signment is not absolutely necessary,' except in the case of corporate stocks, mentioned later in this section. Thus, a negotiable instrument may be pledged by a simple delivery, without any indorsement, even though it be payable "to order." And it has long been settled that if a nonnegotiable note is transferred by delivery, in good faith and for a valuable consideration, this is a valid pledge, which the courts of law will recognize and protect, even though the pledgee cannot maintain an action at law thereon. in his own name. And the same principle applies to other choses in action. An equitable interest in a judgment may be pledged by the delivery of the execution thereon to the pledgee.10 Where there is a pledge of a nonnegotiable chose in action, no notice to the debtor is necessary to the validity of the pledge.11

Applying the rules of the preceding paragraphs to some special cases, we find that a delivery of a savings bank book, with the intention that the deposit in the bank represented by the book should be held as collateral security for the payment of a debt,

Bank of Chadron v. Anderson, 6 Wyo. 518, 48 Pac. 197; Sharmer v. McIntosh, 43 Neb. 509, 61 N. W. 727; Crain v. Paine, 4 Cush. (Mass.) 483, 50 Am. Dec. 807; Dickey v. Pocomoke City Nat. Bank, 89 Md. 280, 43 Atl. 33; Bank of Woodland v. Duncan, 117 Cal. 412, 49 Pac. 414. But see American Exch. Bank of New York v. Federal Nat. Bank of Pittsburg, 226 Pa. 483, 75 Atl. 683, 27 L. R. A. (N. S.) 666, 134 Am. St. Rep. 1071, 18 Ann. Cas. 444, holding that there must be a written assignment to pledge a book account, though in the note to this case in 27 L. R. A. (N. S.) 666, many cases are cited holding oral assignments of book accounts valid.

• Bank of Chadron v. Anderson, 6 Wyo. 518, 48 Pac. 197; Van Riper v. Baldwin, 19 Hun (N. Y.) 344; Morris v. Preston, 93 Ill. 215; Tucker v. New Hampshire Sav. Bank in Concord, 58 N. H. 83, 42 Am. Rep. 580.

⚫ Jones v. Witter, 13 Mass. 304, 307; Grover v. Grover, 24 Pick. (Mass.) 261, 263, 35 Am. Dec. 319; Norton v. Piscataqua Fire & Marine Ins. Co., 111 Mass. 532, 535; Kingman v. Perkins, 105 Mass. 111; Dix v. Cobb, 4 Mass. 508; Williams v. Ingersoll, 89 N. Y. 508, 518; Stout v. Yaeger Mill. Co. (C. C.) 13 Fed. 802; McArthur v. Magee, 114 Cal. 126, 45 Pac. 1068; Hewins v. Baker, 161 Mass. 320, 37 N. E. 441; Grant's Adm'r v. Kline, 115 Pa. 618, 9 Atl. 150.

10 Crain v. Paine, 4 Cush. (Mass.) 483, 485, 50 Am. Dec. 807; Dunn v. Snell, 15 Mass. 481; Thayer v. Daniels, 113 Mass. 129. See, also, Mulford v. Waller, 3 Abb. Dec. (N. Y.) 330.

11 Jones, Collateral Securities (3d Ed.) § 136; Thayer v. Daniels, 113 Mass. 129. But see, contra, the English cases of Dearle v. Hall, 3 Russ. 1; Meux v. Bell, 1 Hare, 73. The rule in England would seem to be that, as between successive purchasers of a chose in action, he will have the preference who first gives notice to the debtor, even if he be a subsequent purchaser. Such, however, has not been the rule adopted in this country, where it is held that the assignment of a chose in action is complete upon the mutual assent of the assignor and assignee, and does not gain additional validity, as against third persons, by notice to the debtor.

DOB.BAILM.-13

is a valid pledge.12 So the delivery of a note and mortgage as security for a debt, even without an assignment in writing, is entitled to protection in a court of law.18 And where the directors of a corporation placed the company's policies of insurance in the hands of two of its directors, without any formal assignment, to secure loans made and to be made by such directors and others to the corporation, it was held that there was a sufficient delivery of these policies to sustain the pledge.1

