by negli- 
 gence failed to obtain it before the pledger's death, was 
 not allowed to claim privilege under the Louisiana code. 7 
 A prior pledgee, with possession, is preferred in equity. 8 
 
 'Crossley v. Ins. Co. 4 Ch. D. 421; Ins. Co. v. Coffee, 61 Tex. 287; Ins. 
 
 Webster v. Ins. Co. 15 Ib. 169. Co. . Garland, 108 111. 220 ; Olmsted 
 
 8 Soule v. Bank, 45 Barb. Ill; v. Keyes, 85 N. Y. 593; Gilbert v. 
 
 West v. Ins. Co. 31 Ark. 476; Bruce Moose, 13 W. N. C. 439; Fairchild 
 
 v. Gardner, L. K. 5 Ch.32; Edwards . Life Assn. 51 Vt. 625; Gilman v. 
 
 v. Martin, L. R. 1 Eq. 121 ; Latham Curtis, 64 Cal. (16 C. L. N. 217). 
 D. Bank, 17 Ib. 205; Stout v. Yaeger 6 Rombach v. Ins. Co. 35 La. Ann. 
 
 Co. 13 Fed. R. 802; Chapman v. 233; Stokell v. Kimball, 59N.H. 13; 
 
 Mcllrath. 77 Mo. 39; Hart . Forbes, Stevens v. Warren, 101 Mass. 251; 
 
 60 Miss. 29; Williams' App. 15 W. Johnson v. Van Epps, 14 Bradw. 
 
 N. C. 89. 201 ; Warnock v. Davis, supra. 
 
 8 Myers . Guarantee etc. Co. 7 Ellis v. Kreutzinger, 27 Mo. 311; 
 
 DeG. M. & G. 112; City Bank . Spare . Ins. Co. 17 F. R. 568; Pow- 
 
 Ass. Co. supra; Diflenbach v. Vo- ers v. Ins. Co. 136 Mass. 108. 
 geler, 61 Md. 370. 7 Succ. D'Meza, 26 La. Ann. 35. 
 
 4 Warnock v. Davis, 104 U. S. 775 ; 8 Spence?- v. Clarke L. R. 9 Ch. D. 
 
 O'Mara v. Nugent, 37 N. J. Eq. 324; 137; Diffenbach v. Vogeler, supra.
 
 576 NON-NEGOTIABLE COLLATERAL SECURITIES. 
 
 427. THE PLEDGEE'S LIEN, UPON PAYMENT OF PRE- 
 MIUMS. A lien enforcible in equity may be created upon 
 the moneys secured by an insurance policy by payment of 
 premiums, where they are paid under a contract with the 
 beneficial owner. The sureties of a mortgagor who has con- 
 tracted with a mortgagee to pay the premiums on an insur- 
 ance policy as a collateral security, who have paid such 
 premiums upon default of their principal, are given a lien 
 upon the moneys realized from the insurance policy held as 
 security. 1 Such lien upon insurance policies as collateral, 
 may also be acquired by trustees who have advanced money 
 for the preservation of the trust property, and by other 
 persons who have loaned funds bona fide, upon request of 
 trustees, for the like purpose.* The claim of persons ad- 
 vancing money to pay premiums on insurance policies at 
 the request of trustees, is not defeated by reason of the fact 
 that the trustees who obtained the loan might possibly have 
 taken some other course to obtain a fund for the preserva- 
 tion of the trust property. 8 Payments of premiums upon 
 insurance policies made by a stranger, or by an owner in 
 part of such policies, are not sufficient to create a lien upon 
 the insurance moneys, unless the owner stands by during such 
 payments, and allows the same to be expended in preserving 
 his property. 4 An owner of insurance policies, as a part of a 
 transaction voidable for fraud, assigned the same as collateral 
 security for moneys advanced, covenanting to pay the premi- 
 ums to keep them alive. The pledgee paid some of the premi- 
 ums after the assignment. The pledgor instituted a suit to 
 set aside the transaction as being voidable by reason of fraud, 
 but was only given relief as to the premiums paid, as by the 
 
 'In re Leslie, L. R. 23 Ch. D. 552; 4 Norris v. Caledonian Ins. Co. 
 
 Warnock v. Davis, 104 U. S 775; L. R. 8 Eq. 127; In re Leslie, Les- 
 
 Scobey . Waters, 10 Lea, 551- Har- lie v. French, L. R. 23 Ch. D. 552, 
 
 ley v. Heist, 86 Ind. 196. 565 ; Burridge t>. Row, 1 Y. & C. 
 
 'Clack v. Holland, 19 Beav. 262; Ch. 183; Clack . Holland, 19 Bcav. 
 
 Todd V. Moorhouse, L. R. 19 Eq. 69. 262; Pinkett v. Wright, 2 Hare, 120; 
 
 Todd t. Moorhouse, supra. 12 Cl. & F. 764.
 
 CHOSES IN ACTION AS COLLATERAL. 577 
 
 assignment as security the pledgee had become a part owner 
 the policies, and had no lien for such payments. The title 
 of the pledgee, however, was fully protected to the amount 
 of the moneys actually advanced, the assignment of the 
 policies being a valid security to that extent. 1 An insurance 
 policy on the life of a third person was assigned by the 
 equitable owner as collateral security for the payment of 
 certain legacies, the pledger covenanting to pay the premi- 
 ums. After his decease, his executor continued the pay- 
 ments. The payments of premiums being by a part owner 
 and his representative, created no lien on the insurance 
 policies, as against the legatees. 1 
 
 428. PLEDGE OF NON - NEGOTIABLE COLLATERALS, 
 WITHOUT NOTICE TO DEBTOR. A pledgee for value, with- 
 out notice, of non-negotiable collaterals, which are in the 
 form of documents or indicia of title, receiving the same 
 indorsed, where required, or by delivery, is protected as 
 against creditors of the debtor, or subsequent assignees of 
 the same security, although he has given no notice of the 
 assignment to the person who is liable. 8 Under this rule, 
 supporting the equitable title of an assignee of a non-nego- 
 tiable chose in action, receiving the documents of title, as 
 against later pretended assignments of the same collateral 
 security, it is immaterial that the second assignee acquired 
 his interest under such pledge in good faith and for value. 4 
 Creditors of the debtor are subject to the rights acquired 
 under such pledge, although no notice be given to the 
 debtor, and the assignment of the chose in action is by 
 
 1 Pennell v. Millar, 23 Beav. 172. Martin v. Potter, 11 Gray, 37; King- 
 
 * In re Leslie, L. R. 23 Ch. D. 552. man v. Perkins, 105 Mass. Ill; 
 
 Muir t>. Schenk, 3 Hill, 228; Tkayer . Daniels, 113 Ib. 129; 
 
 Greenstock v. Rosenback, 61 N. Y. United States v. Vauglian, 3 Binn. 
 
 583; Freund v. Importer's Bank, 76 394; Stevens v. Stevens, 1 AshmeaJ, 
 
 Ib. 352; Williams . Ingersoll, 89 190. 
 
 Ib. 518; Dix v. Cobb, 4 Mass. 508, 4 Muir v. Schenck, 3 Hill, 228. 
 
 512; Richards v. Smith, 9 Gray, 315; 
 87
 
 578 NON-NEGOTIABLE COLLATERAL SECURITIES. 
 
 delivery merely. 1 Notice to an insurance company of the 
 assignment of a policy, where the pledgee never received 
 possession of the document of title, is of no avail as against 
 a second pledgee, advancing money upon an indorsement 
 and delivery of the policy, in good faith and without notice 
 of the previous pledge. 9 The early rule in England, under 
 which, as between bona fide assignees of the same non-nego- 
 tiable chose in action, the one giving notice to the debtor 
 was preferred, although becoming a holder for value with- 
 out notice subsequently, 8 has been overruled. The equita- 
 ble claim of the bona fide assignee, for value, having prior- 
 ity in point of time, although he has given no notice to the 
 debtor, is preferred. 4 A minor's interest under a will is 
 assignable, and although unrecorded, and without notice to 
 the person holding the fund, the rights of a bona fide assignee 
 advancing value are preferred as against the claims of a 
 subsequent assignee, who had both recorded his assignment 
 and given notice to the trustee. 8 
 
 429. PRIORITY OF ASSIGNEES OP FUNDS, UPON GIV- 
 ING NOTICE. Upon an equitable assignment of an interest 
 in funds in the hands of debtors, or third parties, or'trustees, 
 or only potentially existent, the assignments being made by 
 independent instruments, notice should be given by assignees 
 to such debtors, or trustees, or third persons, within a reason- 
 able time. As between the immediate parties to an assign- 
 ment, no notice to the debtor or trustee is required; but 
 
 1 Taft v. Bowker, 132 MQSS. 297; v. Cooper, Ib. 60; Mangles P. Dixon, 
 
 Norton . Piscataqua Ins. Co. Ill McN. & G. 437: Fosters. Blackstone, 
 
 Ib. 532; Thnycr v. Daniels, 113 Ib. 1 M. & K. 297; Meux v. Bell, 1 Hare, 
 
 129; Kingman . Perkins, 105 Ib. 73. 
 
 Ill; Martin v. Potter, 11 Gray, 56; 4 Pickering v. Ilfracombe Ry. Co. 
 
 Lewis v. Trailer's Bank,*30 Minn. L. R. 3 0. P. 235; Robinson v. Nes- 
 
 134. bitt, L. R 8 0. P. 264 ; Beavan t?. 
 
 Spencer v. Clarke, L. R, 9 Ch. Oxford, 6 DeG. M. & G. 492; Kin- 
 D. 137. derley v. Jervis, 23 Beav. 1. 
 
 Watts V. Porter, 3 E. & B. 743; Putnam . Story, 132 Mass. 205; 
 Dearie v. Hall, 3 Russ. 1 ; Lovcridge Thaycr v. Daniels, 105 Ib. 139.
 
 CHOSES IN ACTION AS COLLATERAL. 579 
 
 the assignee, in order to protect his title against subse4uent 
 assignees of the same equitable interest in such funds, for 
 value, without notice, and who have honestly made inqui- 
 ries as to the title, should give reasonable notice of his 
 claims to the debtor or trustee. A failure to give such 
 notice, by reason of which an innocent assignee has been 
 deceived into advancing value for a second assignment of 
 the same interest from the assignor, will defeat the claim of 
 the prior assignee, although he has advanced value, where 
 notice to the debtor or trustee of his assignment has been 
 given by the second assignee. The latter stands in a better 
 position than the first assignee, having acquired by notice 
 the legal as well as the equitable title to the fund assigned. 1 
 An assignee for value of a legal title from a real owner, 
 with a valid title of record, is not chargeable with notice by 
 the registry of an equitable title, although a subsequent 
 assignee of such equitable interest from the same grantor is.* 
 
 430. THE DEBTOR'S LIABILITY, WITH NOTICE OP AS- 
 SIGNMENT. Debtors bound upon non-negotiable choses in 
 action, or trustees holding equitable funds, who are charge- 
 able with notice of the transfer to the assignee, are equitably 
 required to abstain from doing or omitting any act which 
 may result to the prejudice, loss or damage of the rights and 
 interests of such assignee for value, in good faith. Any 
 payments, or compromises, or settlements made by a debtor 
 with the assignor or other parties, after notice of such as- 
 signment, and without consent of the assignee, are fraudu- 
 lent and void, and afford no defense to an action by the 
 assignee. 8 The assignee for value, without notice, of a non- 
 negotiable document of title, is protected as against credi- 
 
 'Judson . Corcoran, 17 How. * Creightonfl. Hyde Park, 6 Brad w. 
 280; Murray v. Lylburn, 2 Johns. 274; Carr v. Waugh, 28 111. 418; 
 Ch. 442 ; Moore <o. Holcombe, 3 Morris v. Cheney, 51 Ib. 451 ; Little- 
 Leigh, 597. field v. Story, 3 Johns. 426; Field v. 
 
 * Tarbell . West, 86 N. T. 280 ; Mayor, 7 N. T. 179. 
 Bentley . Bates, 4 T. & C. 190.
 
 580 NON-NEGOTIABLE COLLATERAL SECUKITIES. 
 
 tors of the debtor and subsequent assignees of the same 
 chose in action, although no notice has been given of such 
 assignment. Notice, however, should be given to the debtor 
 to defeat a subsequent bona fide payment made by him to 
 the creditor. 1 Fraudulent releases of choses in actions or 
 equitable funds by the creditor after assignment and 
 notice to the debtor or trustees, are of no effect as against 
 a bona fide assignee for value advanced.* 
 
 431. NO TITLE ACQUIRED BY PLEDGEES, WITH NOTICE 
 
 OF FRAUD. A pledgee of a non-negotiable security, charge- 
 able with notice, express or implied, that such use is an act 
 of fraud or misappropriation, can acquire no right to be pro- 
 tected in equity, nor any better title to such collateral than 
 the pledger. A trust company issued a non-negotiable re- 
 ceipt for certain bonds, the receipt being in the name of a 
 third person as " trustee." Authority was given to use the 
 receipt as collateral security for a certain sum, but it was 
 fraudulently pledged to secure more than twice the amount. 
 Learning of the misappropriation, a tender was made of the 
 amount authorized, and demand for the receipt. Charge- 
 able with notice by the terms of the receipt, the pledgee 
 was bound to inquire of the cestui que trust whether the 
 transaction was authorized ; failing to do so, he must bear 
 the loss resulting from his negligence.* Notice of the re- 
 stricted rights of a pledgee, holding a lease as security for 
 the payment of a negotiable note, is sufficient to defeat an 
 assignee of the interest of the pledgee when attempting to 
 claim greater rights than those of his assignor. 4 A pledgee 
 can acquire no interest under an assignment of a judgment, 
 taken against a putative father in a bastardy case to provide 
 for the maintenance of the child, in custody of a guardian, 
 made by the mother as collateral security for her individual 
 
 1 Williams t>. Ingersoll, 89 N. Y. Swan v. Produce Bank, 24 Hun. 
 
 518. 277. 
 
 * Andrews c. Becker, 1 Johns. Cas. 4 Dewey v. Bowman, 8 Cal. 145. 
 411.
 
 CHOSES IN ACTION AS COLLATERAL. 581 
 
 debt, when chargeable with notice of the misappropriation. 1 
 Nor can a pledgee acquire any title as against the real owner 
 in a case where a truscee borrows money for his own use, 
 assigning an order or decree in favor of the trust estate as col- 
 lateral security for its repayment, the pledgee being charge- 
 able with knowledge of the misappropriation.* Upon a 
 wrongful pledge by an agent, however general his powers, 
 of a judgment owned by his principal, as collateral security 
 for a loan by a bank to himself, the principal note being 
 signed as " agent and attorney," the pledgee, being charge- 
 able with the duty of inquiring as to the extent of the au- 
 thority given, upon failure so to do, can acquire no valid 
 claim against the real owner of the judgment. 8 Notice is 
 not presumed as against a bona fide pledgee for value, 
 where land certificates, and transfers indorsed in blank, 
 properly acknowledged, having been deposited with an 
 agent for safe keeping and for sale, were fraudulently 
 pledged by him as collateral security for an advance made 
 without notice of equities. There is nothing in the fact of 
 a pledge of certificates, indorsed in blank, to put a bona fide 
 pledgee upon inquiry as to who is the real owner. The 
 presumption is, that the holder is the owner, and has given 
 value for the same. 4 And the pledgee, receiving such 
 choses in action so as to be vested with the legal title and 
 ownership, also enjoys the benefit of the presumption that 
 the assignment was executed to him upon a sufficient and 
 valuable consideration, and that he is a holder for value, 
 with a good title. 6 
 
 1 Heritage v. Hedges, 72 Ind. 247. * Stone t>. Brown, 54 Tex. 330. 
 
 8 Brewster D. Galloway, 4 Lea, 558. 6 Tallman v. Hoey, 89 N. T. 537 ; 
 
 8 Wickham v. Morehouse, 16 Fed. Belden . Meeker, 47 Ib. 311. 
 Rep. 324.
 
 582 NON-NEGOTIABLE COLLATERAL SECURITIES. 
 
 CHAPTER XLV. 
 
 ESTOPPEL IN PAIS, IN FAVOR OF PLEDGEES. 
 
 Estoppel in pais, as applied to non-negotiable collateral. 
 
 433. Essential elements of estoppel under such collateral. 
 
 434. Recognized propositions of an estoppel iu pais. 
 
 435. Estoppel, by representations upon non-negotiable securities. 
 
 436. Estoppel of owner, in cases of tortious pledge. 
 
 437. The innocent pledgee for value protected as against owner. 
 
 438. Rights of pledgee under blank indorsements. 
 
 439. Moore v. Metropolitan National Bank. 
 
 440. Estoppel of corporations as against innocent pledgees for value. 
 
 432. ESTOPPEL IN PAIS, AS APPLIED TO NON-NEGOTIA- 
 BLE COLLATERAL. No distinction can be drawn between 
 the equitable title of a pledgee for value of a non-negotia- 
 ble chose in action, where the rules of estoppel in pais are 
 invoked, and the legal title of the pledgee for value holding 
 negotiable collateral securities, under indorsement and de- 
 livery. 1 The representations made in non-negotiable choses 
 in action are enforced, under the rules of equitable estoppel, 
 to the same extent as the like representations contained in 
 instruments negotiable by the commercial law. They are 
 subject to the like qualification, when sought to be enforced 
 by a pledgee for value, that faith and credit have been given 
 to such collateral securities upon the belief that the repre- 
 sentations made on its face and by indorsement, are true.* 
 Equities existing between the original parties to the contract 
 
 1 Moore c. Metropolitan Nat. Bank, Metropolitan Nat. Bank, 55 Ib. 41; 
 
 55 N. Y. 41. Goodwin v. Robarts, L. R. 10 Ex. 76, 
 
 Armour . Michigan Central R. 337; 1 App. 476, 489. 
 R. Co. 65 N. Y. Ill, 123 ; Moore t>.
 
 ESTOPPEL, IN FAVOR OF PLEDGEES. 583 
 
 yield to ihe rules of estoppel in pais, in cases where it ap- 
 pears from the terms of the collateral security or by indorse- 
 ment that the intention of the person executing the same 
 must have been that such chose in action should be assigna- 
 ble free from and unaffected by all equities, defenses, or 
 set-offs of such maker or obligor. 1 The equities and de- 
 fenses to which a non-negotiable chose in action is per se 
 subject, are not affected by the application of the rules of 
 estoppel in pais in favor of bona fide pledgees for value, and 
 receiving an assignment, as against the real owner. 8 
 
 The rule that where a person gives a non-negotiable se- 
 curity to another for the very purpose of raising money upon 
 it, he is estopped to set up any collateral contract to defeat 
 the title of an innocent person advancing money on the faith 
 of the statements in the bond, was approved by the Court 
 of Queen's Bench, in a case where a secret agreement was 
 made by a corporation with the person to whom a bond was 
 issued, that he should pay the same, and the accruing inter- 
 est, and indemnify the corporation. Such contract consti- 
 tuted no defense as against innocent holders for value as the 
 person in possession of the bond was able by means of the 
 defendant's acts, to deceive the parties who advanced money 
 on the faith of the statements contained in the bond. 3 And 
 where, upon an absolute failure of consideration by a person 
 to whom a bond had been issued, an application of the rules 
 of equitable estoppel in favor of a holder for value, without 
 notice, was refused, the title acquired to a mere chose. in 
 action being subject to all the equities between the original 
 parties to the contract, the court (Lush, J.) said: "But if 
 the bond had been given for the purpose of raising money on 
 it, it would have made all the difference." 4 
 
 1 In re Agra v. Masterman's Bank, * Dickson v. Swansea R. R. Co. L. 
 
 L. R. 2 Ch. 391, 397. R. 6 Q. B. 44. 
 
 3 Trustees of Union College v. * In re Natal Investment Co. L. 
 
 Wheeler, 61 N. Y. 114. R. 3 Ch. 355.
 
 584 NON-NEGOT1ABL3 COLLATERAL SECURITIES. 
 
 433. ESSENTIAL ELEMENTS OF ESTOPPEL, UNDER SUCH 
 COLLATERAL. The essential elements of equitable estoppel 
 are : a representation or concealment of material facts ; such 
 representation must be made with knowledge, unless the 
 party making the representation is bound to know the facts, 
 or ignorance is the result of gross neglect; the party to 
 whom it is made must be ignorant of the truth of the mat- 
 ter; it must be made with the intention that the other shall 
 act upon it, and a culpable neglect on the part of the person 
 sought to be estopped, the effect of which is to make a fraud 
 on the party setting up the estoppel, will supply the place 
 of intent; the other party must have been induced to act 
 upon the representations. 1 The rules of equitable estoppel 
 are founded, to a great extent, upon the existence^ of fraud 
 in the transaction, alike in its purposes and in its results. 9 
 To constitute an estoppel, both an opportunity and an appar- 
 ent duty to speak must concur with knowledge that reliance 
 is being placed upon the written representations of the per- 
 son sought to be estopped, and in cases of loan, that the 
 lender of money is acting or about to act as he would not do 
 if the truth was declared. 8 And silence merely of the 
 obligor of a non-negotiable chose in action, during .the 
 course of negotiation, where the assignment is made with 
 his consent, is sufficient to entitle an innocent pledgee de- 
 ceived thereby to the benefit of an application of the rules 
 of equitable estoppel as against any attempt of the obligor to 
 set up defenses or equities to defeat his title, or its enforce- 
 ment. 4 But no estoppel arises where the representation con- 
 sists in an incorrect statement of law, nor upon false 
 
 'Griffin . Dwiglit, 6 Col. 584; 153; Odlin v. Gove, 41 N. H. 465; 
 
 Patterson . Hitchcock, 3 Col. 5C6. Wegh <o. Boylan, 85 N. Y. 394: Hill 
 
 Traun v Kiefer, 31 Ala. 136 ; . Epley, 31 Pa. St. 331 ; Eldred . 
 
