A pledgee are an appropriation of some distinctive fund. loaning money in good faith to a person holding such certificates 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 nonnegotiable securities under blank indorsement. No suspicion 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 indorsement 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 appears. 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 payment of money, and no element of estoppel arises to control the relations of the parties, pledgees, or parties claiming 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." The pledgor in the case of Moore v. Metroplitan National Bank,' received the 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 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 negligence or mistaken confidence, he caused or allowed to appear to be vested in the party making the conveyance.' Here the complainants could have expressed in their indorsement the purpose of the deposit of the certificate with Blumenburgh, 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, appeared 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 complainants, we are inclined to think that his defense would have been sustainable. But as he has not shown that he 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, Blumenburgh." 155 N. Y. 41. Moore was the owner of a certificate of indebtedness of the State of New York for $10,000, which he was induced to deliver to one Miller with the indorsement 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 representations 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 Metropolitan 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 supported as a bona fide pledgee for value. The case is cited and approved in Driscoll v. West Bradley Co. 59 N. Y. 96, 101; Armour . Michigan Central R. R. Co. 65 Ib. 111, 123; Wegh v. Boylan, 85 Ib. 394, 401; and explained in Trustees v. Wheeler, 61 Ib. 114. non-negotiable collateral securities, Moore v. Metropolitan National Bank' 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 contrary 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 disposition. Another reason was, that were the rule otherwise, 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 property; 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 transfer 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 155 N. Y. 48. $55 N. Y. 48. 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 latter equally with the former, that a distinction can only be justified upon authority." $440. ESTOPPEL OF CORPORATIONS, AS AGAINST INNOCENT 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, "I wish to rest my judgment on the general doctrine 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 transfer 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):' "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.):* "I 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. Herne Bay Comm. L. R. 5 Q. B. 642, 655; In re Bahia & S. F. Ry. Co. L. R. 3 Q B. 583; Freeman v. Cooke, 2 Ex. 651. ? Webb v. Herne Bay Comm. supra, p. 651; Pickard v. Sears, 6 A. & E. 469. Webb v. Herne Bay Comm. supra, p. 653, 654. 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 pledgor's rights upon wrongful sale or sub-pledge. 445. Talty v. Freedman's Saving and Trust Company. 445. The pledgee's remedies, at law and in equity. 417. The pledgee's recovery on choses in action. 448. Payment and discharge of pledgor. $441. THE PLEDGEE'S APPLICATION OF NON-NEGOTIABLE 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 indorsement and delivery, as collateral security for a certain indebtedness. The pledgor having deceased, the pledgee sold the insurance policies, realizing more than enough to pay the particular debt, and then sought to apply the surplus 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.' Generally, clear evidence is required of an express agreement or Talbott v. Frere, L. R. 9 Ch. D. 568; overruling Spalding v. Thompson, 26 Beav. 367; In re Haselpot's Est. L.R. 13 Eq. 327; ex parte Bank, L. R. 14 Eq. 507, in which an executor's lien, under such circumstances, attached even to unsecured debts. |