debt, when chargeable with notice of the misappropriation.' Nor can a pledgee acquire any title as against the real owner in a case where a trustee borrows money for his own use, assigning an order or decree in favor of the trust estate as collateral security for its repayment, the pledgee being chargeable 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 chargeable with the duty of inquiring as to the extent of the authority given, upon failure so to do, can acquire no valid claim against the real owner of the judgment. 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.1 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."

1 Heritage v. Hedges, 72 Ind. 247. Brewster v. Galloway, 4 Lea, 558. Wickham v. Morehouse, 16 Fed. Rep. 324.

Stone v. Brown, 54 Tex. 330. Tallman v. Hoey, 89 N. Y. 537; Belden v. Meeker, 47 Ib. 311.

CHAPTER XLV.

ESTOPPEL IN PAIS, IN FAVOR OF PLEDGEES.

§432. Estoppel in pais, as applied to non-negotiable collateral. 433. Essential elements of estoppel under such collateral. 434. Recognized propositions of an estoppel in 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-NEGOTIABLE COLLATERAL.-No distinction can be drawn between the equitable title of a pledgee for value of a non-negotiable 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 delivery. 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 representations made on its face and by indorsement, are true.* Equities existing between the original parties to the contract

1 Moore v. Metropolitan Nat. Bank, 55 N. Y. 41.

Armour v. Michigan Central R. R. Co. 65 N. Y. 111, 123; Moore v.

Metropolitan Nat. Bank, 55 Ib. 41; Goodwin v. Robarts, L. R. 10 Ex. 76, 337; 1 App. 476, 489.

yield to the rules of estoppel in pais, in cases where it appears from the terms of the collateral security or by indorsement that the intention of the person executing the same must have been that such chose in action should be assignable free from and unaffected by all equities, defenses, or set-offs of such maker or obligor.' The equities and defenses 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.'

The rule that where a person gives a non-negotiable security 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 interest, and indemnify the corporation. Such contract constituted 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. 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,

L. R. 2 Ch. 391, 397.

Trustees of Union College v. Wheeler, 61 N. Y. 114.

Dickson v. Swansea R. R. Co. L. R. 6 Q. B. 44.

4 In re Natal Investment Co. L. R. 3 Ch. 355.

§ 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 matter; 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.' 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.' To constitute an estoppel, both an opportunity and an apparent duty to speak must concur with knowledge that reliance is being placed upon the written representations of the person 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. 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 deceived 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 enforcement. But no estoppel arises where the representation consists in an incorrect statement of law, nor upon false

1 Griffin v. Dwight, 15 Rep. 551; Patterson v. Hitchcock, 3 Col. 536.

2 Traun Kiefer, 31 Ala. 136; Martin . Zellerbach, 38 Cal. 318; Taylor v. Ely, 25 Conn. 250; Davidson v. Young, 38 Ill. 146; People v. Brown, 67 Il. 437; Powell v. Rogers, 105 Ib. 318; Dixfield v. Newton, 41 Me. 221; Grimes v. Kimball, 8 Allen,

153; Odlin v. Gove, 41 N. H. 465; Wegh . Boylan, 85 N. Y. 394; Hill v. Epley, 31 Pa. St. 331; Eldred . Hazlett, 33 Ib. 307; White v. Langdon, 30 Vt. 599.

8 Viele v. Judson, 82 N. Y. 33. 4 Wegh. Boylan, 85 N. Y. 394; Watson v. McLaren, 19 Wend. 563.

And the

statements made to conceal an illegal contract.' document upon which advances are made, must be an indicia 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.'

§ 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 contained 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 endeavors 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 exist." 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 existence of such a state of facts, to the damage of him who so believes and acts, the first is estopped from denying the ex

'Rashdall v. Ford, L. R. 2 Eq. 750. In Horton v. Westminster Comm. 7 Ex. 780, 791, Martin. B. says: "The meaning of estoppel is this-that the parties agree, for the purpose of a particular transaction, to state certain facts as true, and that, so far as regards that transaction, there shall be no question about them. But the whole matter is opened where the

statement is made for the purpose of concealing an illegal contract; for persons cannot be allowed to escape from the law by making a false statement."

Imperial Bank v. London Dock Co. L. R. 5 Ch. D. 195; Gunn v. Bolckow, L. R. 10 Ch. 499.

Carr v. London Ry. Co. L. R. 10 C. P. 307, 316.