 Martin v. Zellcrbacb, 38 Cal. 318; Hazlctt, 33 Ib. 307; White*. Lang- 
 
 Taylor v. Ely, 25 Conn. 250 ; David- don, 30 Vt. 599. 
 
 son v. Young, 38 111. 146 ; People . Viele v. Judson, 83 N. Y. 33. 
 
 Brown, 67 111. 437; Powell v. Rogers, < Wegh v. Boylan. 85 N. Y. 394; 
 
 105 Ib.318; Dixfleld . Newton, 41 Watson t>. McLaren, 19 Wend. 563. 
 Me. 221 ; Grimes v. Kimball, 8 Allen,
 
 ESTOPPEL, IN FAVOR OF PLEDGEES. 685 
 
 statements made to conceal an illegal contract. 1 And the 
 document upon which advances are made, must be an indi- 
 cia of title or a symbol of property, by the transfer of which 
 the legal title and right to possession of the property or 
 funds represented, may pass to the lender of money. 3 
 
 434. RECOGNIZED PROPOSITIONS OF AN ESTOPPEL IN 
 PAIS. In a case in which it was sought to estop a common 
 carrier from denying that it was in possession of certain 
 property, which it was, if in possession, bound to deliver, the 
 representations to the person advancing money being con- 
 tained in non-negotiable "advice notes," the Court of 
 Common Pleas (Brett, J.) announced certain recognized 
 propositions of an estoppel in pais, within the lines of 
 which it was necessary such innocent person should bring 
 his claim : "If a man by his words or conduct wilfully en- 
 deavors to cause another to believe in a certain state of 
 things which the first knows to be false, and if the second 
 believes in such state of things, and acts upon his belief; he 
 who knowingly made the false statement is estopped from 
 averring afterwards that such a state of things did not ex- 
 ist." 8 Another recognized proposition seems to be that, 
 " If a man, either in express terms or by conduct, makes a 
 representation to another of the existence of a certain state 
 of facts which he intends to be acted upon in a certain way, 
 and it be acted upon in that way, in the belief of the exist- 
 ence of such a state of facts, to the damage of him who so 
 believes and acts, the first is estopped from denying the ex- 
 
 1 Rashdall v. Ford, L. R. 2 Eq. 750. statement is made for the purpose of 
 
 In Horton v. Westminster Comm. 7 concealing an illegal contract ; for 
 
 Ex. 780, 791, Martin, B. says: "The persons cannot be allowed to escape 
 
 meaning of estoppel is this that the from the law by making a false 
 
 parties agree, for the purpose of a statement." 
 
 particular transaction, to state cer- * Imperial Bank v. London Dock 
 
 tain facts as true, and that, so far as Co. L. R. 5 Ch. D. 195; Guun v. Bol- 
 
 regards that transaction, there shall ckow, L. R. 10 Ch. 499. 
 
 be no question about them. But the * Carr v. London Ry. Co. L. R. 10 
 
 whole matter is opened where the C. P. 307, 316.
 
 586 NON-NEGOTIABLE COLLATERAL SECURITIES. 
 
 istence of such a state of facts. 1 And "if a man, whatever 
 his real meaning may be, so conducts himself that a reason- 
 able man would take his conduct to mean a certain repre- 
 sentation of facts, and that it was a true representation, and 
 that the latter was intended to act upon it in a particular 
 way, and he with such belief does act in that way to his 
 damage, the first is estopped from denying that the facts 
 were as represented." 
 
 Another rule of estoppel is, that " If in the transac- 
 tion itself which is in dispute, one has led another into the 
 belief of a certain state of facts by conduct of culpable neg- 
 ligence calculated to have that result, and such culpable 
 negligence has been the proximate cause of leading and has 
 led the other to act by mistake upon such belief, to his prej- 
 udice, the second cannot be heard afterwards, as against the 
 first, to show that the state of facts referred to did not 
 exist.* 
 
 Another rule of estoppel, and its limitation, founded upon 
 a representation made by a vendor to a person advancing 
 money for property to the vendee, whose fraud must 
 cause loss to one or the other of two persons, was stated : 
 that where one states a thing to another, with a view to the 
 other altering his position, or knowing that, as a reasonable 
 man, he will alter his position, then the person to whom the 
 statement is made is entitled to hold the other bound, and 
 the matter is regulated by the state of facts imported by the 
 statement. 8 But the reason of the rule ceases at once when 
 a stranger to the arrangement seeks to avail himself of the 
 statements which were not made as a basis for him to act 
 upon. They are for a stranger evidence against the party 
 making the statement, but no more than evidence which 
 may be rebutted ; between the parties they form an estoppel 
 at law. 4 
 
 1 Carr t>. London Ry. Co. L. R. 10 4 Wegh v. Boylan, 85 N. Y. 398 ; 
 
 C. P. 817. (Brett, J.). Knights v. Wiffln, L. R. 5 Q. B. 660. 
 
 Ibid, p. 818. (Mellor, J.), citing Blackburn Sales, 
 
 Knights v. Wiffln, L. R. 5 Q. B. 162. 
 060 (Blackburn, J.).
 
 ESTOPPEL, IN FAVOR OF PLEDGEES. 587 
 
 435. ESTOPPEL, BY REPRESENTATIONS UPON NON-NE- 
 GOTIABLE COLLATERAL. A bona fide pledgee for value, 
 without notice of fraud or other equities, is protected, un- 
 der approved rules of estoppel in pais, where the obligor 
 upon the non-negotiable chose in action has declared upon 
 its face, or by indorsement, that he has no defenses, equi- 
 ties, or set-offs to the debt or duty secured, or that the 
 consideration has been paid in full, or other like representa- 
 tions. 1 Such declarations of "no defenses, equities or set- 
 offs," made by the debtor in writing and generally under 
 seal, forms muniments of title, and are conclusive, under 
 estoppel, when such choses in action are in the possession 
 of bona fide pledgees, for value advanced on the credit of 
 such representations, without notice of fraud. 8 Nor is the 
 benefit of such declarations confined to the first holder for 
 value. A sub-pledgee of sucli non-negotiable collaterals, 
 advancing value in good faith, without notice, takes a good 
 title as against the obligor, who is estopped to set up any 
 defense in opposition to his own declarations made to be 
 acted upon by successive assignees of the non-negotiable 
 security. 8 
 
 436. ESTOPPEL OF OWNER, IN CASES OF TORTIOUS 
 PLEDGE. The rules of estoppel in pais are enforced against 
 an owner of a non-negotiable chose in action, who has, with 
 mistaken confidence, entrusted the indicia of title and the 
 apparent absolute ownership, by indorsement and delivery 
 to a third person, so that he is able to deceive bona fide 
 pledgees, advancing value upon the faith and credit of such 
 documents of title and apparent absolute ownership, with- 
 out notice that the act of pledge is a fraudulent misappro- 
 priation and an unauthorized act. 4 The only limitation 
 
 1 Smyth <p. Munroe, 84 N. Y. 354 ; Ashton's App. 73 Pa. St. 153. 
 
 Payne . Burnham, 62 Ib. 69. * Combes . Chandler, 33 Ohio St. 
 
 *Wegh 0. Boy Ian, 85 N. Y. 394; 178; Moore v. Bank, 55 N. Y. 41; 
 
 Ryall v. Howies, W. & T. Lead Cas. McNeil 0. Tenth Nat. Bank, 46 Ib. 
 
 2, pt. 2, 1673. 325; Horn v. Cole, 51 N. H. 287;
 
 588 NON-NEGOTIABLE COLLATERAL SECURITIES. 
 
 upon the application of estoppel upon this ground is, that it 
 must be the affirmative act of the owner himself in confer- 
 ring such ownership that has enabled the deceit to be prac- 
 ticed upon the innocent pledgee. 1 The payee of a 
 non-negotiable certificate of deposit who has indorsed the 
 same in blank and entrusted it to another person, will have 
 no defense as against an innocent pledgee receiving the 
 same from such fraudulent person for an advance, without 
 notice. The pledgee will hold the collateral security free 
 from equities existing between the pledgor and the payee. 
 The apparent ownership and legal right to the collateral be- 
 ing vested in the pledgor, the pledgee may, in good faith, 
 safely loan his money to him.* The rule is applied where 
 the owner of a deposit in a bank indorses his letter-of credit 
 in blank, and hands the same to a third person who misap- 
 propriates it. 8 A cestui que trust is not allowed to impeach 
 the title of a pledgee for value, of a non-negotiable chose in 
 action, part of the trust estate, where the trustee is clothed 
 with full power in its management, and the security is re- 
 ceived in good faith, and without notice. 4 The title of an 
 innocent holder for value cannot be defeated by the owner, 
 who has conferred such title and apparent ownership on the 
 person by whom the securities have been assigned, upon 
 any claim of infirmity in the title thus conferred, or the in- 
 validity of the collateral security.* 
 
 437. THE INNOCENT PLEDGEE FOR VALUE PROTECTED, 
 AS AGAINST OWNER. The real owner of goods who suffers 
 another to have possession of his property, or of those docu- 
 
 Cowdrey v. Vanderburgh, 101 U. 8. ' Davis t>. Beckstein, 69 N. Y. 442. 
 
 572 ; Merchants' Bank v. Phoenix, International Bank v. German 
 
 etc. Co. L. R. 5 Ch. D. 217 (Jessell, Bank, 71 Mo. 183. 
 
 M. R.); Briggs v. Jones, L. R. 10 Eq. * Weirick . Mahoning Co. Bank, 
 
 92 ; Herrick v. Attwood, 25 Beav. 16 Ohio St. 296. 
 
 205 ; 2 DeG. & J. 21 ; Vickers v, * Dillaye v. Commercial Bank, 51 
 
 Hertz, L. R. 2 Sc. App. 113 ; Good- N. Y. 345. 
 
 win v. Robarts, L. R. 10 Ex. 76, 337; Clark t>. Roberts. 25 Hun, 80. 
 
 1 App. 476.
 
 ESTOPPEL, IN FAVOE OF PLEDGEES. 589 
 
 ments which are the evidence of property, is bound by a sale 
 or pledge which he has enabled the other person to make. 
 So long as the document of title remains in the possession of 
 the person who fraudulently obtained it, the vendor, who 
 has been cheated out of its possession, may reclaim and re- 
 cover it; but at the moment such document of title passes 
 into the hands of a holder for value, a pledgee, to whom it 
 is indorsed for a valuable advance, made in good faith, with- 
 out notice, the right of the vendor to follow it is at an end. 
 This rule was applied by the Privy Council of England, 
 where a document of title of property, obtained by a vendee 
 by fraud, was at once indorsed for a valuable consideration, 
 without notice. The fraudulent person became bankrupt, 
 and the owners lost their property by reason of the transfer 
 to a pledgee who received the same bona fide, for a valuable 
 consideration, and in ignorance of the fraud. 1 " The pos- 
 session was not only united to the previous owner- 
 ship with the consent (however obtained) of the person 
 temporarily entitled to it, but transferred for the express 
 purpose of giving to the owner [the pledgee] an absolute do- 
 minion over his own property." and the principle was an- 
 nounced that an ownership at the time perfect at law, though 
 voidable as to part, viz., the possession, cannot in principle 
 be treated differently from an ownership voidable as to the 
 whole, but in the interim protected by the interposition of 
 a bona fide purchaser, for a valuable consideration (applied 
 in the principal case to a bona fide pledgee, for a valuable 
 consideration). 
 
 The rule of estoppel by conduct is applied in cases 
 where a vendee obtains possession of a chattel, with the in- 
 tention, by the vendor, to transfer both the property and 
 possession, although the vendee has committed a false and 
 fraudulent misrepresentation in order to effect the contract 
 or obtain the possession. The property vests in the vendee 
 until the vendor has done some act to disaffirm the transac- 
 
 1 The Marie Joseph, L. R. 1 Pr. C. 219. (Lord Chelmsford, Lord Chan.)
 
 590 NON-NEGOTIABLE COLLATERAL SECURITIES. 
 
 tion, and the legal consequence is, that if before the dis- 
 affirmance the fraudulent vendee has transferred the whole 
 or a partial interest in the chattel to an innocent transferee, 
 the title of such transferee is good against the vendor. 1 
 The doctrine of estoppel by conduct was enforced where a 
 bill of exchange, the drawing and indorsements of which 
 were forgeries, having been accepted for honor, were dis- 
 counted by a bank. Upon discovery of the forgery, the 
 bank sued the acceptor, and it was held, by the Court of 
 Common Pleas, that as the acceptor had induced the bank 
 to part with its money upon the faith of his authentication 
 of the bill, he was estopped to dispute its genuineness. 8 But 
 the payment of a bill of exchange, the name of the acceptor 
 being forged, by such acceptor, raises no estoppeljis against 
 him upon the forgery of his name as acceptor upon another 
 bill, held by the same person. 8 
 
 438. ESTOPPEL, UNDER INDORSEMENT OF CHOSES IN 
 ACTION. The principle of estoppel by conduct that, when the 
 owner of property in any form clothes another with the ap- 
 parent title and power of disposition, third parties who are 
 thereby induced to deal with him, are protected, is applied 
 to choses in action, non-negotiable in character. 4 The de- 
 livery of choses in action indorsed in blank as collateral 
 security for value, transfers the property to the pledgee, 
 and authorizes him to write over the signature a formal and 
 regular assignment, if it should become necessary, or if the 
 pledgee should think it is for his interest so to do. An in- 
 dorsement in blank of such non-negotiable securities is suf- 
 ficient where they are payable, under statutory enactments, 
 to the person to whom issued, his representatives or assigns, 
 the same appearing upon the face of the certificates, and 
 
 1 Kingsford v. Merry, 11 Ex. 577. * Morris v. Bethell, L. R. 5 C. P. 47. 
 
 (Pollock, C. B), a case of pledge ; 4 Cowdrey v. Vaudenbergh, 101 U. 
 
 Dyer v. Pearson, 3 B. & C. 42. S. 572, 575 ; McNeil v. Tenth Nat. 
 
 Phillips v. Im Thorn, L. R. 1 C. Bank, 46 N. Y. 325. 
 P. 463.
 
 ESTOPPEL, IN FAVOR OF PLEDGEES. 591 
 
 are an appropriation of some distinctive fund. A pledgee 
 loaning money in good faith to a person holding such certi- 
 ficates indorsed in blank comes within the rule of estoppel 
 stated, no knowledge or notice being chargeable against 
 him by reason of his dealing with an apparent owner of non- 
 negotiable securities under blank indorsement. No sus- 
 picion arises that the pledgee acquired them unfairly ; on the 
 contrary, the possession of such certificates by the pledgor 
 indorsed in blank is prima facie evidence of ownership. In 
 cases of non-negotiable certificates, where transfer by in- 
 dorsement in blank is ordinarily used, and appears in the 
 hand-writing of the original holder, the pledgee is entitled 
 to the benefit of the legal presumption in favor of his right 
 which always arises from possession, until the contrary ap- 
 pears. 1 In other cases, where the non-negotiable chose in 
 action, the subject of pledge, is merely a statement of the 
 auditing and allowing of an account for work done, by a 
 municipal officer, but with no promise to pay any sum of 
 money, nor an order upon any person or fund for the pay- 
 ment of money, and no element of estoppel arises to con- 
 trol the relations of the parties, pledgees, or parties claim- 
 ing under them by purchase, can take such interest only as 
 was originally pledged by the owner. Any holder of such 
 a certificate is subject to the equities of the real owner, 
 whether chargeable with notice or not, so long as the same 
 remains indorsed in blank. Should, however, the power to 
 fill up such blank with an absolute assignment be exercised 
 by the pledgee, the presumption from the delivery of a 
 chose in action indorsed in blank as collateral security 
 being prima facie an authorization to the pledgee so to do, 
 and the same is transferred to an innocent holder for value, 
 by a like absolute assignment, the owner may be estopped 
 in the case of any chose in action. 9 The pledgor in the 
 
 ' Baldwin v Ely, 9 How. 580. to McNeil t>. Tenth Nat. Bank, 46 N. 
 
 * Owdrey v. Vandenbergh, 101 U. Y. 325, say: " The rights of inno- 
 
 S 572 576. The United States Su- cent third parties, as the court there 
 
 pi-erne' Court (Field, Jus.), referring observes, 'do not depend upon the
 
 692 
 
 NON-NEGOTIABLE COLLATERAL SECURITIES. 
 
 case of Moore v. Metroplitan National Bank, 1 received tlie 
 non-negotiable certificate from the owner indorsed with an 
 absolute assignment, and upon his fraudulent deposit of the 
 certificate as collateral security with the bank, an absolute 
 assignment to the pledgee was in turn executed by him. 
 
 439. MOORE v. METROPOLITAN NATIONAL BANK. A 
 leading case on the law of estoppel in pais, as applied to 
 
 actual title or authority of the party 
 \7ith whom they deal directly, but 
 are derived from the act of the real 
 owner, which precludes him from 
 disputing, as against them, the exis- 
 tence of the title or power which, 
 through negligence or mistaken con- 
 fidence, he caused or allowed to ap- 
 pear to be vested in the party making 
 the conveyance.' Here the complain- 
 ants could have expressed in their 
 indorsement the purpose of the de- 
 posit of the certificate with Blumen- 
 burgh, that it was as security for a 
 specified sum of money, and thus 
 imparted notice to all subsequent 
 purchasers or assignees that the 
 pledgee held only a qualified interest 
 in the claim. But having indorsed 
 their name in blank, they virtually 
 authorized the holder to transfer or 
 dispose of the certificate by writing 
 an absolute assignment over their 
 signature. Had it, therefore, ap- 
 peared in this case that Cowdrey 
 paid any money for the certificate, 
 and took it with the assignment 
 which he himself afterwards wrote 
 over the signature of the complain- 
 ants, we are inclined to think that his 
 defense would have been sustainable. 
 But as he has not shown that lie 
 parted with any value for the claim, 
 and no assignment was at the time 
 indorsed over the blank signature, 
 he must be treated as standing in the 
 
 shoes of his alleged vendor, Blumcn- 
 burgh." 
 
 1 55 N. T. 41. Moore was the 
 owner of a certificate of indebted- 
 ness of the State of New York for 
 $10,000, which he was induced to 
 deliver to one Miller with the in- 
 dorsement thereon, "$10,000. For 
 value received, I hereby transfer 
 and set over to Isaac Miller the 
 within described amount, say $10,- 
 000. Levi Moore." The assignment 
 was obtained by false representa- 
 tions of Miller, and upon an agree- 
 ment to return the certificate if not 
 sold within three weeks. After the 
 expiration of the time agreed upon, 
 Miller, by a similar indorsement, 
 assigned the certificate to the Metro- 
 politan National Bank as collateral 
 security for his promissory note, 
 which the bank discounted. An 
 equitable suit was brought by Moore 
 to restrain the bank from disposing 
 of and to recover possession of the 
 certificate. The suit was dismissed, 
 the claim of the bank being sup- 
 ported as a bona fide pledgee for 
 value. The case is cited and ap- 
 proved in Driscoll v. West Bradley 
 Co. 59 N. Y. 96, 101; Armour t. 
 Michigan Central R. R. Co. 65 II). 
 Ill, 188; Wcgh v. Boylan. 85 Ib. 
 394, 401 ; and explained in Trustees 
 . Wheeler, 61 Ib. 114.
 
 ESTOPPEL, IN FAVOR OF PLEDGEES. 593 
 
 non-negotiable collateral securities, Moore v. Metropolitan 
 National Bank 1 arose from the misappropriation as collateral 
 security of a non-negotiable chose in action by one who was 
 entrusted with the title and apparent ownership. The court 
 (Grover, J.) stated the argument : " The reasons are that 
 such purchase was made upon the faith of the title which 
 the owner had apparently given, and that it would be con- 
 trary to justice and good conscience to permit him to assert 
 his real title against an innocent purchaser from one clothed 
 by him with all the indicia, of ownership and power of dis- 
 position. Another reason was, that were the rule other- 
 wise, it would afford opportunities for the perpetration of 
 frauds upon the purchasers from such apparent owners. 
 Where one, known to be the owner of shares or chattels, 
 delivers to another the scrip or possession of the chattels, 
 together with an absolute written transfer of all his title 
 thereto, he thereby enables him to hold himself out as owner, 
 and, as such, obtain credit upon and make sales of the prop- 
 erty; and if, after he had so done, the owner was permitted 
 to come in and assert his title against those dealing upon 
 the faith of these appearances, the dishonest might combine 
 and practice the grossest frauds. Another reason is, that 
 it presents a proper case for the application of the legal 
 maxim that, where one of two innocent parties must sustain 
 a loss from the fraud of a third, such loss should fall upon 
 the one, if either, whose act has enabled such fraud to be 
 committed. All these reasons, it is obvious, apply with all 
 their force to choses in action." 
 
 It was claimed that a different rule should be applied to 
 the merely equitable title acquired by the assignee of a 
 chose in action than to the legal title obtained upon a trans- 
 fer of shares of stock or chattels, but the court said :' 
 " Upon what ground the same state of facts that will estop 
 a party from the assertion of a legal title will not also estop 
 him from the assertion of an equitable one the counsel fails 
 
 65N. Y.48. 55N. Y.43. 
 
 38
 
 594 NON-NEGOTIABLE COLLATERAL SECURITIES. 
 
 to show, for the very good reason that no such ground exists. 
 It is so obvious that the estoppel should, upon principle, 
 apply to the Jatter equally with the former, that a distinc- 
 tion can only be justified upon authority." 
 
 440. ESTOPPEL OF CORPORATIONS, AS AGAINST INNO- 
 CENT HOLDERS FOR VALUE. Equitable estoppel arose 
 against a corporation which issued non-negotiable choses in 
 action purporting to be issued pursuant to powers conferred 
 by statute, although the issue was illegal and in violation of 
 statutory powers, when in the hands of an innocent holder 
 for value. As said by Mellor, Judge of the Court of Queen's 
 Bench, 1 " I wish to rest my jadgment on the general doc- 
 trine of estoppel. * * * The holder may, by a writing 
 under his hand, transfer the mortgages to any person, and 
 the Act gives the form of indorsement by which the trans- 
 fer may be made. There is a provision for registering the 
 transfer, and when that is completed any person who is an 
 innocent holder has a complete title. The commissioners, 
 who have borrowed the money and enabled the transfer of 
 the mortgage, cannot afterwards deny their liability on the 
 ground that the mortgage was given, not for money lent, 
 but for some purpose which they allege to be illegal." 
 The Chief Justice (Cockburn): 4 "The commissioners 
 might be wrong in allowing these debentures to go forth, 
 knowing that they might come into the hands of an innocent 
 holder for value, but they are estopped from alleging that 
 the debentures were illegally issued." And Blackburn (J.) : * 
 " t hold that the commissioners, who have stated on the 
 face of the mortgages that money had been advanced and 
 lent on the credit and for the purposes of the commissioners, 
 are precluded as against bona fide transferees from denying 
 the truth of that statement." 
 
 1 Webb v. Hcrnc Bay Comm. L. supra, p. 651 ; Pickard v. Sears, 6 
 
 R. 5 Q. B. 642, 655 ; In re Bahia & A. & E. 469. 
 
 S. F. Ry. Co. L. R. 3 Q B. 583; s Webb . Herne Bay Comm. 
 
 Freeman v. Cooke, 2 Ex. 654. supra, p. 653, 654. 
 
 * Webb v. Herne Bay Coinm.
 
 THE PLEDGEE'S RIGHTS AND DUTIES. 595 
 
 CHAPTER XLVI. 
 
 THE PLEDGEE'S RIGHTS AND DUTIES. 
 
 441. The pledgee's application of non-negotiable collateral. 
 
 442. The pledgee's duty as to collection. 
 
 443. The pledgee's sale of non-negotiable collateral. 
 
 444. The pledger's rights upon wrongful sale or sub-pledge. 
 
 445. Tally v. Freedman's Saving and Trust Company. 
 
 446. The pledgee's remedies, at law and in equity. 
 
 447. The pledgee's recovery on choses in action. 
 
 448. Payment and discharge of pledger. 
 
 441. THE PLEDGEE'S APPLICATION OP NON-NEGOTIA- 
 BLE COLLATERAL. The pledgee of non-negotiable choses 
 in action is not any more entitled than any other holder of 
 collateral securities to retain a surplus arising from a sale or 
 collection, after satisfaction of the debt, upon a claim to 
 apply such surplus to some account other the principal debt 
 secured. Life insurance policies were transferred, by in- 
 dorsement and delivery, as collateral security for a certain 
 indebtedness. The pledger having deceased, the pledgee 
 sold the insurance policies, realizing more than enough to 
 pay the particular debt, and then sought to apply the sur- 
 plus in payment of simple contract debts, to the injury of 
 specialty creditors. The pledgee also claimed a general 
 lien as executor. The surplus remaining was required to be 
 paid over for the benefit of the specialty creditors. 1 Gener- 
 ally, clear evidence is required of an express agreement or 
 
 1 Talbott . Frere, L. R. 9 Ch. D. L. R. 14 Eq. 507, in which an sx- 
 
 568; overruling Spalding . Thomp- ecutor's lien, under such circumstan- 
 
 son, 26 Beav. 367 ; In re Haselpot's ces, attached even to unsecured 
 
 Est. L.R. 13 Eq. 327 ; ex parte Bank, debts.
 
 596 NON-NEGOTIABLE COLLATERAL SECURITIES. 
 
 understanding by the parties to the contract of pledge that 
 the pledgee may apply the money realized upon a pledge of 
 insurance policies, a loss having occurred, to any other debt 
 or liability than that for which they were specifically 
 pledged, in order to entitle the pledgee to make such appli- 
 cation. 1 The rule applies to transactions with brokers, upon 
 deposit of securities for the benefit of holders of notes en- 
 trusted to such brokers for sale. In the absence of agree- 
 ment, the equity thus created is preferred as against the 
 claim of brokers seeking to appropriate the proceeds of such 
 securities to personal loans to customers for which no col- 
 lateral security was deposited. Notwithstanding the cus- 
 tomers may have become insolvent, the equitable rule 
 which, on proper occasions, extends securities to other debts, 
 is not applied to such transactions. 9 
 
 Parties to the contract of pledge may extend the benefit 
 of collateral securities held by the pledgee to other debts 
 and obligations of the .pledger other than those originally 
 secured. An agreement that insurance policies, pledged 
 for a specific debt, should be applied to cover ** any and all 
 pecuniary obligations " of the pledger, entitled the pledgee 
 to apply the proceeds of the collateral securities in payment 
 of the whole debt due. 8 And the same rule as to the dispo- 
 sition of the surplus resulting from the realization of collat- 
 eral securities was .applied in favor of a third person, where 
 policies of insurance had been pledged, and then sub-pledged, 
 and the pledgee directed the sub-pledgee to hold such sur- 
 plus for the benefit of such third person, making advances 
 thereon, of which assignment notice was also given by the 
 beneficiary. 4 
 
 442. THE PLEDGEE'S DUTY AS TO COLLECTION. The 
 pledgee of non-negotiable choses in action is required to 
 
 1 Bulkley t>. Garrett, 60 Pa. St. 333. Myers v. United Guaranty Co. 7 
 James' App. 89 Pa. St. 54. DcG. M. & G. 112. 
 
 1 Boardman c. Holmes, 124 Mass. 
 438.
 
 THE PLEDGEE'S EIGHTS AND DUTIES. 597 
 
 exercise reasonable care and diligence in their collection. 1 
 Upon as assignment of a lease as collateral security for a 
 note, the pledgee should collect the rents. Such collections 
 are applied upon the note, at maturity. 9 The failure of a 
 pledgee to collect non-negotiable collateral securities, or to 
 enforce agreements made by third persons assigned to them, 
 so that the collaterals are eventually lost through the sub- 
 sequent insolvency of the parties, is not, in the absence of 
 gross negligence or fraud, such a default as to render a 
 pledgee liable for the consequent injury to the pledger.* 
 The pledgee of a part interest in a note, is under no obliga- 
 tion to pursue its collection ; and if lost, is not chargeable 
 with the full amount, or any part of the note. 4 Upon a 
 discount of commercial paper, a judgment against a third 
 party was assigned as collateral security, with power of sale 
 upon default. At the time of the pledge, the judgment 
 debtor could have satisfied the judgment, but when enforced 
 at the request of the pledgor, his property had been ex- 
 hausted by previous levies. Evidence not being admissible 
 to change the written contract of pledge, the pledgee was 
 not required to collect the judgment until maturity of the 
 principal debt and default, and the pledgor, who remained 
 the general owner of the collateral security, should have 
 enforced its collection himself.' The pledgee, however, is 
 answerable for the face value of non-negotiable collateral 
 securities where they are lost by reason of his inexcusable 
 default, although such loss is not presumed from mere non- 
 collection. 4 
 
 443. THE PLEDGEE'S SALE OP NON-NEGOTIABLE COL- 
 LATERAL. In the absence of any special contract giving a 
 
 1 Whittaker v. Charleston Gas. Word D. Morgan, 5 Sneed, 79 ; 
 
 Co. 16 W. Va. 717. Wellsburg Bank v. Kimberlands, 16 
 
 s Dewey v. Bowman, 8 Cal. 145. W. Va. 555; Williams . Price, 1 
 
 8 Runals v. Harding, 83 111. 75. Sim. & S. 581 ; Reeves v. Plough, 
 
 4 Smouse t>. Bail, 1 Grant's Cas. 41 Ind. 204; Burrows . Bangs, 34 
 
 397. Mich. 304. 
 * Bast . Bank, 101 U. S. 93.
 
 598 NON-NEGOTIABLE COLLATERAL SECURITIES. 
 
 power of sale of choses in action held as collateral security, 
 the pledgee is not entitled to sell such collaterals, except af- 
 ter due demand of the principal debt, and det'.mlt, and reas- 
 onable notice of the time and place of sale. 1 Nor will a court 
 of equity decree a sale of non-negotiable collateral securi- 
 ties, in aid of a pledgee for value, where there is no right to 
 sell such securities, and no contract authorizing a sale.* 
 Where a power of sale of such collaterals, either public or 
 private, upon default, without notice to the pledger, is given 
 in a contract of pledge, it is optional with the pledgee 
 whether he will at once proceed to sell upon default. Any 
 extension of time or. delay in making sale, is a benefit to the 
 pledgor, as it increases his opportunity to redeem his collat- 
 eral securities.* 
 
 444. THE PLEDGOR'S RIGHTS UPON WRONGFUL SALE 
 OR SUB-PLEDGE. The right of the pledgor to recover his 
 non-negotiable choses in action where the pledgee has as- 
 sumed, before maturity of the principal note, to sub-pledge 
 or sell the same, is subject to the equitable limitation that 
 he must first have tendered or paid the loan to secure the 
 payment of which the collateral was deposited. The act of 
 the pledgee, in either case, is not such a destruction of his 
 special interest in such collateral, as to destroy the contract 
 of pledge, and entitle the pledgor to demand return of the 
 collateral from the sub-pledgee or purchaser, without a 
 tender or payment of his debt. 4 This equitable rule was 
 enforced in the United States Supreme Court, in Talty v. 
 Freedman's Savings and Trust Company, 6 where the col- 
 lateral security was a non-negotiable certificate for work 
 and materials issued by the commissioners of audit of the 
 
 1 Dewey v. Bowman, 8 Cal. 145; Trust Co. 93 U. S. 321; Johnson t>. 
 
 Robinson . Hurley, 11 Iowa 410. Stear, 15 C. B. N. S. 330; Donald v. 
 
 'Whittaker v. Charleston Gas. Suckling, L. R. 1 Q. B. 585; Hnlli- 
 
 Co. 16 W. Va. 717. day v. Holgate L. R. 3 Eq. 299. 
 
 Robinson v. Hurley, 11 Iowa, 410. 93 U. S. 321. 
 
 * Talty v. Freedman's Savings and
 
 THE PLEDGEE'S RIGHTS AND DUTIES. 599 
 
 city of Washington, indorsed in blank; and by the Court of 
 Queen's Bench of England, in Donald v. Suckling,' a case 
 arising from a sub-pledgee of debentures, non-negotiable. 
 The debentures were deposited by A with B as collateral 
 for a bill of exchange indorsed by A and discounted by B, 
 with power of sale upon default. B, before maturity of the 
 bill, sub-pledged the debentures to G for a larger sum than 
 the amount of the bill. The bill being dishonored and 
 unpaid, A, without tender or payment of the debt to either 
 the pledgee or sub-pledgee, brought detinue against C. The 
 action was dismissed.* 
 
 445. TALTY v. FREEDMAN'S SAVINGS & TRUST Co. 
 In this leading case, involving the rights of a purchaser 
 under a sale of a chose in action held by a pledgee and sold 
 before maturity of the principal debt, 8 the United States 
 Supreme Court (Matthews, Jus.) says : " Kendig was not a 
 factor with a mere lien. He was a pledgee. Tiie collateral 
 was placed in his hands to secure the payment of the note. 
 It was admitted by Talty [the pledger] that Kendig was 
 
 1 L. R. 1 Q. B. 585. collateral. The note was sold the 
 
 * L. R. 1 Q. B. 585 Opinions same day, and the proceeds paid to 
 were given by four judges, Cock- Talty ; and a short time afterwards 
 burn, C. J., Blackburn and Mellor, Kendig sold the collateral to the 
 JJ., in favor of the sub-pledgee; Trust Company, a bona fide pur- 
 Shee, J., dissenting. Extracts from chaser, and with the proceeds 
 the opinions are given in Chap. IX.. took up the note. An offer to 
 82, p. Ill, n. pay the principal note and dc- 
 
 * 93 U. S. 321. Talty had a claim mand for the collateral was made 
 against the city of Washington for by Tally a few days before ma- 
 work and materials, amounting to turity, and learning of the sale, 
 $6,096.75, for the payment of which after making a demand, he obtained 
 he received a certificate from the the certificate from the purchaser 
 commissioners. Two days after- by replevin. No tender or payment 
 wards, he employed Kendig, a was made by Talty, either to the 
 broker, to negotiate a loan, giving purchaser or the pledgee. The only 
 him his sixty-day note of $3,000, disputed fact was as to the time 
 payable to his own order, and in- at which the power of sale was to 
 dorsed in blank, and the certificate, arise: Kendig claiming at once; 
 also indorsed in blank, to be used as Talty, upon default, at maturity.
 
 600 NON-NEGOTIABLE COLLATERAL SECURITIES. 
 
 authorized to sell it if the note were not paid at maturity. 
 Kendig had a special property in the collateral. He was a 
 pawnee for the purposes of the pledge. * * A tender to 
 the second pledgee of the amount due from the first pledger 
 to the first pledgee extinguishes ipso facto the title of the 
 second pledgee ; but that there can be no recovery without 
 tender of payment is equally well settled. But it is sug- 
 gested that the note was in the hands of Kendig, and that 
 therefore Talty could not safely pay the amount due upon 
 it to the holder of the collateral. The like fact existed in 
 Donald v. Suckling. It is not adverted to in the arguments 
 of counsel, nor in the opinions of the judges in that case. It 
 could not, therefore, have been regarded by either as of any 
 significance. The answer here to the objection is obvious. 
 The note, a few days before its maturity, was in the hands 
 of Kendig. There being no proof to the contrary, it is pre- 
 sumed to have remained there. This suit was commenced 
 after it matured. Talty might then have paid the amount 
 due upon it to the defendant in error [the purchaser from 
 the pledgee] and could thereupon have defended success- 
 fully in a suit on the note, whether brought by Kendig 
 or any indorsee taking it after due." 
 
 446. THE PLEDGEE'S REMEDIES, AT LAW AND IN 
 EQUITY. Equity will take jurisdiction where there are 
 different interests as between the owner of non-negotiable 
 collateral securities, the first assignee, and the subsequent 
 pledgee, thus disposing of the whole litigation in one suit. 1 
 And where necessary, will decree a foreclosure and order a 
 sale of such collaterals, upon a bill filed by the pledgee.* A 
 pledgee will be aided in equity, in rendering his security 
 available, as where a policy of insurance was pledged as 
 collateral security for a debt and the pledger died, leaving 
 his estate insolvent, and most of the personal representatives 
 disclaimed, and no administration was taken out, and the 
 
 1 Thayer v. Daniels, 113 Mass. 129. Robinson v. Hurley, 11 Iowa, 410.
 
 THE PLEDGEE'S RIGHTS AND DUTIES. 601 
 
 amount of the principal debt was three times that of the 
 money covered by the insurance policy. The company 
 refused to pay the pledgee the insurance money because 
 of the failure to appoint a representative of the estate. A 
 court of chancery dispensed with the presence of the legal 
 representatives, and ordered the insurance company to pay 
 the money to the pledgee. 1 Otherwise, however, where the 
 amount coming upon the policy is much larger than the 
 debt, although the estate be insolvent. 9 An insurance com- 
 pany cannot defeat the rights of a pledgee of insurance 
 policies to relief by insisting that no assignment can be made, 
 without the written consent of the company, as such pro- 
 hibition has no application to a deposit as collateral secur- 
 ity. 8 A bill in equity to redeem a certificate of member- 
 ship of the New York Cotton Exchange, transferable by 
 assignment under certain restrictions, which had been 
 pledged as collateral security for a promissory note, was 
 bought by a receiver appointed for the bankrupt pledgor, 
 after a tender of the debt and demand for the collateral 
 securities. Redemption was allowed upon the equitable 
 terms of payment of the principal debt. 4 The equitable 
 character of an interest in a chose in action, or in a fund, 
 possessed by the holder, is not of itself, sufficient to entitle 
 him to proceed in equity. Nor will the aid of equity be given 
 to recover moneys alleged to be due under collateral con- 
 tracts, as a complete remedy may be had at law.* Nor where 
 there is no right to sell non-negotiable collateral securities, 
 and no contract authorizing such sale, will the aid of a court 
 of chancery be given to a pledgee praying that a sale may 
 be ordered. 6 Equity, however, where a party seeks to ob- 
 
 1 Curtius v. Caledonian Ins. Co., L. 4 In re Werder, 15 Fed Rep. 789 ; 
 
 R. 19 Ch. D. 534; alike case, Cross- Powell v. Waldron, 89 K Y. 328; 
 
 ley v. Glasgow Ins. Co., L. R 4 Ib. Hyde ,. Woods, 94 U. S. 523. 
 
 401 N.Y. Guaranty, etc., Co. . Water 
 
 Webster t>. British Empire Ins. Co - l07 u - s - 205 - 
 
 Co., L. R. 15 Ch. D. 169. ' Whittaker v. Charleston Gas Co, 
 
 Ellis 0. Kreutzinger, 27 Mo. 811. 16 W ' Va ' 717>
 
 602 NON-NEGOTIABLE COLLATERAL SECURITIES. 
 
 tain the benefit of a judgment obtained upon a debt assigned 
 as collateral security, will not require prior resort to other 
 securities where it does not appear they are of greater value 
 than the excess of the debt secured over the amount of the 
 assigned debt and judgment. 1 
 
 Courts of law enforce the rights of pledgees of choses in 
 action, and equitable assignments of funds. Generally, the 
 real party in interest may, under statutory or code enact- 
 ments, bring an action in his own name, against the parties 
 bound upon such collateral securities, or holding funds sub- 
 ject to assignment. 1 An assignment of warrants or orders, 
 drawn by one municipal officer upon another, where coun- 
 tersigned and registered by the treasurer, vests the legal 
 title in the assignee, and thus enables him to sue in his own 
 name. 8 Where an assignor of a non-negotiable cliose in ac- 
 tion collusively dismissed a suit brought in his name by the 
 assignee, upon learning of which, the assignee brought an- 
 other suit, a court of law refused to hold the second suit 
 barred by the dismissal of the first. 4 The receipt of an in- 
 surance policy upon the life of a debtor as collateral security 
 for the payment of a debt, is not of itself sufficient to con- 
 stitute a defense to an action of debt by the creditor upon 
 the bond representing the personal indebtedness.* 
 
 447. THE PLEDGEE'S RECOVERY ON CHOSES IN AC- 
 TION. The pledgee holding choses in action as collateral 
 security for a loan or other valuable consideration, is enti- 
 tled to collect such securities, as they mature or become 
 payable, and to hold the proceeds to be applied, at maturity, 
 to the payment of the debt. The pledgee is entitled to en- 
 
 1 Batesville Inst. v. Kauffinan, 18 People v. Johnson, 100 111. 537 ; 
 
 Wall. 151. Creighton v. Hyde Park, 6 Braclw. 
 
 8 Brice . Bannister, L. R. 3 Q. B. 274. 
 
 Div. 569 ; Field v. Megaw, L. R. 4 4 Welch v. Mandcville, 1 Wheat. 
 
 Ib. 660 ; Brown v. Bateman, 6 Ib. 236. 
 
 272; Whittakert). Charleston Gas Co. 'Reeves v. Plough, 41 Ind. 204 ; 
 
 16 W. Va. 717 ; Welch v. Mandeville, Burrows t>. Bangs, 34 Mich. 304. 
 1 Wheat. 236.
 
 THE PLEDGEE'S EIGHTS AND DUTIES. 603 
 
 force and collect the full face value of such collaterals as 
 against the parties, being responsible to the pledger for any 
 surplus, after payment of the debt and proper charges. The 
 actual recovery of the pledgee is limited to the amount of 
 the principal debt, with interest, as where a deposit was 
 made as collateral security of scrip certificates for money 
 due at the United States Treasury under a treaty, 1 and of 
 a non-negotiable certificate of deposit in a bank. 5 Where 
 the payment of bills of exchange were secured by a 
 non-negotiable bond, the recovery on the securit}' was 
 limited to the amount of the unpaid bills, with interest from 
 maturity. 3 An unpaid call on shares, assigned as collateral 
 security proved insufficient because of ^misappropriation. 
 The pledgee was allowed to claim in insolvency proceedings 
 the unpaid portion of his debt against the company. 4 Upon 
 the proceeds from property covered by a pledge of dock 
 warrants, about the ownership of which there was much 
 litigation, proving insufficient to discharge the principal 
 debt, the pledgee was allowed to prove not only the unpaid 
 portion of his debt, but his costs in the litigation. 5 A fund 
 was deposited with a third person to hold as collateral secu- 
 rity for the performance of a contract to buy land, give 
 mortgages, and build houses. After some work had been 
 done, the project was abandoned, and the proceeds of the sale 
 under foreclosure proved insufficient to pay the debt. The 
 person for whose benefit the collateral fund was deposited 
 was given so much thereof as would put him in as good a 
 plight as if the houses had been finished.' A mortgagor 
 assigned a lease, with privilege of renewal, as collateral 
 security. Upon default and foreclosure, a deficiency oc- 
 curred. As against a subsequent pledgee of the rent due 
 
 1 Baldwin v. Ely, 9 How. 580. 4 In re Kit Hill Tunnel Co., L. R 
 
 8 International Bank v. German 16 Ch. D. 590. 
 
 Band, 71 Mo. 183. 5 Ex parte Carr, L. R. 11 Ch. D. 62. 
 
 * Orr v. Churchill, 1 H. Bl. 232. Kidd v. McCormick, 83 N.Y. 391.
 
 604 NON-NEGOTIABLE COLLATERAL SECURITIES. 
 
 under the lease, the prior pledgee was preferred until his 
 debt was fully paid. 1 
 
 448. PAYMENT AND DISCHARGE OF PLEDGOB. The 
 pledger of non-negotiable collateral securities is entitled, 
 with other pledgers, to a return of his securities, upon pay- 
 ment of the principal debt. He is also entitled to the bene- 
 fit, upon settlement, of any sura which has been collected by 
 the pledgee on the non-negotiable choses in action held by 
 him as collateral security, and to which the pledgor would 
 be entitled upon payment of the debt.* The lien of a 
 pledgee of a chattel mortgage, held to secure the payment 
 of a debt, is discharged by a tender of the amount due by 
 the debtor or his representatives. 1 The acceptance of a 
 conveyance of real estate as collateral security for the pay- 
 ment of a judgment, is not a satisfaction. 4 But after a full 
 settlement between the parties to the contract of pledge, 
 and release of all claims, where the collateral security was 
 an insurance policy, the pledgor will have no claim to re- 
 turn premiums subsequently paid to the pledgee. 6 No pre- 
 sumption arises where non-negotiable certificates of deposits 
 are held in pledge, that such paper was intended as pay- 
 ment, in the absence of express agreement,' nor where there 
 has been a deposit of fire insurance policies as collateral 
 security. The mere receipt of them is not a payment. 1 The 
 pledgor is not entitled to a return of insurance policies 
 given as collateral security for the payment of a bond and 
 mortgage, where a release of the mortgage has been re- 
 corded, so long as the bond representing the debt remains 
 unpaid. The right to retain such collateral securities enures 
 also to the benefit of assignees from the pledgee.* 
 
 1 Storey v. Button, 46 Mich. 539. West v. Carolina Ins. Co. 31 Ark. 
 
 White v. British Empire Ins. Co. 476. 
 
 L. R. 7 Eq. 874. T Scott v. Lifford, Campb. 246. 
 
 8 Haskins v. Kelly, 1 Robt. 160. 8 Hollis v. Insurance Co. 12 Phila. 
 
 DC Clery v. Jackson, 103 111. 658. 831. 
 Merrifleld v. Baker, 11 Allen, 43.
 
 INDEX. 
 
 ACCOMMODATION INDORSEES. PAGE 
 
 the contract of the indorser . . , , . 328 
 
 subrogation of holders to collateral securities of . . 829 
 
 upon failure of the maker to pay .... 330 
 
 or transfer to holders, upon default . . . 330 
 
 no subrogation, where payment is made voluntarily . . 834 
 
 pending other equities, collateral securities released by . 831 
 
 upon payment of note, subrogation to securities by . . 832 
 
 the rule applied to accommodation acceptors of bills of exchange 332 
 subrogation as to securities held by creditors or holder . 832 
 
 effect of receipt by creditor of collateral security . . 271 
 
 the indorser, as charged by pledgee of collateral notes . 334 
 
 the pledgee's notice of non-payment to pledgor . . . 334 
 
 iudorser discharged, where collateral notes are not produced 
 
 upon demand . . . . . . 334 
 
 liability of indorser where creditor agrees to rely upon col- 
 lateral security ...... 334 
 
 when securities held by, may be returned to principal . . 335 
 
 ACCOMMODATION PAPER. 
 
 the use of, for present advances as collateral security . 42, 56 
 
 the pledgee of, for present advances or antecedent debt, a holder 
 
 for value . ...... 42 
 
 the rule followed in New York, Ohio, and Pennsylvania . 46, 48 
 the pledge of, in case of misappropriation, by agents, for ante- 
 cedent debt . . . . . . .52 
 
 the use of blank acceptances .... 
 
 obligation of makers of, as affected by their holding collateral 43 
 the pledgee of, under the English rule, a holder for value . 49 
 the use of, as collateral security, after maturity . . 42, 54 
 
 the rule in New York . . . .'.".. .41 
 
 pledgee of, chargeable with notice of fraud or forgery . 53 
 where pledged by a partner for his own debts , . .53 
 
 (See ANTECEDENT DKBT, OVER-DUE PAPER.) 
 
 ADMINISTRATOR, 
 
 pledges of securities by, . . . . . .99 
 
 ADVANCES, FUTURE. 
 
 the pledgee of negotiable collateral securities, a holder for value 18 
 and also of certificates of stock, indorsed, for . . 385 
 
 (605)
 
 606 INDEX. 
 
 ADVANCES, FUTURE Continued. PAGE 
 
 the pledge in case of misappropriation . . .19 
 
 pledges of bills of lading for ..... 514 
 
 pledges of certificates of stock for .... 401, 493 
 
 and also sub-pledges of certificates of stock for . . 430 
 
 ADVANCES, PRESENT. 
 
 the pledgee of negotiable collateral securities for, a holder for 
 
 value ....... 16 
 
 the pledgee's rights as against payments made after indorsement 18 
 the pledge of accommodation paper for ... 44 
 
 pledgee of bill of lading for present advance, a holder for value 
 
 as against unpaid vendor ..... 545 
 
 ANTECEDENT DEBT. 
 
 Negotiable Collateral Securities. 
 
 the pledgee of negotiable collateral securities for, a holder for 
 
 value ........ 29 
 
 and of documents of title, bills of lading . . . 513 
 
 the decisions of the United States Supreme Court 7 21, 24 
 the contra State rule not followed .... 26 
 
 the New Yoi-k rule as to pledge of negotiable collateral securi- 
 ties for . . . . . . . .20 
 
 the rule in Missouri, Ohio, and other States . . .32, 33 
 
 the rule in England and Canada the pledgee, a holder for value 26 
 considerations supporting negotiable collateral securities 
 
 for . . . . v . 20,21,24,28 
 
 transfer of, in payment ..... .37 
 
 such transfer prima facie as collateral security . . 38 
 
 the rule in Massachusetts and Vermont . .40 
 
 the pledgee of accommodation paper for, a holder for value 45 
 the pledgee for, with new consideration, a holder for value . 35 
 or a relinquishment of other security ... 36 
 
 or upon a valid extension of time . . . .86 
 
 or the giving of some new consideration . . .37, 365 
 
 the rule where the pledgee of, for antecedent debt, without 
 
 more, is not a holder for value . . . .28 
 
 the New York rule as to pledge for . . . . 30 
 
 the rule in Missouri ..... .32 
 
 the rule in Ohio, and other States .... 33 
 
 the pledgee of misappropriated accommodation paper for, not 
 
 a holder for value . ... 52, 96 
 
 nor where chargeable with notice of fraud upon accommodated 
 
 party . . . . . . . 52, 53 
 
 nor where received as collateral security for, in relation to dis- 
 charge of sureties . . . . . 315 
 
 right of creditors to sue upon, continued, notwithstanding re- 
 ceipt of ...... . 141
 
 INDEX. 607 
 
 ANTECEDENT DEBT Continued. 
 
 Negotiable Collateral Securities. PAGE 
 
 prior lien not discharged, by acceptance of . . 142 
 
 or if the collateral paper is dishonored. . . . 142 
 
 judgment on debt enforced ..... 141 
 
 action on debt as affected, where new collateral securities are 
 
 received in payment ..... 142. 143 
 
 the rule applied to pre-existing simple contract debts . 143 
 
 collateral notes dishonored returned to pledger, and suit 
 
 brought upon the ...... 143 
 
 the rule in England to like effect .... 143, 144 
 Quasi-Negotiable Collateral Securities. 
 
 the pledgee of documents of title, certificates of stock, bills of 
 lading, warehouse receipts and cotton press notes, for ante- 
 cedent debt, is a holder for value . . . 513, 559 
 
 the pledgee of stock certificates, with legal title, in England, for, 
 
 a holder for value ...... 365 
 
 the sub-pledgee of stock certificates, for an antecedent debt, in 
 Pennsylvania, under misappropriation, not a holder for 
 value ........ 432 
 
 and in case of misappropriation of stock, without more, in New 
 
 York, and other States . . . . .421 
 
 a sub-pledgee from a sub-pledgee of stocks, under like circum- 
 stances, not a holder for value .... 429 
 
 pledgee of bills of lading for, under misappropriation, not a 
 
 holder for value ..... 513, 514 
 
 nor the pledgee of warehouse receipts for, without more . 539 
 AGENTS. 
 
 misappropriation of negotiable collateral securities, entrusted to 
 
 them ....... 94-95 
 
 the English rule, as to the misappropriation of securities by 96 
 
 owner estopped as against innocent persons where he has al- 
 lowed agents to have full title and apparent ownership of 
 bonds and mortgages . . . 242 
 
 the rule as to payments to ... 195 
 
 or where presumptions arise that the acts are within the au- 
 thority of .... .521 
 ASSIGNMENT. 
 
 where necessary in cases of pledge of non-negotiable choses 590-593 
 
 (See BONDS AND MORTGAGES, DELIVERY.) 
 BANKS AND BANKERS. 
 
 effect of indorsement to, for collection, of bills and notes . 6 
 
 transfer of notes indorsed for collection, to a bona fide holder 
 for value ... .... 
 
 the banker's general lien on securities . 
 
 his hen under contract, and upon special advance . . 83
 
 COS INDEX. 
 
 BANKS AND BANKERS Continued. PAGE 
 
 his lien as against secret equities of third persons . . 84 
 
 where chargeable with notice, and seeking to enforce a general 
 
 lien 84 
 
 no claim allowed upon special deposits of collateral to apply 
 
 them upon a general account . . . . .83 
 
 the banker's liability holding securities of customer . 84-85 
 
 pledge of director of bank of negotiable collateral securities to 
 
 his bank . . . . . . .97 
 
 loans of money by banking corporations as against borrowers 
 
 retaining the same, although ultra vires . . 231, 232 
 
 pledge by a banker of trust-stock for his own debt, the pledgee 
 
 taking but an equitable title .... 393-96 
 the loan by banking companies on certificates of stock issued 
 
 by other corporations ..... 399-400 
 
 the pledge as voidable ...... 400 
 
 and where not chargeable with the invalidity of a stipulation 
 
 in the contract of pledge ..... 401 
 
 pledges of its own stock to a banking corporation . . 402 
 
 pledges of its own stock to a banking company for future ad- 
 vances. ....... 401 
 
 National Banks. 
 
 the right of, to hold collateral securities for performance of con- 
 tracts ....... 85 
 
 and to guarantee undertakings secured by such deposits . 85 
 
 its liability on account of theft of collateral, as against suit on 
 
 principal note ...... 85 
 
 the right of, to enforce mortgage security for negotiable 
 
 notes ........ 86 
 
 or where given for antecedent debt, upon new notes, or where 
 
 the title is not taken directly to the bank . . 86-87 
 
 recovery of, on negotiable collateral securities given for usurious 
 
 loans ....... 176 
 
 the provisions of the National Bank Act as superseding state 
 
 enactments as to usury . . . . 176 
 
 enforcement of mortgage security given, with negotiable notes, 
 
 as collateral security for loans or discounts of commercial 
 
 paper. ....... 230-231 
 
 or certificates of stock of other corporations as collateral for 
 
 loans or discounts of commercial paper . . . 401 
 
 pledge of its own stock to, except to prevent loss on a debt pre- 
 viously contracted ...... 401-402 
 
 where such contract is executed, no relief given the pledger 402 
 BILLS OF EXCHANGE 
 
 (See COLLATERAL BILLS AND NOTES.)
 
 INDEX. 609 
 
 BILLS OF LADING. PAQB 
 
 Description of, as used by carriers by water and by land . 499 
 
 the bill of lading as quasi-negotiable, when in the hands of a 
 
 bona fide pledgee, or other holder for value . . 499 
 
 the pledgee of, for value advanced in good faith, and without 
 
 notice, under indorsement and delivery . . . 500 
 
 the bill of lading, in Europe, a negotiable instrument, passing 
 
 freed from equities ..... 501, 502 
 
 where provided by statute that bills of lading shall be negoti- 
 able " in the same sense " as bills of exchange and promis- 
 sory notes ....... 504 
 
 where transferable " in the same manner " as bills and notes, 
 
 negotiability does not follow ..... 504 
 
 the bill of lading indorsed "without recourse" . . 504 
 
 the bill, a symbol of the property, while in a warehouse, float- 
 ing or fixed ....... 505 
 
 and remains in force until delivery to some person authorized 
 
 to receive . ..... 527 
 
 what is a good delivery . ... . . . 527 
 
 custom as controlling delivery, without requiring production of 527 
 or where delivery is made to an officer upon a writ . 525, 528 
 the pledgee holding bills of lading unindorsed, as against fac- 
 tors, creditors, owners, brokers, or agents . . . 512 
 and as against the unpaid vendor's lien . . . 512 
 the pledge of, for future advances .... 514 
 
 and of a reversionary interest in .... 514 
 
 Bills of lading as Collateral. 
 
 the pledgee receiving, with or without indorsement, upon bona 
 fide loans or discounts of commercial paper, a holder for 
 value ........ 506 
 
 third parties, chargeable with notice of the contents of the bill. 507 
 the transfer as a pledge of the goods, or mortgage of them and 
 
 the returns . . . . . . . 508 
 
 and vests a general or special ownership in the pledgee for 
 
 value, without notice ..... 507 
 
 Pledge of Sills of lading, with or without indorsement. 
 
 the pledge of, where not negotiable, not excluding evidence of 
 
 parol agreement, nor inquiry into original transaction . 508 
 when properly transferred, by indorsement as well as delivery . 508 
 indorsement necessary in England .... 509 
 
 transfer by delivery of, in the United States, sufficient to pass 
 
 the title and property ..... 510, 511 
 
 even where drawn to "order" . . . . . 611 
 
 delivery by the shipowner or wharfinger upon a " second " bill 
 
 unindorsed, without notice . 512 
 
 39
 
 610 INDEX. 
 
 BILLS OF LADING Continued. 
 
 Bills of lading under Estoppel. PAGE 
 
 the holder of, where negotiable, as transferring a greater interest 
 
 than he himself has ..... 532 
 
 the transfer of, where quasi negotiable, under indorsement for 
 
 value, also for a greater interest than possessed . . 533 
 
 the innocent pledgee for value of, as unaffected by secret agree- 
 ments between vendor and vendee . . . 534, 535 
 the rules of equitable estoppel, as applied to void and fraudulent 535 
 and as against a land carrier, when issued upon a forged receipt 535 
 or when bill is held by innocent persons advancing value 536 
 or upon delivery to consignee, the bill being pledged for value, 
 
 the carrier being without knowledge . . . 443 
 
 The Bill of lading, as a receipt. 
 
 fraud and mistake as shown in the bill, a receipt, and between 
 
 the parties ...... 523, 524 
 
 the carrier as estopped as to matters which were or ought to be 
 within the knowledge of the officers or agents issuing such 
 
 bills . 524. 525 
 
 the rights of the bona fide lender of money upon bills, as against 
 
 creditors ........ 325 
 
 defense as against a consignee or a bona fide pledgee for 
 
 value, wfthout notice, that the quantity is misstated . 525 
 the pledgee's action against the carrier for non-delivery, after 
 
 demand . ..... 526 
 
 the right of pledgee of first indorsed of bills to bring trover 
 or assumpsit where a pledgee of another of the set has ob- 
 tained possession and sold the goods . . . 531 
 the pledgee, upon notice by the vendor, holding any surplus 
 
 for his benefit .... ... 539 
 
 the pledgee's title subject to terms of bills while goods are in 
 
 transitu ..... 540, 541, 542 
 
 (See PLEDGEE'S TITLE AGAINST CARRIER, ESTOPPEL, FORGERY, 
 NOTICE BY PLEDGEE, STOPPAGE IN TRANSITU, BLANK IN- 
 DORSEMENTS.) 
 BONDS AND COUPONS. 
 
 delivery merely, when payable to " bearer " or " holder," . 8 
 the pledgee of, upon advances, a holder for value . . 57 
 
 no title acquired by pledgee for value totally void . . 59 
 
 corporations when estppped to deny recitals upon . 58 
 
 or by paying coupons or warrants of interest on . .58 
 
 or by subsequent ratification . . . 60 
 
 where there is a total want of power . . .59 
 
 when received after due by pledgee .... 61 
 
 presence of unpaid coupons upon bond without effect upon its 
 
 negotiability ... ... 61
 
 INDEX. 611 
 
 BONDS AND COUPONS- Continued. P AOB 
 
 severed coupons, payable to "bearer," negotiable . . 63 
 
 the pledgee of negotiable bonds when required to re-deliver 
 
 upon payment the identical bonds received . . 134 
 
 the pledgee when required to retain an equal number of like 
 
 bonds, pending purchase and delivery . . . 134 
 
 the pledgee of, for value, without notice, under acts of misap- 
 propriation in pledge by agents .... 96 
 
 Bonds, Registered. 
 
 the transfer of, upon the books of the company, required to vest 
 
 in the transferee the legal title to . . .60 
 
 Bonds and Treasury Notes of the United States. 
 
 when received after due, as collateral security . . 61 
 
 BONDS AND MORTGAGES. 
 
 Bonds and mortgages, the subject of pledge . . . 250 
 
 pledge of, by mere delivery of the document . . . 251 
 
 the pledgee, taking a special property to the amount of his ad- 
 vances ....... 251 
 
 such collateral, when held as security for claims of other per- 
 sons than the pledgee ..... 251 
 
 the assignment of, as collateral security for sterling bonds, by a 
 
 separate instrument ...... 252 
 
 the title of assignee of, under equitable estoppel . . 237 
 
 the assignment of the bond carries the mortgage security . 184 
 the equities to which the assignee is subject under the New York 
 
 rule . .238 
 
 the rule in New Jersey ...... 240 
 
 the duties of the assignee as to the mortgagor . . 240 
 
 the rule applied in Pennsylvania, and also in Virginia . 241, 242 
 Assignment of Bonds and Mortgages under Estoppel. 
 
 the rules of equitable estoppel as invoked in favor of innocent 
 
 assignees of ..... 242, 243 
 
 where an agent has full title and apparent ownership of . 242 
 equitable limitations of estoppel, as applied in such cases . 243 
 
 estoppel of cestuis que trust, where trustees have full title and 
 
 apparent ownership ...... 243 
 
 estoppel, by certificate of " no defenses, equities, or set-offs," of 
 
 obligor and mortgagor ..... 244 
 
 such certificates as affected by fraud or misappropriation in the 
 
 original transaction ..... 244 
 
 the bond and mortgage, under indorsement, quasi-negotiable in 
 
 character . . 245, 246 
 
 the enforcement allowed assignee, where mortgage security itself 
 
 is void ..... 246 
 
 or where a valid bond and mortgage is given as collateral for 
 
 an invalid loan ...... 247
 
 612 INDEX. 
 
 CHOSES IN ACTION. PAOR 
 
 the use of, as collateral security ..... 568 
 
 the equities to which the pledgee is subject . . . 569 
 equitable assignments of funds, as collateral security . 570, 571 
 
 assignments in part of such collateral securities in equity . 571 
 the pledge of non - negotiable instruments, with or without 
 
 indorsement ...... 573 
 
 the assignment in pledge of insurance policies . . . 575 
 
 the pledgee's lien upon payment of premiums . . 576 
 
 pledge of non - negotiable collateral, without notice to debtor 577 
 
 priority of assignees of funds, upon giving rule . . 578 
 
 the debtor's liability, with notice of assignment . . 579 
 
 the title acquired by pledgees, with notice of fraud . . 580 
 COLLATERAL SECURITY. 
 
 definition of . ...... 2 
 
 definition of the term " collateral " .... 2 
 
 primary purpose of . . . . .115 
 
 recital of, in principal note . . . . *~ 3 
 
 renewals of principal note . . . . .14 
 
 exchange or substitution of collateral notes ... 15 
 
 the rule as applied to negotiable notes, secured by mortgage . 214 
 
 security follows debt in equity, a .... 107 
 
 documents of title, under indorsement and delivery, as . 341, 342 
 
 the use of stock certificates of stock, as ... 391 
 
 the use of bills of lading, as ..... 495 
 
 the use of warehouse and cotton-press receipts, as . 555 
 the use of non-negotiable choses in action, and equitable assign- 
 ments of funds, as . . . . . . 568 
 
 COLLATERAL, CONTRIBUTION BY SURETIES WITH. 
 
 contribution, as to collateral securities by surety . . 298 
 whether obtained before or subsequently . . . 301, 302 
 
 surety with collateral as a trustee for co-sureties . . 299 
 no revocation of deposit of collaterals after negotiation of 
 
 note ........ 300 
 
 estoppel of surety by conduct or by surrender of such collateral 300 
 
 payment, necessary to entitle surety to . . 800, 301 
 
 surety entitled to, although holding collateral securities . 300 
 
 the rule where securities are more than debts . . 301 
 
 the surety's stipulation for separate indemnity . . . 803 
 
 the right to as waived or surrendered by contract . . 303 
 surety entitled to, upon paying more than his aliquot portion of 
 
 debt ,. 304 
 
 the surety's action at law for, dependent upon payment of debt 306 
 
 can only recover aliquot part of debt .... 806 
 
 (See SURETY.)
 
 INDEX. 61E 
 
 COLLATERAL BILLS AND NOTES. 
 
 The Pledgee's enforcement. PAGE 
 
 the pledgee's right of determining manner and time . 116 
 the pledgee as a trustee of collateral securities . . .117 
 
 of collateral bills aud notes, under special agreement . 110 
 
 or where contract is to return, or pay their value at maturity . 110 
 
 pledgee's obligation to present and give notice of non-payment 118 
 
 his liability, in cases of failure . . . . 118 
 the rules of notice to pledgor enforced where not a party 
 
 to 118,119,120 
 
 limitations of notice, by pledgee of accommodation paper . 119 
 
 the pledgee's obligation to collect collateral paper . . 120 
 enforcement by pledgee, under statutory enactment, although 
 
 unindorsed ....... 121 
 
 or where collateral notes are indorsed in blank or payable to 
 
 bearer . . . . . . . 131 
 
 the pledgee's recovery of collateral paper . . . 121, 122 
 
 upon deficiency, suit upon principal note . . 122 
 
 collection of " short " collateral paper .... 124 
 
 of paper held by the pledgee, uncollectible . . . 125 
 
 pledge of such paper implies right to compromise . . 125 
 
 pledgee sale of past-due paper where uncollectible . . 126 
 Production and return of Collateral paper. 
 
 the pledger when entitled to return of . . . 134 
 
 but not on a mere offer to pay .... 134 
 
 pledgee should produce collateral bills and notes on action on 
 
 principal obligation ..... 138 
 
 the like rule as to bills of exchange .... 139 
 
 return of collateral paper ...... 141 
 
 nor is the pledgor entitled to return of collateral paper upon 
 
 payment of part of debt merely . . . 149 
 Application of Collateral paper. 
 
 the pledgee when entitled to apply collateral to other debts . 129 
 
 the rule applied to stock and insurance policies 454, 455, 595, 596 
 application of securities to other debts by contract . . 129, 130 
 
 the rule as applied to individual partner's securities . . 81 
 
 and as to collateral securities deposited with banks . 84 
 stock and other brokers within the like rule . . .84 
 sub-pledgees of collateral stocks favoring stocks of one at the 
 
 expense of others ...... 434 
 
 equitable relief of the pledger, whose stocks have been sold 434 
 
 rights of customer under sub-pledge of stocks . . 435 
 (See EQUITABLE JURISDICTION.) 
 Compromise or surrender. 
 
 pledgee's compromise or surrender for less than its face . 123 
 
 although with power of sale under contract . . . 128
 
 614 INDEX. 
 
 COLLATERAL BILLS AND NOTES Continued. 
 
 Compromise or surrender. PAGE 
 
 compromise as made by agreement of parties . . . 128 
 
 when surrendered without consent .... 128 
 
 CONCURRENT REMEDIES. 
 
 pledgee's right to proceed upon principal and collateral notes at 
 
 the same time ....... 146 
 
 but with only one satisfaction ..... 146 
 
 the pledgee's recovery of costs ..... 146 
 
 indorsee of note and mortgage, may proceed, upon default, on 
 
 both . .198 
 
 trustee's sale where suit on note is pending . . . 198 
 
 costs in action at law part of mortgage debt . . . 199 
 
 remedies of indorsee as controlled by statutory enactments . 199 
 judgment on principal note as affecting mortgage security 198 
 
 CORPORATIONS. 
 
 recovery of money loaned without authority . 86. 231, 232, 263 
 
 the forfeiture of franchises, at the instance of government 86, 233, 234 
 corporations issuing their own unsubscribed and unissued 
 
 shares of stock as collateral for advances made or to be 
 
 made ........ 401 
 
 when a pledge of stock for future debt, not defeated . 400 
 
 Corporations, under Estoppel. 
 
 estoppel as against corporations, founded on agency 412, 414, 417 
 responsible to same extent, and under like circumstances, as 
 
 individuals ....... 413 
 
 estoppel as applied in favor of a pledgee of stock certificates 
 
 against a corporation by the acts of its officers . 414, 415 
 estopped as to recitals of bonds when in the hands of inno- 
 cent holders, pledgees for value . . . .58 
 or by payment of interest ..... 58 
 or by subsequent ratification, where originally irregularly 
 
 issued ....... 60 
 
 estopped as to its representations upon its certificates, as against 
 
 innocent pledgees for value, with authority to transfer . 359 
 corporations estopped as to liability as stockholder where it 
 
 has received stock and received dividends as collateral and 
 
 transferred the same ..... 400 
 
 or to set up defense of ultra vires, as against innocent holder of 
 
 note ........ 401 
 
 DELIVERY IN PLEDGE. 
 Negotiable Instruments. 
 
 of negotiable instruments, payable to bearer, or indorsed in 
 
 blank .....'. 8 
 
 or in case of negotiable bonds and coupons . 8, 11, 57, 61, 62 
 or under the Louisiana code ..... 7
 
 INDEX. 615 
 
 DELIVERY IN PLEDGE. 
 
 Negotiable Instruments. PAGE 
 
 or to third parties, under contract of pledge . . .10 
 
 essential to a valid use of negotiable instruments as collateral 9 
 
 pledge of bills of exchange dishonored, as against mortgage 
 
 covering the bills ..... 126 
 
 pledgee's right to sue unindorsed paper, under statutory enact- 
 ment . . . . . ' . 121 
 
 recovery of pledgee under unindorsed bills . . . 123 
 
 pledgee of uniudorsed note, secured by mortgage . . 191 
 
 and where assigned by a separate instrument . . . 192 
 
 no recovery on unindorsed paper in cases of fraud or misappro- 
 priation ....... 192 
 
 pledge of negotiable notes, secured by mortgage, by 225, 226, 228 
 pledgee of unindorsed notes, as subject to subsequent indorse- 
 ment to another pledgee . ! ... 22 
 Bonds and Mortgages. 
 
 delivery and assignment necessary to validity of bond without 
 
 consideration . ..... 245 
 
 intervening lienors before assignment and delivery . . 245 
 
 Certificates of Stock. 
 
 assignment and delivery in pledge of certificates of stock . 361, 381 
 executory contracts for pledges of stocks, as against third per- 
 sons, cestuis que trust .... 361, 362 
 
 or in cases of misappropriation by trustees . . . 362 
 
 or to the injury of subsequent pledgees, without notice . 361 
 equity will, in proper cases, aid the pledgee by requiring indorse- 
 ment (See INSURAXCE POLICIES.) . . . 361 
 DIRECTORS OF CORPORATIONS. 
 
 the pledge of bonds and other securities to themselves . . 99 
 
 the pledge when made for liabilities incurred or money ad- 
 vanced ....... 100 
 
 when liable as sureties for loan of money to corporations . 263 
 DISCHARGE OF PLEDGOR. 
 
 discharge of, on principal obligation upon payment to holder of 
 
 collateral paper ..... 102, 599 
 
 discharge by gross neglect or bad faith of pledgee . 147, 148 
 
 no discharge by reason of mere passive delay of pledgee . 149 
 
 pledger's enforcement of collateral paper . . 
 
 where surrendered for less than face . . 
 
 the pledgee when chargeable with face value of collateral 
 
 paper ... 107 
 
 and in case of tortious sale 
 
 pledger when entitled to have collections on collateral notes 
 
 applied to debt ... 120
 
 616 INDEX. 
 
 DISCHARGE OF PLEDGOR Continued PAGB 
 
 and to return of collateral securities on payment of principal 
 
 debt . . . . f . * -.. . . 134 
 
 discharge of pledgee of choses in action . . . 604 
 
 a pledger's right to return premiums on insurance policies 
 
 paid to pledgee, after settlement . . . . 604 
 
 ESTOPPEL, AS APPLIED TO COLLATERAL SECURITIES. 
 
 recognized propositions of an estoppel in pais . 582, 585, 586 
 
 essential elements of equitable estoppel . . ':*' 584 
 
 As against Corporations. 
 
 to deny recitals of its negotiable bonds and coupons, as against 
 
 innocent holders for value . . . . .58 
 
 or by payment of interest .. . . . . 58 
 
 or by ratification where originally irregularly issued . . 60 
 
 the same rules applied to recitals in non-negotiable choses iu 
 
 action . , . . . . . . 494 
 
 by representations on face of certificates of stock . 359, 360 
 
 nor that shares have been issued on separate assignment ^ . 360 
 as against innocent holders of new certificates, issued upon 
 
 forged transfers . . . . . 408 
 
 as against pledgees for value of fictitious and other stocks issued 
 
 by agents ....... 411 
 
 as against innocent pledgees, where choses in action are exe- 
 cuted expressly for the purpose of raising money . 63, 189, 533 
 As against Owner. 
 
 where third person holds bill of lading with full title . . 535 
 
 of notes and mortgages by payments to agents with authority 195 
 as against indorsees of such notes, until authority revoked . 195 
 also as to payments made to trustees, before notice . 195, 196 
 as against pledgee of notes and mortgages, where title is in 
 
 third person . . . . . .190 
 
 or where sub-pledged by pledgee with title for a larger sum than 
 
 original loan ....... 233 
 
 or where documents of title, and apparent absolute ownership, 
 
 are entrusted to a third person and a fraud or deceit results 587, 590 
 as against sub-pledgee of negotiable instruments held by 
 
 pledgee with title and apparent ownership . 109, 110 
 
 As against Cestuis que trust. 
 
 as against misappropriations of securities by trustee in pledge 399 
 As against Pledgee. 
 
 where pledgor allowed to appear as owner . . . 559 
 
 or where title to securities are in third person , . . 190 
 
 Other canes of Estoppel. 
 
 a creditor estopped to enforce liability of surety, by fraudulent 
 
 representations as to collateral securities . . . 817
 
 INDEX. 617 
 
 ESTOPPEL, AS APPLIED TO COLLATERAL SECURITIES t'ontd. 
 Other cases "of Estoppel. PAOB 
 
 as against sureties, in favor of indorsees, without notice, where 
 
 name of a surety is forged ..... 320 
 
 as against shipowner or land carrier, to set up non-delivery of 
 goods, or fraud, or forgery, as against innocent pledgees 
 for value ..... 520, 521, 522, 523 
 
 or by acts of agent within his apparent authority . . 521 
 
 estoppel of mortgagor by representations that the money loaned 
 
 for which the mortgage was given, was paid in full . 194 
 
 or by certificates of "no defenses, equities, or set offs " 175, 176, 587 
 
 or by his wilful silence or neglect .... 204 
 
 or when executed for the purpose of raising money 65, 189, 221, 583 
 
 estoppel of warehouseman by terms of his receipts, as against 
 
 bona fide pledgees for value ..... 560 
 
 and in cases where no goods have been delivered . . 560 
 
 and as against an innocent pledgee for value of receipts . 560 
 
 Limitations of Estoppel. 
 
 estoppel as against owner where negotiable coupons pledged 
 
 fraudulently, after maturity . . . . .64 
 
 or where a pledgee of notes from an administrator, is chargeable 
 
 with knowledge of fraud . . . , .99 
 
 or where forgery and felony by a broker of certificates were 
 
 necessary to carry out a fraud and deceit . . . 420 
 
 or as against a shipowner or inland carrier to set up non-de- 
 livery of goods ...... 516 
 
 as to apparent authority of agents to issue bills of lading abso- 
 lutely void ...... 516-520 
 
 cases where estoppel not enforced against pledgee of bills of 
 
 lading 537,538,540 
 
 nor, as against indorsees of mortgage notes, 
 
 nor, as against corporations, upon a total want of authority 
 
 (See FICTITIOUS AND STOLEN SECURITIES.) 
 
 EQUITY JURISDICTION OVER COLLATERAL SECURITIES. 
 The Pledgee's relief in Equity. 
 
 to obtain a judicial sale of negotiable collateral securities 154, If 
 
 and in the case of long-time bonds 
 
 or a foreclosure and sale of such negotiable collateral paper 
 
 or a foreclosure and sale of mortgage security given to secure 
 payment of long-time bonds 
 
 or in preserving his security from improper diversions . 
 
 or, holding notes and mortgages, upon default . . 235, 2? 
 
 or entry and possession, as any mortgagee 
 
 the pledgee's rights until sale, or possession of land twenty years 
 
 or where pledgee has surrendered valid notes receiving new 
 securities which are void
 
 618 INDEX. 
 
 EQUITY JURISDICTION OVER COLLATERAL SECURITIES Con. 
 The Pledgee's relief in Equity. PAGE 
 
 the pledgee's rights under contracts by which collateral secur- 
 ities are forfeited . . .... . 108 
 
 or securities given upon an illegal agreement . . . 247 
 
 or where reliance is placed upon an illegal contract . 94 
 
 or where parties to the contract have a complete remedy at law 155 
 or where a company refuses to transfer stock 355, 409, 410 
 
 or where the pledge of stock is made unindorsed but with 
 
 agreement for indorsement ..... 361 
 
 or in aid of a pledgee of insurance policies . . . 600, 601 
 
 The Pledgor's Relief in Equity. 
 
 the pledgor of, where they have been wrongfully transferred 107 
 or where tortious sales have been made by pledgees . 234 
 
 or where the negotiable securities have been separated from the 
 
 mortgage ....... 199 
 
 or where tender of debt is made, after foreclosure of security 134 
 or will grant an injunction against a pledgee, where holding 
 
 bonds largely in excess of the debt .... 156 
 
 or to redeem his negotiable securities . . . 168 
 
 or redemption where pledged for a specific debt . . . 170 
 
 or where no time is set for payment of the loan . . 169 
 
 the pledger's right to, when lost by laches . . . 169 
 
 or where the securities have increased greatly in value . 170 
 or where nothing has been realized upon collaterals . . 170 
 
 equitable relief where pledgee has obtained new certificates of 
 
 stock 376, 452, 453 
 
 the transfer as collateral security, as established by parol evi- 
 dence 372,373,376,377 
 
 the cases in which a decree is given for a return of, the specific 
 
 shares of stock ..... 452, 453 
 
 the pledger's relief where a pledgee has sold securities to him- 
 self, or through an agent . .... 453 
 
 or where stocks held as. collateral security are lost by gross 
 
 negligence ... .... 453 
 
 or where collateral stocks pledged for a specific loan are re- 
 tained for other liabilities .... 454, 455 
 
 or where a tender has been made of the debt for which the 
 
 stock was authorized to be placed .... 454 
 
 the pledger's relief by the application of securities held from 
 
 different pledgers by sub-pledgees . . . 453, 454 
 
 the pledgee's set-off in cases of an unauthorized sale . 455 
 
 the redemption of stocks, when made by receivers of insolvent 
 
 stockbrokers ...... 456 
 
 the pledger's redemption, where stocks are in the hands of 
 receivers ....... 456
 
 INDEX. 619 
 
 EQUITY JURISDICTION OVER COLLATERAL SECURITIES-tfon. 
 The Pledger's relief in Equity. PAGE 
 
 the pledger's right by injunction to restrain trustee from voting 
 
 stock held as collateral ..... 372 
 
 the pledger's right to redeem, when lost by laches . 456, 457 
 the rule in Louisiana ...... 457 
 
 EXCHANGES. (See OPTION DEALS, USAGES, BROKERS' SUITS.) 
 EXECUTORS. 
 
 their right to use negotiable securities of the estate as collateral 98 
 or to pledge stocks, or other securities of the estate 897 
 
 the knowledge of pledgee sufficient to defeat his title . 397 
 
 pledges of securities of estate, after settlement for over twenty 
 
 years ........ 396 
 
 pledges of, of stocks of the estate for their own debts . 398 
 the title of pledgee, when chargeable with notice of fraud 98, 398 
 and of sub-pledgees of stocks, so pledged ... 399 
 the return of securities to the estate .... 399 
 
 THE FACTOR AS PLEDGOR. 
 
 his rights at common law, to pledge and assign his lien . 547 
 
 character and extent of the factor's lien . . . 548 
 
 factor's lien, as affecting the ownership of goods . . 549 
 
 when equity, will enforce lien in favor -of holders of notes as 
 
 agaiiist factor ..... 549, 550 
 
 factor making advances, a pledgee .... 550 
 his lien as affected by a wrongful sale or pledge . . 550 
 
 when entitled to set-off lien against action for wrongful sale 550 
 when, in an action of trover, tender of advances and charges 
 
 are required ....... 551 
 
 pledgees of property, or documents of property, from factors, 
 
 when chargeable with notice ..... 552 
 indorsement and delivery of documents of title when made at 
 
 the time of . . . . . .553 
 
 where pledgee holds other securities, his primary resort as con- 
 trolled by courts . . . . . , 553 
 
 FICTITIOUS AND STOLEN SECURITIES. 
 
 title of the innocent pledgee for value of fictitious bills of lading 539 
 liability of sureties, upon notes void, although holding collateral 263 
 title of innocent pledgee for value of fictitious certificates of 
 
 stock fraudulently issued by officers of a company 411, 417 
 
 the rule as limited by confining it to the governing officers of 
 
 a company ...... 411, 412 
 
 title of the innocent pledgee for value, as supported upon rules 
 
 of equitable estoppel ..... 412 
 
 title of innocent pledgee of a new certificate of stock issued in 
 
 the place of one stolen from the true owner, as against the 
 
 latter .410
 
 620 INDEX. 
 
 FICTITIOUS AND STOLEN SECURITIES Continued. PAGE 
 
 or where a certificate in the name of a third party was stolen 
 and negotiated by him as having the legal title, as against 
 
 the real owner ...... 411 
 
 FORGERY. 
 
 Negotiable Collateral Securities. 
 
 pledge of accommodation paper, tainted with . . .53 
 
 pledge of, directly affected with . , . 91 
 
 the enforcement of collateral paper, where free from . . 92 
 
 surety's liability, where signatures of other sureties forged 263 
 
 revival of original debt, where new security a . . 319 
 
 pledgee's title to mortgages, where notes are void . . 189 
 Quasi-Negotiable Collateral Securities. 
 
 claims of pledgees, under certificates of stock, tainted with 407, 408 
 and under new certificate where it remains in possession of the 
 
 transferee - . . . . . . . 407 
 
 or in the hands of a bare trustee, the principal debt being paid 408 
 
 title of the holder for value of new certificate, without notice . 408 
 
 or of bona fide pledgees for value, without notice . . 408 
 
 rights of the owner of shares of stock, by . . 408 
 and under the issue of new certificates . . . 409, 410 
 
 title of innocent holder for value of new certificate . . 351 
 
 estoppel, as applied to stock certificates, tainted with . 411 
 
 liabilities of pledgees, indorsing certificates, tainted with . 411 
 
 as against carriers, issuing bills of lading on forged receipts 536 
 
 FORMS AND CONTRACTS. 
 
 recital of collateral in principal note . . . . ' 4 
 
 form of notice of public sale of collateral . * . 153 
 
 power of sale of collateral, in principal note . . 153 
 
 " seller's option " contract ..... 472 
 
 " put " contract, for differences .... 473 
 
 . a restrictive indorsement on a bill of lading . . . 542 
 
 GUARANTY. 
 
 contract of the guarantor . . . . . 329 
 
 law and rules of continuing guaranties . . . 336 
 
 rules as to notice of acceptance of guaranties . . . 837 
 when relieved of equities, in hands of holder for value, without 
 
 notice ........ 338 
 
 guarantor's liability fixed, upon default of principal . 338 
 
 rule where guaranty is of collection merely . , . 839 
 
 or where principal maker is openly insolvent . . 339 
 
 or where guarantor's liability is to pay the note " . 839 
 
 discharge of, as affected by receipt of security by holder . 339 
 
 holder's duty to resort to collateral securities before suit . 840 
 
 subrogation of guarantors, upon payment of debt . . 340 
 
 rule where guaranty is for collection only . . . 340
 
 INDEX. 621 
 
 GUARANTY Continued. PAGB 
 
 right of guarantors, upon payment, to sue acceptor for full 
 
 amount of bills ..... 122 
 
 of negotiable bonds, payable to bearer, free of equities . 61 
 
 its enforcement by pledgee, where given by third party to 
 
 pledger of collateral notes ..... 121 
 
 HOLDER FOR VALUE. 
 
 Negotiable Collateral Securities. 
 
 pledgee of, for present advances, a -.*.. 16 
 
 pledgee of, for future advances, a ... . . 18 
 
 pledgee of for antecedent debts, without further consideration, a 20 
 pledgee of, for antecedent debt, with new consideration, a . 35 
 pledgee of accommodation paper, for present and future ad- 
 vances, and for antecedent debt, a . . 31, 42 
 pledgee of accommodation paper, in England, a . .49 
 pledgee of negotiable bonds and coupons, upon a valuable con- 
 sideration, a . . . . . .58 
 
 pledgee of, receiving collateral paper in good faith, without 
 
 notice, under acts of misappropriation, a . . .87 
 
 sub -pledgee of, for value, without notice, a ... 108 
 sub-pledgee from a sub-pledgee for value, without notice, a 109 
 pledgee of stock certificates, indorsed, upon advances, a 350, 367 
 pledgee of bills of lading, upon bona fide loans or discounts, 
 
 as against an unpaid vendor, a . . . . 545 
 
 INDORSEMENT. 
 
 pledge of negotiable bills or notes, by . . . .5 
 
 use of bills and no:es as collateral security, unindorsed for col- 
 lection, or for special purpose only . 6 
 pledger protected from misappropriation, by restrictive indorse- 
 ment ........ 91 
 
 transfer by, of notes and mortgages as collateral upon separate 
 
 instrument ....... 214 
 
 the pledge of notes indorsed "without recourse" . . 225 
 
 bonds and mortgages, quasi-negotiable under indorsement, 
 
 " payable to bearer " ..... 261 
 
 assignment and delivery to validate transfer of bond and mort- 
 gage, executed without consideration . . . 245 
 ENDORSEMENTS IN BLANK. 
 Negotiable Collateral Securities. 
 
 use of bills and notes as collateral security indorsed in blank 8 
 misappropriation in pledge, under such indorsement . . 227 
 
 Quasi-negotiable Collateral Securities. 
 
 transfer of stock certificates as collateral, under 
 title of pledgee of stock certificates, under 346, 347, 352, 353, 354 
 title vesting in the pledgee for value, under . . . 353 
 
 title of innocent holder for value, under . . 451
 
 622 INDEX. 
 
 INDORSEMENTS IN BLANK- Continued. PAOB 
 
 Quasi-Negotiable Collateral Securities. 
 
 such certificates of stock pass from " hand to hand ** . . 847 
 
 and its benefits enure to sub-pledgees for value . 349 
 
 the transfers of shares in England, under . . 348, 349 
 
 liabilities of persons indorsing in blank certificates of stock, 
 
 tainted with forgery .... 375, 376, 411 
 
 limitations of the rule, where equitable title only passes to 
 
 pledgee . . . . . . .355 
 
 indorsements in blank, filled up after pledger's death ... 387 
 owners of stock estopped, by delivery of certificates of stock, 
 
 under . . . . . . , 417 
 
 presumptions which arise in favor of holders of certificates of 
 
 stock, under . . % , . . 417, 418 
 
 owner estopped as against innocent pledgees for value, without 
 notice, by acts of fraud, under .... 417 
 
 indorsement of bills of lading to pledgee for value, without 
 notice under . . . . . .^ . 509 
 
 INDORSEE. 
 
 (See ACCOMMODATION INDORSES.) 
 INSOLVENCY. 
 
 (See RECOVERY, SALE, AND STOCK AS COLLATERAL.) 
 INSURANCE POLICIES. 
 
 assignment of, as collateral security . . . . 574, 575 
 
 pledgee's lien, upon payment of premiums . . . 576 
 
 payment of premiums, by pledgee, where assigned fraudulently 576 
 payment by strangers or part owners .... 577 
 
 pledgee entitled to return premiums, after settlement . 604 
 
 rights of a pledgee of, by indorsement and delivery, as against 
 
 a prior pledgee, without delivery . . . 578 
 
 application of, to debts other than those specifically covered by 
 
 the pledge ...... 595, 596 
 
 equitable relief, when given to pledgee of . . 600, 601 
 
 INVALID LOANS. 
 
 as defense to surety, that corporation loaning money had no 
 
 authority so to do . . . . . 263 
 
 the guaranty of contracts entirely void . .. . . 337 
 
 guaranties of coupons when en forcible, where the bonds are 
 
 voidable only ....... 838 
 
 usurious interest paid upon loans, as affecting guarantors 338 
 
 "LIS PENDENS." 
 
 as applied to the transfer of stock certificates 352 
 
 LOUISIANA. 
 
 rule under the code as to prescription against negotiable collat- 
 eral paper . ..... 133 
 
 title of notes, secured by mortgage, how passed . 225
 
 INDEX. 623 
 
 LOUISIANA Continued. PAQE 
 shares of stock pledged by contract and delivery of certifi- 
 cates '. 861, 362 
 
 pledgee of stocks, subject to liens and privileges . 362, 882 
 
 possession of certificates when held by a trustee . . 362 
 
 a pledge of shares by delivery ... 381 
 
 MANDAMUS. 
 
 pledgee's right to, upon refusal of company to transfer stock 353, 396 
 MARRIED WOMEN. 
 
 when entitled as surety, that creditor shall first exhaust princi- 
 pal's property ...... 266 
 
 her own contract void, when surety bound . . . 267 
 
 pledges of stock certificates by . . . 403 
 
 MARSHALLING SECURITIES. 
 
 principle, as applied to pledges of negotiable collateral paper 130 
 and to brokers pledging customers' notes en masse . . 131 
 
 like rules applied to sub-pledgees of negotiable securities 130, 131 
 limitations of the rule, as applied to such securities . . 130 
 
 MEASURE OF DAMAGES. 
 For wrongful sale by Stockbrokers. 
 
 general rule as to . . . . . . 447 
 
 in cases of a tortious sale of collateral mining stock . . 447 
 
 or where stocks obtained fraudulently are sold to purchasers 
 
 with notice ....... 447 
 
 rule as to such sales made by brokers in New York . 448 
 
 rule in Pennsylvania ...... 448 
 
 pledger, when entitled to an action of trover for, without a 
 
 tender of the price .... . 451 
 
 demand of payment and tender of stocks, when required by 
 
 broker before suing customer . . ... 451 
 
 Other rules as to Measure of damages. 
 
 of the owner of stock, transferred upon forged indorsement 422 
 or where new certificates of stock have been issued 408 
 
 and as against the fraudulent person and the company 409, 410 
 
 of pledgee, upon indorsement of certificate by prior pledgee, in 
 
 a case of forgery ...... 422 
 
 and upon a wrongful pledge of certificates by a stockbroker 
 
 signing as " trustee " ..... 395 
 
 of pledges of spurious stock 
 
 of pledgee, where company refused to transfer stock as being 
 
 subject to a " lis pendens " 
 
 of a sub-pledgee, for value, without notice, the pledgee being 
 chargeable with notice of fraud .... 
 
 and upon a sub-pledgee of mining stock .... 430 
 
 and of the fraudulent use of stock to fill a "borrowed" con- 
 tract 43 . 431
 
 024 INDEX. 
 
 MINORS. PAGE 
 
 contract of, as sureties ...... 266 
 
 stock speculations of, upon securities and margins 267, 403, 404 
 
 MISAPPROPRIATION IN PLEDGE. 
 Negotiable Collateral Securities. 
 
 presumptions in favor of pledgees for value, without notice, 
 
 under ........ 90 
 
 and of blank acceptances and accommodation paper, under 89 
 use of accommodation paper, under . . . . 5(> 
 
 pledgee, when protected against pledger, under re-delivery, with 
 restrictive indorsement . . . . . .95 
 
 pledgee for value, without notice, from agents, under . 94 
 
 rule enforced in English cases . . . . 95 
 
 pledge of negotiable bonds, by agents, under . . 9ft 
 
 rights of the pledgee, where given in place of forged securities 91 
 or where forgery occurred in the drawing or indorsement of 
 
 bills of exchange ...... 92 
 
 by bankers, intrusted with title, under indorsement . 96 
 
 or by executors and administrators, the pledgee without notice 98 
 pledgee of accommodation paper, chargeable with notice of 
 
 fraud, under ....... 51 
 
 where misappropriated for antecedent debts . . 52 
 
 or received, after maturity, under . . . .93 
 
 surety's liability to holder for value of accommodation paper, 
 
 under ........ 264 
 
 securities of estates, where pledgees are chargeable with notice 99 
 pledges of notes and mortgages, under .... 227 
 
 notes and mortgages, indorsed in blank, pledged by an agent, 
 
 under ........ 227 
 
 such pledges, where pledgee is chargeable with notice of 228, 229, 
 
 243 
 
 pledgees of stock, with equitable title only, under acts of mis- 
 appropriation by trustees ..... 362 
 
 Misappropriation of proceeds of Loan. 
 
 firm not discharged, where partner .... 70 
 
 nor where a cashier transferred collateral paper for an author- 
 ized loan, but ...... 97, 98 
 
 indorsees of note, secured by mortgage, when affected by 192, 193 
 or assignees of bonds and mortgages, with certificates of "full 
 
 payment" indorsed ..... 244 
 
 or a pledgee of stock certificates for value, from an execu- 
 tor, where ....... 398 
 
 MORTGAGE SECURITY. 
 
 indorsee's title to the mortgage security, free of antecedent 
 equities ....... 207, 208 
 
 rule in the United States Supreme Court . . . 209, 210
 
 INDEX. 625 
 
 MORTGAGE SECURITY Continued. PAGB 
 
 New York view of notes and mortgages . . . 211 
 
 rule in Massachusetts, Maine, New Hampshire, Iowa, Wiscon- 
 sin, Missouri, and Kansas .... 212-215 
 
 indorsee's title under fraudulent releases of mortgage . . 216 
 
 statutory provisions relative to priority under the rule . 216 
 indorsee's title under insolvency, or payments . 209, 213, 214 
 
 rule under which the indorsee in enforcing the mortgage is sub- 
 ject to equities ...... 216 
 
 rule in Illinois and in other states .... 217-229 
 
 rule as to negotiable bonds and accommodation paper . 222, 223 
 and as to collateral matters . . . . . 218, 219 
 
 and where notes and mortgages are made to be used to raise 
 money, by loan or otherwise ; or are sold with consent of 
 the mortgagor . . ... 219, 221 
 
 Enforcement of Mortgage security. 
 
 mortgage enforced at same time as principal note . . 198 
 
 judgment on the note as affecting the mortgage security . 198 
 
 when enforcement in equity barred .... 201 
 
 pledgee entitled to foreclosure and sale .... 235 
 
 the effect of entry and possession by pledgee . . 235 
 
 such entry as a payment of notes held as collateral security 235, 236 
 indorsee's collection of notes, where not chargeable with notice 
 
 of payments ..... 191, 192 
 
 and by the pledgee and sub-pledgee . . . 232, 233 
 
 sub-pledgee restricted in equity in certain states, to amount of 
 
 original loan ....... 223 
 
 the recovery, where notes are received unindorsed . . 191 
 
 credits on mortgage notes, when to be explained . . 193 
 
 fraudulent releases of record by mortgagee as affecting indor- 
 see's title . . . . .194 
 
 MORTGAGE. 
 
 title of the pledgee, under indorsement of notes and assign- 
 ment of mortgages 
 assignment of, without the negotiable notes . . . 
 assignee of, a secondary trustee for note holders . . 186 
 mistakes in mortgage deeds as defense against an indorsee for 
 value .... 
 
 indorsee's rights to, when once freed of equities . . 190 
 
 estoppel of owner, to dispute title of innocent indorsee for 
 
 value ... .... 190 
 
 MORTGAGOR. 
 
 pledgee's title, as against mortgagor, upon foreclosure, entry, 
 
 9^fi 
 
 and possession ...... * 
 
 O'-^A 
 
 and as against the pledgor . . 
 
 40
 
 626 INDEX. 
 
 MORTGAGOR Continued. PAGE 
 
 when assigned with consent, mortgagor estopped to set up 
 
 equities 119, 189, 221, 583 
 
 when entitled to set off as against holder for value . . 189, 199 
 
 recovery where the principal note is a forgery . . . 189 
 
 or where the negotiable notes are separated from the mortgage 
 
 security . ...... 199 
 
 NEGOTIABLE NOTES AND MORTGAGES. 
 
 indorsement of note as carrying mortgage security, whether as- 
 signed or not. ... ... 183 
 
 where indorsement is of part of notes only . . . 184 
 
 assignment of mortgage, separate from the negotiable 
 
 notes, ....... 185, 186 
 
 indorsee's control of the mortgage security, although not as- 
 signed . ...... 186 
 
 indorsee title as subject to record, and his record of assign- 
 ment 187, 188 
 
 indorsee when subject to equities under traudulent m&rtgages 
 
 or forged notes . . . . . .189 
 
 rule where mortgage voidable only . . . 189, 190 
 
 recovery of the indorsee . ..... 191 
 
 the pledgee, when subject to equities, . . . 191, 192 
 
 NOTE, THE PLEDGOR'S PRINCIPAL. 
 
 pledgee's right to enforce payment of, upon default . . 137 
 
 although holding collateral notes unpaid, or himself become 
 
 purchaser ....... 138 
 
 pledger's liability on, in cases of failure to give him notice of 
 
 non-payment, or to collect collateral notes . 118, 137, 138 
 pledgee's recovery on . . . . . .137 
 
 upon deficiency in realization of collateral notes, pledgee may 
 
 sue on ........ 122 
 
 presumption of payment as arising from retention of collateral 
 
 notes ........ 125 
 
 judgments upon collateral notes as extinguishing the debt . 141 
 defenses against pledgee in his action on principal note 107, 108, 113 
 defense, that pledgee has lost collateral notes . . . 138 
 
 or, that they were lost by third person selected by the pledger 139 
 NOTE, SECURED BY MORTGAGE. 
 
 retains its negotiability, although reciting "secured by mort- 
 gage" ........ 19G 
 
 or where indorsed "without recourse" by the mortgagee and 
 
 payee ........ 197 
 
 rule as applied to long-lime paper . 196 
 
 as affected by release of mortgage . . . .197 
 
 or by a void or fraudulent mortgage . . . 197 
 
 indorsee's recovery upon notes .... 197
 
 INDEX. 627 
 
 NOTE, SECURED BY MORTGAGE <7<mtfnuZ. PAGE 
 
 and where payments have been made, but not indorsed . . 197 
 
 and where given for an illegal consideration . . 226 
 
 upon deficiency under foreclosure decree, indorsee's suit upon 
 
 principal note ..... 198 
 
 indorsee's recovery, where chargeable with notice of fraud . 226 
 (See ENFORCEMENT OP MORTGAGE SECURITY.) 
 NOTES HELD AS COLLATERAL. 
 
 requirements of reasonable and ordinary care and diligence, and 
 
 good faith, by the pledgee, in the collection of . . 147 
 
 pledgee, when accountable for loss .... 148, 149 
 
 or where the liability of the pledger, as indorser of collateral 
 
 notes, is discharged ...... 148 
 
 pledgee's liability for mere passive delay in . . . ] 59 
 
 or misconduct of banks or persons employed as agents to . 150 
 pledger's rights where default has occurred on the part of such 
 
 agents . . . . . . . . 150 
 
 pledgee's election upon which to sue, or upon all at once, at 
 
 maturity ....... 144 
 
 or the pledger upon his indorsement of ... 140, 146 
 
 liabilities of parties to, where pledgee has other ways to enforce 
 
 collection of principal notes .... 145 
 
 such liabilities as affected by payments of pledgor, subse- 
 quently to indorsement of . . . . 145 
 
 and where the maker is chargeable, with notice of indorse- 
 ment of ....... 146 
 
 parties bound upon, although loan be illegal . . 94, 177 
 
 and where indorsement of is void by statute . . 173, 177 
 
 pledgee's duty to present and give notice of non-payment of . 118 
 liability of parties on, although held by pledgee unindorsed 121 
 
 pledgee's duty to collect . . . . . . 120 
 
 when unaffected by power of sale . . . .121 
 
 where the principal note is barred by statute of limitations, en- 
 forcement upon ..... 133. 134 
 
 failure to collect, when a payment of principal debt . . 119 
 
 liabilities of parties on, when unaffected by misappropriation 
 
 of the loan ....... 98 
 
 NOTICE. 
 
 Negotiable Collateral Securities. 
 
 essentials of notice of fraud or misappropriation, to defeat tne 
 
 title of the pledgee for value . . . 51, 100 
 
 pledgee of accommodation paper, with notice of fraud, not a 
 
 bona fide holder .... 50, 76, 78, 79 
 
 the notice necessary to charge pledgee with misappropriation 
 
 by partners . . . 78, 79 
 
 nnd bankers, from designatory words , . 84
 
 C28 INDEX. 
 
 NOTICE Continued. PAGE 
 
 Negotiable Collateral Securities. 
 
 or by the terms of the collateral security . . 102, 103 
 
 notice as a question of construction, and a matter of law . 102 
 
 the grounds upon which the title of the pledgee for value, are 
 
 subject to defeat ..... 100,101 
 
 when without possession, pledgee of notes and mortgages sub- 
 
 jlct to equities ..... 189, 193 
 
 when failure to require production of negotiable notes will op- 
 erate as notice ....... 193 
 
 purchasers or subsequent mortgagees, with notice, or release 
 
 without paj r ment ...... 194 
 
 where such securities show a trust upon their face . 228, 229 
 Quasi-negotiable Collateral Securities. 
 
 indorsements of certificates of stock, to relieve pledgees from 
 
 liability as stockholders ..... 372, 374 
 
 pledgees when chargeable with notice of restrictive interest of 
 
 piedgor, upon . . . . . 421 
 
 or. where chargeable with inquiry, and making none . 421,422 
 as implied from use of " trustee " upon stock certificates . 393-396 
 and as to mining stock, issued to persons " as trustees" . 896, 397 
 the pledgee's title to trust stocks, where chargeable with . 393 
 the rule as applied to pledgees from executors, chargeable with, 398 
 and to creditors or purchasers of the pledgee's rights . 388 
 
 the pledgee of warehouse receipts, under the same rules 561-563 
 Wlwn Notice not presumed. 
 
 in cases of misappropriation, by the terms of the instru- 
 ment 103, 104 
 
 from the words " as curator " . . . . 375, 376 
 
 in the case of "as trustee," as used in mining stocks . 396, 397 
 
 from the mere fact of executors pledging stocks of estates . 397 
 from indorsement " without recourse" by mortgagees and 
 
 payees . . . . . . 197, 225 
 
 of the terms of mortgages from indorsement of notes showing 
 
 " secured by mortgage " on their face . . . 196 
 
 from non-production of notes, secured by a prior mortgage as 
 
 against a lender of money on a clear title of record 194, 195 
 essentials necessary to defeat the. indorsee's title . . 196 
 
 NOTICE BY PLEDGEES OF BILLS OF LADING. 
 
 obligation of, as to giving notice to any one .. . . 525 
 
 where holding a bill of lading indorsed, to carrier of his in- 
 terest . . . . . . . V . 628, 531 
 
 or to a wharfinger or warehouseman .... 528 
 
 a wrong delivery as an excuse against a pledgee . . 628 
 
 duty of, where issued in sets of three . . . 629 
 
 or where only one bill is obtained . . 629
 
 INDEX. 629 
 
 NOTICE BY PLEDGEES OF BILLS OF LADING-CforfintuA PAGE 
 delivery by the shipowner when good, on any one of the bills 529 
 title of pledgee of the first indorsed of a set . . 530 
 
 effect of tender of a duly indorsed bill of lading 
 NOTICE BY RECORD. 
 
 indorsee of mortgage notes as subject to record . . 187, 215 
 
 and as to conveyances subsequent to recording his mortgage . 187 
 no record required, as between the parties . . 188, 215 
 
 equity of prior assignees, with possession without record . 189 
 without delivery, mere record of assignment . .188,189 
 
 right of a subsequent indorsee or purchaser of mortgage notes 195, 215 
 indorsee of notes when affected by fraudulent discharge of rec- 
 ord by mortgagee, .... 194 
 and where mortgagee believes the notes to be paid . . 194 
 and a purchaser, with notice, acquiring rights under such 
 
 release ........ 194 
 
 assignment of, by independent instrument, without delivery 221 
 transfer of, as collateral, in a separate instrument with delivery 214 
 assignees of bonds and mortgages should notify mortgagors of 
 
 the assignments ...... 248 
 
 rule where such notice is given, as to payments . . 248 
 
 OPTION DEALS THE BROKER'S SUIT. 
 
 broker's option deal for his customer . . 460, 461 
 
 "seller's option" contract ..... 402 
 
 speculative option contracts to be settled upon differences 
 
 merely ...... 463, 465 
 
 the rule where one party acts in good faith . . . 464 
 
 validity of option deals, as showed by evidence . 466, 468 
 
 stockbroker's option contract, on purchase of stock . 469, 470 
 other option deals, upon stock and other exchanges . 471 
 
 broker's option deals on boards of trade .... 471 
 
 options "puts," "calls," "straddles," and "shaves" 472, 474 
 
 broker's suit for losses on trades .... 475, 476 
 
 or where payments made by brokers of differences at customer's 
 
 request, and commissions charged .... 477 
 or upon notes given for differences paid . . . 479 
 
 broker's suit for advances made or commissions earned upon 
 
 illegal and void gambling trades .... 479 
 and where the deals are bets upon the future prices, with no 
 
 intention to deliver or receive "... 481 
 and upon illegal contracts to " corner " .... 482 
 relief, when given to the customer .... 483 
 OVER-DUE PAPER. 
 
 pledge of, where accommodation paper . . . 42, 54 
 
 when without limitation as to its use, the presumption as to its 
 
 pledge, after maturity ..... 54
 
 630 INDEX. 
 
 OVER-DUE PAPER Continued, PAGE 
 
 pledgee of negotiable bonds and coupons, when subject to 
 
 equities ..... 61 
 mere presence of unpaid coupons upon bonds, insufficient to 
 
 destroy negotiability ..... 61 
 the title of the pledgee of coupons, transferred fraudulently, 
 
 after mnturity . ..... 64 
 
 or to paper of a partnership, pledged by a partner for his own 
 
 debt 78 
 
 or where indorsed to an agent, and misappropriated . . 93 
 or where such paper is lost, or stolen, and pledged . 93, 127, 226 
 such paper, when subject to defenses and equities connected 
 
 with it, or to collateral matters .... 127 
 
 and to charges for losses of collateral notes given by its maker 127 
 
 pledgee's right to sell such paper, after failure to collect . 126 
 
 and to extend the time of its payment .... 126 
 collection of such paper, under agreement . . 125, 126 
 PAYMENTS. 
 
 Application of, upon Collateral paper. 
 
 application of, in payment of debts at maturity . . . 182 
 
 and upon collection of " short " paper . . . 132 
 pledgee, when chargeable with interest upon collections of 
 
 "short "paper ...... 133 
 
 creditor's right of selection, where held as security for several 
 
 notes ....... 282 
 
 creditor's election, as affected by secret equities . . . 283 
 rule as to election of application, when applied in favor of 
 
 sureties ....... 283 
 
 priority rule, of mortgage notes, governed by the maturity of 
 
 notes . ...... 203 
 
 indorsees of mortgage notes, when subject to the rule of priority 203 
 priority, as given under contract to the last or any note 203, 204 
 
 the right, when defeated by neglect .... 204 
 
 rule where all notes become clue upon default . . 204 
 
 application of the pro rata rule .... 204, 205 
 
 and in cases where the payment of long-time bonds is secured 205 
 
 claim of the indorsee of the transferred note when preferred 205 
 
 priority of the first note indorsed, in absence of contract . 206 
 pledgee's rights, as against payments on mortgage notes to an 
 
 agent, with apparent authority .... 195 
 
 or to a trustee, with apparent authority . . . 196 
 or to fraudulent mortgagee, although after negotiation, in favor 
 
 of a lender upon new notes ..... 195 
 
 or of a credit of, on a mortgage note .... 193 
 or upon bonds, secured by mortgage, after assignment 247, 249 
 
 where paid before due, and the collateral retained . . 248
 
 INDEX. 631 
 
 PA YMENTS Continued. 
 
 Application of, upon Collateral paper. PAGE 
 
 duty of the assignee to give notice to the mortgagor to protect 
 
 himself from ....... 248 
 
 subrogation to securities as given upon, by strangers or volun- 
 teers ........ 275 
 
 or where provided for by agreement . . . 275 
 
 title acquired by purchasers of notes upon the pledger's default 276 
 Pledgee's collection of Dividends. 
 
 collection by pledgee of stock, with transfer upon the books of 
 
 the company ....... 365 
 
 or where holding stocks indorsed, upon notice to the company 365 
 pledgee's right to sue for dividends, before transfer . . 366 
 
 and to sue the pledger, where after transfer by indorsement, he 
 
 collects ........ 266 
 
 collection of, as applied on the debt at maturity . 365, 366 
 
 collections of, by sub-pledgees of stock, with certificates in- 
 dorsed ........ 363 
 
 right of customers to, where brokers are carrying stocks for 
 
 his account ....... 366 
 
 right to, upon mere delivery of certificates, or special in- 
 terest only . . . . . . .366 
 
 PARTNERS. 
 
 general authority of to borrow money and give collateral se- 
 curity . . . . . . . 67,68 
 
 the pledges when creditor of the firm, . . 70, 71, 72 
 
 the use of (rust funds and securities by partners . 72, 73 
 
 the pledge of. the name and credit of the firm, for his own 
 
 debts, by a partner, without consent . . 73, 74 
 
 subsequent ratification of such pledge . . .74, 75 
 
 the pledge of the name and credit of firm as surety, acceptor, or 
 
 guarantor . . . . . . 75, 76 
 
 or of accommodation paper, indorsed by partner for his own debt 53 
 recovery of pledgee, where received without notice, . 77, 78 
 
 rule as to discharge of partnership where a bond of one part- 
 ner is received on a contract debt, and where new securi- 
 ties of like character . . . . . .80 
 
 action for conversion of collateral securities by partners . 81 
 
 PLEDGEE'S TITLE, AS AGAINST CARRIER. 
 
 his title to a bill of lading, issued without delivery of goods 515, 517 
 such bill, as validated by subsequent delivery . . . 517 
 
 as against the pledgee, the shipowner or inland carrier not 
 
 within the rules of estoppel as to agency . . 516, 520 
 
 exceptional cases, founded on the rules of equitable estoppel as 
 applied to agents, as enforced in favor of innocent pledgees 
 for value . . . 520, 522, 543
 
 632 INDEX. 
 
 PLEDGEE'S TITLE, AS AGAINST CARRIER Continued. PAGH 
 title of the pledgee, under fraud of the shipper, or non-delivery 
 of goods or forgery in the original transaction, as against 
 the carrier . . . . . . . 521 
 
 PLEDGEE, A PURCHASER FOR VALUE. 
 
 of negotiable paper, although misappropriated . . 94 
 
 and in like cases of the pledge of negotiable notes and mort- 
 gages ....... 228 
 
 the title of the pledgee for value, without notice, as a purchaser 
 
 for value, without notice .... 406, 407 
 
 pledgee's purchase of collateral securities, at sales under the con- 
 tract of pledge . . . . . 161, 442 
 
 his purchase, where under execution sale - . 
 
 or where made under permission of the court decreeing the sale 
 rights of the purchaser for value, at the pledgee's sale of collat- 
 eral bills and notes . . , 160, 161 
 pledgee receiving certificates, indorsed in blank, upon a valua- 
 ble consideration .....*-. 350 
 
 pledgee of warehouse receipts as a purchaser for value . . 555 
 PLEDGOR. 
 
 Negotiable Collateral Securities. 
 
 pledger's transfer or re-pledge of his residuary interest 
 
 in - 163,164,229,251 
 
 agreements for preferences to a second pledgee . 230 
 
 or a further specific pledge, where the pledgee retains posses- 
 sion, after payment . . 
 
 pledger's enforcement and collection of, upon indemnity to the 
 ^ pledgee f . . . . . .116 
 
 his claim to any surplus arising from the sale or other realization 
 
 of 164, 165 
 
 and to an action, where the sale of assignment is a tort 107, 152, 164 
 and to the proceeds where, after payment of judgment, the 
 
 pledgee sells the securities .... 167 
 pledger's claim to, upon payment or tender of the principal debt 165 
 or upon a mutual rescission of the contract . . . 165 
 notice of default and non-payment of collateral notes to pledg- 
 er 118, 120 
 
 tender of the debt by, as affecting his right to return of . 165 
 
 pledger's payment or tender before suit for a tortious sale 165, 167 
 pledger's remedy for conversion . . . 166, 167, 598, 560 
 
 his recovery upon such suit .... 167, 168, 598 
 pledger of choses in action, when entitled to return of collateral 604 
 (See COLLATERAL BILLS, DISCHARGE, EQUITY JUR.) 
 POSSESSION. 
 
 the possession of collateral securities by the pledgee . .11 
 
 rule aa to possession of negotiable bills and notes . . 13
 
 INDEX. 633 
 
 POSSESSION Continued. PAGE 
 
 re-delivery for collection to pledger . . . .11 
 
 the pledgee's property in securities, when not defeated . . 97 
 
 payment by pledgee of the sub-pledgee, before maturity and re- 
 delivery, as re-sustaining .... 114 
 
 pledgee's liability where securities are placed by pledger in 
 
 the hands of a third party . 139 
 
 the pledgee's title to stock where transferable only upon surren- 
 der of the certificate, as against a by-law permitting assign- 
 ment by separate instrument ..... 360 
 
 PURCHASER. 
 
 the title of pledgee of collateral stock who sells to himself or to 
 
 one acting in his interest ..... 442 
 
 pledger's remedy upon such sale ..... 442 
 
 pledgee's purchase in sales on stock exchanges in transactions, 
 
 between brokers ..... 443 
 
 title of the bona fide purchaser at pledgee's sale . . 443 
 
 privity of contract as between pledger and purchaser . 443 
 
 or where pledgee of stock has equitable title only . . 444 
 
 RECOVERY, PLEDGEE'S. 
 Negotiable Collateral Securities. 
 
 pledgee's recovery upon principal notes, upon default . 136, 137 
 and on notes secured by mortgage .... 197 
 
 and where payments have been made before indorsement, but 
 
 not credited ...... 191 
 
 and both note and mortgage are founded on an illegal considera- 
 tion . ..... 226 
 
 recovery of the bona fide pledgee of accommodation paper, 
 
 without notice ... ... 150 
 
 or where proceeds of accommodation paper of partnership are 
 
 misappropriated ..... 79 
 
 or blank acceptances or accommodation paper are received in 
 
 pledge ........ 89 
 
 or upon commercial paper over-due . . . 126 
 
 and where subject to proof of payments made to pledger before 
 transfer, and to equities arising from misappropriation by 
 
 pledger .127 
 
 or such collateral paper is fraudulently pledged . . 94, 95 
 
 or the enforcement is sought by a sub-pledgee . . . 109 
 
 or suit upon such paper is against the parties liable . . 120, 121 
 
 proof of the pledgee in insolvency . . / . 163, 164 
 
 where holding several securities the pledgee may proceed upon 
 
 all, at once ....... 144 
 
 recovery upon a bond from principal and surety . . 286 
 
 pledgee's collection of negotiable bonds . . 122, 146, 160, 159
 
 034 INDEX. 
 
 RECOVERY, PLEDGEE'S Continued. 
 
 Negotiable Collateral Securities. PAGE 
 
 and right to enforce the mortgage security given to secure their 
 
 payment ...... 159, 160 
 
 recovery of pledgee, where chargeable with notice of misap- 
 propriation of accommodation paper . . 55, 123 
 or as against the accommodating party . . . 56, 123 
 and in cases of misappropriation and fraud for antecedent debt, 
 
 without further consideration .... 52 
 
 and where past due paper is pledged by one not its owner, in 
 
 fraud 127 
 
 or bonds and coupons are pledged, and the pledgor not liable 
 
 over for any surplus . . . . .61, 105 
 
 and as against a corporation using its own bonds as collateral 
 
 security ....... 123 
 
 recovery of pledgee, receiving negotiable paper unindorsed, or 
 
 with knowledge of a subsequent indorsement . . 192, 226 
 
 or taking bills of exchange unindorsed . . . . 123 
 
 or in cases of misappropriation of negotiable paper by bankers 97, 98 
 or where the commercial paper shows the amount of terms for 
 
 which it is held as collateral ..... 
 or where the loan upon which the collateral notes are given, is 
 
 illegal 56, 57 
 
 recovery of holders of notes from sureties and makers, where 
 
 payments have been made ..... 286 
 Non-negotiable Choses in Action. 
 
 recovery of pledgee, as governed by the debt for which the 
 
 chose in action is held as security . . . 602, 603 
 
 the rule, as applied to scrip certificates, certificates of deposits, 
 
 dock warrants, and unpaid calls on shares . . . 603 
 
 RELEASES OF MORTGAGES. 
 
 releases of, after negotiation of notes, as against innocent persons 
 
 advancing money . . . . . 195. 215 
 
 or where releases are made by agents, with apparent authority 195 
 or with notice of mortgagor ..... 193 
 
 the indorsee's title to enforce the mortgage security, as against 
 
 such releases . . . . . 193, 197 
 
 indorsee's suit on principal note, still retaining the mortgage 
 
 security ..'.... 197 
 releases by mortgagee, as against pledgees of bonds ami mort- 
 gages 249, 253, 254 
 
 the proof admitted to show fraud, accident or mistake . 250 
 REPLEVIN. 
 
 action of, to recover negotiable collateral securities . 96, 97 
 
 the pledgee's right to, where holding a bill of lading, as against 
 
 any one attaching the goods . . . . 543
 
 INDEX. 635 
 
 SALE OF COLLATERAL SECURITIES. 
 
 Negotiable Collateral Securities, PAGE 
 
 pledgee's right of sale of . . . . .151 
 
 where such collateral paper matures later than the principal 
 
 debt 152 
 
 or the pledge is of long-time paper, or negotiable bonds 152, 155 
 sale of, when made under contract .... 152 
 
 essentials of a valid sale ..... 153 
 
 pledgee's right of private sale, under contract . . . 154 
 
 and to sell long time bonds, without contract . . 155 
 
 or bonds, where made payable upon condition . . . 156 
 
 requirements of a valid sale of bonds . . . 157 
 
 the notice of sale, the subject of agreement . . . 158 
 
 notice to be given by sub-pledgees .... 159 
 
 form of notice of public sale of collateral securities, whether 
 with power of sale or without ..... 153 
 
 Sales under Contracts. 
 
 sale of long-time paper under contract .... 158 
 
 notice to be given to pledger, under powers of sale . . 234 
 
 pledgee's failure to sell collateral bonds under power . . 152 
 
 power to " negotiate " under contract . . . 152 
 
 power of sale as affecting the right to sue and collect . 121, 153 
 attachment of the pledger's residuary interest, under power of 
 
 sale ........ 154 
 
 power of sale as given in mortgage securities . . 201 
 
 exercise of such powers, when closely scrutinized . . 842 
 
 sales by pledgee of notes and mortgages to the maker . 234 
 Quasi- Negotiable Collateral Securities. 
 
 pledgee's sale of stocks, after demand and notice . . 437 
 
 rights of the purchaser at such sale .... 437 
 
 and of sub pledgees of stocks indorsed . . . 437, 438 
 
 requirements of valid notice and sale . . . 441, 442 
 
 sale by pledgee, where stocks are held as collateral for promis- 
 sory notes ....... 439 
 
 contracts of pledge of, giving right of sale upon default . 439 
 private sales of stocks, under contract, below the market price, 
 
 and to avoid liability ...... 438 
 
 remedies of the pledgee by foreclosure, . . . 440 
 
 sale of stocks, upon insolvency of the pledger . . 440 
 
 sale of stocks by stockbrokers, under like conditions t 440, 441 
 sale by assignees in insolvency ..... 440 
 
 Non-Negotiable Choses in Action. 
 
 pledgee's sale of, after demand, and notice of sale . 597, 598 
 
 effect of delay in enforcing a power of sale . . . 598 
 
 aid of equity to decree a, when refused . . . . 598 
 
 (See NOTICE, PLEDGOR, PURCHASER, STOCK.)
 
 636 INDEX. 
 
 " SHORT " COLLATERAL PAPER. PAGE 
 
 implications arising from its use as collateral . . .14 
 
 pledgee's right to collect and enforce the same . . 124 
 
 his receipt of the money, and its application to the principal 
 
 debt . . . . . . . .124 
 
 STATUTE OP LIMITATIONS. 
 
 retention of collateral securities by pledgee, although debt 
 
 barred . ....... 133 
 
 rule under the Louisiana code .... 133 
 
 effect of collection of dividends upon collateral notes . . 134 
 
 recovery on mortgage securities, although notes barred . 200 
 powers of sale under mortgages, as affected by . . 201 
 
 note barred, as affecting the mortgage remedy . . 201, 202 
 
 where the bar of the statute removed, the mortgage security en- 
 forced, or judgment entered on note . . . 202 
 sale of pledged securities, as fixing the running of statute 236 
 lien of a company on its stock, as affected by the running of . 383 
 Action of contribution between co-securities, as affected by 304 
 STOCKS AS COLLATERAL. 
 The Certificate of Stock. 
 
 description of ....... 343 
 
 and as used as collateral security . . . 343, 344 
 
 its character as " quasi-negotiable," and " approximating to ne- 
 gotiable paper "..... 844, 366 
 
 negotiability of " cost book " mining shares . . . 345 
 
 as subject to a lis pendens ..... 352 
 
 use of, indorsed in blank, as collateral security . 346, 347, 351 
 
 the rule where charter provisions require powers of attorney to 
 
 be under seal ....... 847 
 
 transfer in England, under indorsements in blank . . 348 
 
 sub-pledgee of stocks, holding under blank indorsement . 849 
 
 title of innocent holders for value of certificates . . 416 
 
 their rights upon transfer, although made without authority 416 
 TJte Transfer of Stock. 
 
 pledgee's right to transfer, holding possession of certificate 357 
 
 presumptions arising as against company, from applications for 
 
 transfer without production of certificates . . 357 
 
 limitation of a company's right to control transfer . 357, 358 
 
 as controlled by the terms of the certificate . . . 859 
 
 duty of the holder for value of certificate, without notice 359 
 
 his title, as affected by a by-law providing for assignment by 
 
 separate instrument . . . . . . 360 
 
 estoppel of companies, by representations on certificates . 360 
 
 pledgee's right to transfer collateral stocks to his own name 430 
 delivery of the certificate, with power to transfer, as between 
 
 the parties ....... 353
 
 INDEX. 637 
 
 STOCK AS COLLATERAL Continued. 
 
 The Transfer of Stock. PAGE 
 
 and in cases where an equitable title only passes by delivery of 
 
 the certificate ....... 353 
 
 pledgee's right to transfer of . . . . 354 
 
 his power under the pledge to transfer irrevocable, conditioned 
 
 only by payment of the debt .... 355 
 
 remedies of the pledgee, upon refusal of company to transfer 355 
 mode of transfer of shares in England . . . 357, 358 
 
 as between the parties of the contract of pledge . . 358 
 
 title acquired by the pledgee, where receiving only an equitable 
 
 interest ....... 362 
 
 pledgee's title, under statutes or charter provisions requiring 
 
 transfer on the books of the company . . . 366 
 
 character of the record required .... 356, 357 
 
 discretion of directors as to refusing a transfer . . . 358 
 
 liabilities of a company, upon a fraudulent delay and refusal 
 
 to transfer ....... 886 
 
 pledgee's rights, as against purchasers at execution sales . 388 
 pledgee's rights, as supported against cestuis que trust . 894 
 
 the latter's claim, as against the corporation . . 394, 395 
 
 effect of insolvency, where only equitable title is passed to the 
 
 pledgee ....... 364 
 
 , or indorsements or transfers are made, after insolvency . 364 
 the pledgee's rights, as against assignees of insolvent pledgers, 
 
 where a transfer has been obtained on the books of the 
 
 company, or the certificate of stock is held indorsed . 363 
 receiver's right of an insolvent corporation, pledgor of 
 
 stocks ....... 363, 364 
 
 pledgee of a surplus of collateral stocks, asagainst an assignee 
 
 in bankruptcy . . . . . . 364 
 
 Pledgee as a Stockholder. 
 
 pledgee, upon transfer and issue of new certificates, a . 368, 369 
 or where the transfer is obtained by a corporation holding 
 
 shares of stock as collateral .... 400 
 
 transfer, as affected by secret equities between the pledgor and 
 
 pledgee ... . . . . .368,369 
 
 and by the antecedent liens or claims of the corporation . 369 
 
 pledgee, a stockholder, by his acts in relation to the stock, vot- 
 ing or receiving dividends, and other acts . 370, 372, 400 
 pledgee's right to vote as a . . . . . 371 
 
 rights of the pledgee as controlled by statutory provisions 372-374 
 or where stock is indorsed "as collateral security" . 373, 375 
 
 or held "in trust" or "held in escrow" . . . 373, 374 
 
 proof allowed to establish an absolute transfer to be as and for 
 
 collateral security ..... 372, 373, 376
 
 6S8 INDEX. 
 
 STOCK AS COLLATERAL Continued. 
 
 Pledgee as a Stockholder. PAGE 
 
 liability of pledgee as a stockholder, retaining the stocks after 
 payment of principal debt, where such company becomes 
 insolvent ....... 375 
 
 the use of stocks as collateral security, as shown by restrictive 
 
 indorsement ....... 375 
 
 pledgee's liabilities, until re-transfer . . . 874, 375 
 
 Liens of Company, as against Pledgees of Stocks. 
 
 pledgees, with title, when subject to statutory or charter liens 379 
 pledgee's rights, affected by secret liens of a company . 379, 380 
 or by secret by-laws, not shown upon the certificates of stock 381 
 presumptions in favor of innocent pledgees, not chargeable with 
 notice, as against the discretionary right of companies to 
 refuse transfer ...... 380 
 
 rights of pledgees of stock, issued by National Banks, as to stat- 
 utory or secret liens ..... 381 
 
 pledgee, when subject to statutory enactments or charter provi- 
 sions . . . . . . 381, 382 
 
 presumptions arising from the non-appearance of such liens 
 
 upon the face of certificates .... 383 
 
 extent of the lien, under statutes or charters . . 382, 383 
 
 limitations of such liens, as against the pledgee , 383, 385 
 
 limitation as to debts of the pledgor to the company, after notice 
 
 of transfer ....... 383 
 
 the lien of, as enforceable only by judgment and execution 384, 385 
 pledgee's rights, under waiver and laches . . . 384 
 
 his claims, where stocks have been sold by the company under 
 
 authority executed in an invalid manner . . 384, 385 
 
 Liens of Creditors, as against Pledgees of Stocks. 
 
 pledgee of slocks indorsed, a holder for value as against cred- 
 itors ....... 385, 386, 388 
 
 claims of lenders of money on stock certificates, as against cred- 
 itors ........ 386 
 
 and in cases where pledgees have given notice to the company 
 
 of the indorsement and delivery of certificates . . 387 
 
 creditor levying upon shares held by a bare trustee, as against 
 
 bona fide pledgee ...... 387 
 
 pledgee's rights, upon indorsement after pledger's death, as 
 
 against creditors ...... 387 
 
 or in cases where creditors are chargeable with notice of the 
 
 pledgee's rights ...... 388 
 
 or purchasers, at execution sales, also chargeable with such notice 388 
 creditor's claims, as against an equitable pledge of stock . 388 
 claims of the pledgee, as against creditors, where he has done all 
 
 he possibly could ...... 389
 
 INDEX. 639 
 
 STOCK AS COLLATERAL. Continued. 
 
 Liens of Creditors, as against Pledgees of Stock. PAGE 
 
 pledgee under statutory provisions requiring transfer, and also 
 
 giving liens on stocks to creditors . . 389, 890 
 
 bona fide purchaser's title, buying at a sale under execution . 390 
 pledgee's duty, under such statutory or charter provisions 390 
 
 (See FICTITIOUS SECURITIES, FORGERY, INDORSEMENTS.) 
 STOCKBROKERS. 
 
 stockbroker's general lien on his customer's deposits of collateral 84 
 and where collateral securities are deposited for a special debt 84 
 pledgee's rights, under misappropriation of negotiable securities 
 
 by . . 95,96 
 
 claims of, where chargeable with notice that securities belonging 
 to an estate, are pledged by a fraudulent person for his own 
 
 debt 395, 396 
 
 his rights, upon paying proceeds of such securities to the person 
 
 from whom received ...... 396 
 
 stockbroker carrying stocks, upon margins, as a pledgee . 404 
 his relations as pledgee, sustained by the usual contract between 
 
 brokers and customers ..... 405 
 
 Massachusetts rule as to the relations of stockbrokers and cus- 
 tomers ....... 406 
 
 stockbroker's right of pledging certificates, held by apparent 
 
 owner, as against the real owner . . . 420 
 
 his claims, where resort to forgery and felony were required 
 
 to perpetrate the fraud, as against the real owner . 420 
 
 the rule where lenders of money to stockbrokers upon pledges 
 of certificates of stock for specific loans, claim to apply the 
 the surplus proceeds in payment of a general balance . 454, 455 
 stockbroker's loan or pledge of stocks, while carrying them for 
 
 his customer ....... 435 
 
 stockbroker's liability, speculating in his customer's stocks 435, 449 
 usage of broker, as governed by contract. . . , 436 
 
 rule as to the non-identity of stock extended to gold certificates 
 
 and warehouse receipts . .... 435, 436 
 
 stockbroker's right to sell stock, upon default of margins . 438 
 where collateral stocks are sold out on the Exchange, between 
 
 brokers, the pledgee may become purchaser . . 443 
 
 usage of brokers to sell stocks, upon Exchanges, upon failure 
 
 of margins, without notice ..... 444 
 
 question of reasonable notice as to putting up of further mar- 
 gins .444,445 
 
 broker's liability, retaining customer's stock after debt is due 446 
 broker's sale, without notice, under contract . . 445, 443 
 
 (See OPTION DEALS, BROKER'S SUIT, USAGES.)
 
 CIO INDEX. 
 
 STATUTORY OFFENSES. PACK 
 
 pledgee's title, where negotiable paper, used as collateral secur- 
 ity, was executed under circumstances so as to conic within 
 a statutory offense ...... 92 
 
 rule, the principal debt being void, as to collateral securities 
 
 given for its payment ..... 395 
 
 pledgee's claims, upon a bona flde loan, not being chargeable 
 
 with notice of invalidity in the contract of pledge . 401 
 STOPPAGE IN TRANSITU. 
 
 character of the right of the unpaid vendor of . . 543 
 
 the effect of the order of, upon the contract of purchase . 544 
 
 right, as affected by an indorsement and delivery qf the bill of 
 
 lading, to a bona fide pledgee for value, without notice . 545 
 same rule where the bill of lading is in the name of the pledgee, 
 
 or of his agents . ..... 545 
 
 pledgee, a holder for value, as against the unpaid vendor . 546 
 vendor's rights as to the surplus of the goods, or of the proceeds, 
 after payment of the advances of the bona fide pledgee for 
 value . . . . . , . . 545 
 
 SUB-PLEDGES OF COLLATERAL. 
 Negotiable Collateral Securities. 
 
 pledgee's right to transfer and sub-pledge his . . 108 
 
 sub-pledge of, for sums larger than the principal debt 108, 233 
 
 sub-pledge of, for sums not larger than original advance 112, 113, 233 
 rules of equitable estoppel, as applied in favor of sub-pledgees 
 
 of 110,233 
 
 proof allowed sub pledgee where the sub-pledge is less than 
 original advance, the parties to the collateral paper being 
 bankrupt . . . . . . .233 
 
 sub-pledgee's recovery upon mortgage securities, holding legal 
 
 title to the negotiable notes . . . 232, 233 
 
 where sub-pledgee is subjected to the rule under which recov- 
 ery on the mortgage is restricted by equities . . 233 
 distinction between sub pledgees of negotiable and non-negotia- 
 ble collateral securities . . . . .82 
 
 sub-pledgee's discharge as to pledgor . . . 113, 114 
 
 Quasi-negotiable Collateral Securities. 
 
 pledgee's right to transfer and sub-pledge stock certificates 424 
 
 sub-pledge of stock certificates, indorsed in blank, for sums 
 
 larger than the original loan , 425 
 
 sub-pledgee's title, as based upon the legal title and apparent 
 ownership of the pledged stocks, when under blank in- 
 dorsement . . -. . . 425, 426 
 the rules of equitable estoppel, as applied in favor of bona fide 
 
 sub-pledgees of stocks ..... 426, 427 
 
 use of stock certificates, under such rules . . . 427, 428
 
 INDEX. 641 
 
 SUB-PLEDGES OF COLLATERAL Continued. 
 
 Quasi-Negotiable Collateral Securities. PAGE 
 
 sub-pledgees, receiving stock certificates, indorsed in blank, from 
 
 sub-pledgees, upon bona fide advances, within the rules 428 
 last sub-pledgee, upon a bona fide loan, without notice, a holder 
 
 for value, in the usual course of business . . 428 
 
 like rules applied in favor of sub-pledgees of mining stock, 
 
 although issued to the holder " as trustee " . . 430 
 
 sub-pledgee's title, under an authorized pledge of the stocks of 
 
 an estate, under estoppel ..... 3S9 
 
 title of sub-pledgees, receiving certificates of stocks from per- 
 sons claiming only as agent, agents or attorneys, as against 
 the real owner ....... 433 
 
 and where the pledger has a limited interest only in the stocks 434 
 sub-pledge, under statutory enactments, prohibiting transfers 
 
 and sub-pledges of stocks and other collateral securities 430 
 SURETY. 
 
 contract of a . . . . . . 259 
 
 contract, as shown by terms of the instrument, or by parol 
 
 evidence ....... 260 
 
 creditor's duty, with notice of ..... 260 
 
 the general liability of, and its limitations . . . 262 
 
 and on invalid loans, or forged or fraudulent paper, and on 
 
 penal bonds . . . . . 263, 264 
 
 obligation of the surety, upon the principal note . 283, 284 
 
 as affected by the acceptance by creditor, of securities from 
 
 principal ........ 314 
 
 or by money collected, before maturity of . . 315 
 
 a surety's rights under statutory provisions, as to notice to cred- 
 itor to bring suit ...... 284 
 
 character of the notice required under such statutes . . 285 
 
 liability of the creditor, neglecting to sue upon notice . 284 
 
 surety's liability upon, as controlled by the judgment against 
 
 the principal ...... 285 
 
 Subrogation to Collateral Securities. 
 
 creditor's liabilities, as to enforcement of collateral securities 268 
 conditions under which the creditor is required to resort to such 
 
 collateral securities .... 269, 270 
 
 right of subrogation, where its enforcement would work in- 
 justice ....... 272 
 
 right of the surety, upon payment, as to collateral securities 
 
 held by creditors 271, 273 
 
 right of a surety assignable ..... 272 
 
 assignee's right as against new advances, made after notice 273 
 
 securities to which the surety is subrogated . . . 273 
 
 special liens of the federal and state governments , . 274 
 
 41 

 
 642 INDEX. 
 
 SURETY Continued, 
 
 Subrogation to Collateral Securities. PAGE 
 
 right of the surety, where both principal and surety appear as 
 
 principals . . . , . . . 278 
 
 the payment of the debt, as an essential preliminary to subro- 
 gation ..... . 275 
 
 surety's relief as against legal process by application of secur- 
 ities held by creditors . . . . . . 275 
 
 surety's right of subrogation to judgment on note, with or 
 
 without assignment ..... 277, 278 
 
 surety's rights, in the absence of formal assignment . 277 
 
 subrogation to, upon paying judgment against himself as surety 293 
 surety's right to the original debt, where resort is had to collat- 
 eral securities ....... 277 
 
 right of, when defeated by laches or by estoppel . . 277 
 
 upon a bona fide sale of securities, the surety is liable on the 
 
 principal note for any deficiency . . , 270 
 
 Surety's Collection of Collateral Securities. 
 
 enforcement of securities before payment by surety 287, 288, 296 
 surety's liability as a valuable consideration for the transfer of 
 
 securities ....... 288 
 
 recovery of surety where the security is given upon the condi- 
 tion to pay the debt ., . . . 289,290 
 a surety seeking relief in equity may make the creditor and 
 
 principal parties . . . . . 288, 289 
 
 rule where a surety must pay before resorting to collateral 291 
 
 and where an equity of equal weight would suffer . . 291 
 
 pledgee's agreement with creditor to collect debt from collateral 
 
 securities , . .' . ^ . . . 270 
 
 Creditor's Subrogation to Surety's Collateral Securities. 
 
 character of the creditor's right to resort to such collateral 279, 281 
 limitations of the right ..... 280 
 
 character of the interest of the creditor acquired in such secur- 
 ity . . , , ' . . 280 
 surety's right to transfer such collateral to the creditor 281, 282 
 and to securities held by an agent upon a loan obtained for his 
 
 principal ....... 281 
 
 contribution between accessory sureties . . . 303, 306 
 
 Insolvent Principal. 
 
 surety's' right of set-off as against an insolvent principal 292 
 
 Surety's Action at law against Principal. 
 
 surety recovery at law, as dependent upon payment . 294, 295 
 surety's recovery, although entitled to execution against the 
 
 principal ....... 295 
 
 surety's rights under payments made, under a mistaken belief 
 
 of his liability . 295
 
 INDEX. 643 
 
 SURETY Continued. 
 
 Surety's Action at law against Principal. PAGE 
 
 and where the principal has assigned his whole property for 
 
 the benefit of sureties ..... 295, 296 
 
 discharge of sureties, by extension of time upon indorsement 
 
 and delivery of collateral securities .... 313 
 
 or if money is borrowed on new note, the old note being re- 
 tained by surety as collateral ..... 315, 316 
 
 or new note of principal is accepted upon time . . 316 
 
 or if surety, owing to representations of the creditor, has re- 
 leased securities held by him .... 317 
 
 discharge of surety by surrender or loss of collateral secur- 
 ities ....... 308, 309 
 
 or where the creditor releases, surrenders, impairs, destroys, or 
 
 fraudulently transfers such collateral security . . 309 
 
 defense thus arising, available in law and equity . . 310 
 
 limitations of the rule ...... 311, 313 
 
 surety's right of set-off, as against insolvent principal . . 292 
 
 his relief in equity, where holding securities . . . 293 
 
 rights of holders of notes, as against securities of indorsers . 330 
 rights of holders of notes to subrogation, as against creditors 330, 331 
 mere inaction or passive delay of creditors to enforce collateral 
 
 securities, as affecting sureties .... 312 
 
 or to sell negotiable bonds held as collateral . . . 314 
 
 or to appropriate funds of debtor upon deposit . . 314 
 
 or the acceptance of collateral security .... 314 
 
 surety's claim, where collateral paper matures earlier than the 
 
 principal note ....... 315 
 
 surety as discharged by changes in the instrument . . 318 
 
 or by a valid extension of time . . . 320-322, 323 
 
 creditor's reservation of rights to proceed against surety, while 
 
 releasing principal , 324, 325 
 
 SURPLUS. 
 
 pledge of a, from collateral securities, where made with notice 
 
 to pledgee . . . . . . 10, 163 
 
 or, by a pledgee, with notice to the sub-pledgee . ; . 596 
 
 or by special indorsement . . . . . . 163 
 
 and to extend the securities to other debts of the pledger . 596 
 
 cases, under misappropriation, as to the responsibility of pledgee 
 
 to pledger for ....... 105 
 
 right of pledger, upon realization of collateral securities, 
 
 to 122, 144, 160 
 
 pledger's action, for ...... 164, 165 
 
 pledgee, as a trustee for the pledgor, of . . . . 236 
 
 effect of acceptance of, in cases of tortious sales . . 167 
 
 rule, as applied in favor of makers of paper fraudulently pledged 
 
 by note-brokers, the pledgee holding a . . 124, 125, 596
 
 644 INDEX. 
 
 TENDER BY PLEDGOR. PAQB 
 
 by assignee of the interest of part only of the members of a 
 
 partnership, to a pledgee, when insufficient . . 81 
 
 rights of a pledger of collateral stocks pledged for a specific 
 
 debt, upon tender, as against a claim of further lien . 459 
 
 rule as to tender, where a separation of the securities from the 
 
 the principal note, has been made .... 459 
 equitable relief to pledgqr by ordering return of securities, as 
 
 controlled by failure of payment or tender of debt . 403 
 rule at law, governing the rights of the pledgers, seeking to re- 
 cover collateral securities, without payment or tender of the 
 
 debt - 167, 108, 458 
 
 pledger's tender or payment before suit for a tortious 
 
 sale 165-167, 598 
 
 pledger's mere offer to pay, without a tender . . 165 
 
 the tender or payment to the holder of the collateral after ma- 
 turity of principal note .... 599, 600 
 
 TROVER. 
 
 action of, where pledger has been entrusted temporarily^vith 
 
 negotiable collateral ..... 12 
 
 or where such possession has been given for collection . . 235 
 
 and in cases of unauthorized sales of collateral stocks . 457 
 or where a company or national bank refuses to transfer 
 shares of stock held as collateral, upon demand and pre- 
 sentation of the certificates . . . 355, 381 
 and by the pledgee of the first indorsed of a set of bills of lading, 
 
 as against persons unlawfully dealing with the goods . 531 
 action of, upon transfer of stock by pledgees, in order to pro- 
 tect their collateral securities from liens of the company or 
 creditors .... 377, 378, 431, 458, 459 
 
 the rule, as applied to sub-pledgees .... 378 
 
 or to avoid injury to the financial credit of the pledgee . 378 
 or by voting at meetings ...... 371 
 
 or, where the pledgee redeems the collateral paper of the 
 pledger from the sub-pledgee, before maturity of the prin- 
 cipal debt . . . . '' 114 
 
 TRUSTEES. 
 
 right of innocent pledgees, for value, of bonds and mortgages 
 
 fraudulently assigned by trustees . . . . 243 
 
 and of notes and mortgages showing a " trust " . . 238 
 
 when notice is charged, by the use of "trustee" in the mort- 
 gage security . , . . . 228, 229 
 use of " trustee" in certificates of stock as against pledgees for 
 
 value . . . ... . . 894 
 
 right of innocent pledgees of negotiable securities from . 98, 99
 
 INDEX. 645 
 
 TRUSTEES Continued. PAGE 
 
 the title of the innocent pledgee, upon transfer on the books of 
 
 company ....... 394 
 
 or where a loan upon stocks is void under statutory provisions, 
 
 when made by a trustee for his own purposes - . 395 
 
 use of the words " as trustee" in mining stocks . . . 396 
 
 title acquired to such stocks by the innocent pledgee for value 397 
 pledgee of stocks, holding them indorsed so as to show their use 
 
 as collateral security ..... 362, 363 
 
 use of the words "in trust" and "held in escrow" upon certifi- 
 cates ........ 373 
 
 claims of pledgees receiving certificates of stock from trustees 
 
 as collateral security for their own debts . . 392 
 
 the rights of the cestuis que trust, as against the pledgee . 392 
 
 presumptions arising from entrusting trustees with muniments 
 
 of title . . . . . . 393 
 
 rights of stockbrokers, when chargeable with notice of trust 396 
 stocks held by a bare trustee, when not subject to creditor's lien 387 
 liability of partners, upon the use of trust funds . 72, 73 
 
 pledgee, as a trustee for the pledgor of the collateral property 117 
 UNCOLLECTIBLE PAPER. 
 
 pledgee's duty as to, upon failure to collect . . . 125 
 
 and where part interest in note is pledged, proving uncollectible 147 
 USAGES ON STOCK AND OTHER EXCHANGES. 
 
 requirements of a valid usage ..... 484 
 
 usage of stockholders selling the collateral stocks of their cus- 
 tomers, without notice ..... 485 
 
 and of a like usage amoug brokers and commission merchants 
 
 advancing money on shipments .... 486 
 
 the usage as to notice of sale of collateral stocks in New York 486 
 sale of stocks by brokers, under contract .... 487 
 
 usage as to notice of sale and closing of deals on boards of trade 488 
 stockbroker's usage, dealing with his customer's collateral stocks 481) 
 broker's usage not to retain the identical certificates of stock or 
 
 warehouse receipts ..... 490 
 
 usage as to collateral funds, charges, and interest, as against his 
 
 customer ...... 492, 493 
 
 stockbroker's usage as to " name day " . . 494,495 
 
 USURY. 
 
 as applied to loans of money .... 171, 172 
 
 effect upon negotiable collateral securities, where the loan itself 
 
 is void ... . 173,174,177 
 
 and upon quasi -negotiable collateral, as certificates of stock 431 
 
 claims of sub-pledgees, upon loans void for usury . 174, 431 
 
 indorsement of negotiable paper as collateral securitv for loans 
 
 void for ....... 177
 
 646 INDEX. 
 
 USURY Continued. PAGE 
 
 substitution of new notes for those void as usurious . .178 
 
 rule as to enforcement of collateral securities, where a loan on 
 
 is voidable only . . . . . 173, 177 
 
 rule as to usury and the collection of collateral securities eu- 
 
 forced as to National Banks . . . 17G 
 
 rights of parties under substitution of valid contracts . 178, 179 
 
 or of a revival of a valid debt, where the new notes are usurious 179 
 rules of estoppel in pais, as applied to a borrower of money 
 upon a bond and mortgage, with a certificate of ''no de- 
 fense, equities, or set-offs" . . . 175,177,178 
 usurious loans, as the subject of defenses by third parties 177, 178 
 limitation of recovery of the pledgee of collateral accommoda- 
 tion, paper, when tainted with . . . .56 
 (See INVALID LOANS.) 
 WAREHOUSE RECEIPTS. 
 
 transfer of warehouse receipts, by indorsement aud delivery, 
 
 where negotiable ... . . SH.! 
 
 rule where such transfer conveys the title of the imlo-ser only Soli 
 warehouse receipt, transferable with or without indorsement 550. 5.17 
 pledge of, without notice to the warehouseman . . 556. 558 
 
 equitable estoppel, as applied in favor of pledgees of, against 
 
 owners of property or warehouse receipts . . 559, SCO 
 
 and as against warehousemen, by the terms of the receipts is- 
 sued, when in the hands of pledgees for value . 500, 501 
 pledge of, where notice of fraud or felony is chargeable as 
 
 against the pledgee ..... 561, 503 
 pledges of, upon delivery of receipt, and notice of the transfer 
 k to the warehouseman ....'.. 563 
 requirement of possession, actual or symbolical to validate 
 
 pledge 564, 56o 
 
 use of receipts issued on their own property by warehousemen, 
 
 as collateral security ...... 505 
 
 use of such receipts, as controlled by statutory provisions 566, 567
 
 LAW LI 
 
 UNIVEKSHT o* CAUFOBNU
 
 000 689 624 5