Corporate Stock

What is necessary to constitute a valid pledge of stock in a corporation has been the subject of much discussion and many conflicting decisions. Indeed, formerly there was doubt whether it could be the subject of a pledge at all, though this is now well settled in the affirmative.15 It seems, also, well settled that, in the absence of statutory provisions, to pledge corporate stock, some written transfer or contract is necessary, as against third parties.16 A mere handing over of the stock certificate to the pledgee is not sufficient. There must be either a transfer on the books of the company, or a power of attorney authorizing such a transfer,18 or some assignment or contract in writing by which the holder may assert title and compel a transfer when desired.1o The safest method of delivery is an actual transfer of the stock

12 Taft v. Bowker, 132 Mass. 277; Boynton v. Payrow, 67 Me. 587.

13 Crain v. Paine, 4 Cush. (Mass.) 483, 50 Am. Dec. 807; Adler v. Sargent, 109 Cal. 42, 41 Pac. 799; Kamena v. Huelbig, 23 N. J. Eq. 78; Prescott v. Hull, 17 Johns. (N. Y.) 284.

14 Stout v. Yeager Mill. Co. (C. C.) 13 Fed. 802.

15 Hasbrouck v. Vandervoort, 4 Sandf. (N. Y.) 74; Gilpin v. Howell, 5 Pa. 41, 45 Am. Dec. 720; Barse Live Stock Co. v. Range Valley Cattle Co., 16 Utah, 59, 50 Pac. 630; Newton v. Fay, 10 Allen (Mass.) 505. See, also, cases cited in the succeeding notes of this section.

16 Nisbit v. Macon Bank & T. Co. (C. C.) 12 Fed. 686; Succession of Lanaux, 46 La. Ann. 1036, 15 South. 708, 25 L. R. A. 577; First Nat. Bank of Waterloo v. Bacon, 113 App. Div. 612, 98 N. Y. Supp. 717.

17 Wagner v. Marple, 10 Tex. Civ. App. 505, 31 S. W. 691.

18 A pledge of stock by a transfer in blank on the back of the certificate, which is pinned to the note secured, is valid in respect to form. McClintock v. Central Bank of Kansas, 120 Mo. 127, 24 S. W. 1052.

19 Nisbit v. Macon Bank & T. Co. (C. C.) 12 Fed. 686. And see article on Law of Collateral Security, by Leonard A. Jones, in 14 Am. Law Rev. (Feb., 1880) 97, 128. A broker carrying stocks upon margins is a pledgee. The purchaser is regarded as pledgor of the stock which the broker holds as a pledge for the advances made by him in purchasing the stock. Baker v. Drake, 66 N. Y. 518, 23 Am. Rep. 80; Stenton v. Jerome, 54 N. Y. 480; Vaupell v. Woodward, 2 Sandf. Ch. (N. Y.) 143; McNeil v. Tenth Nat. Bank, 55 Barb. (N. Y.) 59; Thompson v. Toland, 48 Cal. 99; Worthington v. Tormey, 34 Md. 182; Hatch v. Douglas, 48 Conn. 116, 40 Am. Rep. 154.

1

certificate to the pledgee, with a written indorsement thereon, accompanied by a formal transfer of the stock on the books of the corporation. The pledgee is then fully protected, both as against the pledgor and as against third persons claiming through him. In the absence of a statute, or provision in the corporate charter or by-laws, requiring a transfer on the books of the corporation, however, this is not necessary, and a good delivery in pledge may be made by the mere transfer of the stock certificate to the pledgee, with the proper indorsement written thereon.20

It is usually provided by statute, or by the charter or by-laws of the corporation, that no transfer of stock is valid unless made on the books of the corporation. The entry of the transaction on the corporation's books, where stock is sold or pledged, is required, not for the transfer of the title, but for the protection of the parties and others dealing with the corporation, and to enable it to know who are its stockholders, 21 entitled as such to participate in the control and the profits of the corporation. In such cases, it seems that a pledge transfer not so recorded is invalid as to bona fide purchasers of the stock.22 The effect of the unrecorded pledge transfer as against the creditors of the pledgor has resulted in inconsistent holdings by the various courts passing on the question. In some of the cases, the courts deny the validity of the transfer as against such creditors; 28 while in Massachusetts a like result is reached when the recorded transfer is required by statute or the corporate charter, but when such a provision is found. only in the corporate by-laws, then the pledgee takes precedence (even though the transfer is not recorded in the company's books) as against the creditors of the pledgor." Since a state statute and

20 Cecil Nat. Bank v. Watsontown Bank, 105 U. S. 217, 26 L. Ed. 1039; Sibley v. Quinsigamond Nat. Bank, 133 Mass. 515; Johnson v. Underhill, 52 N. Y. 203; Merchants' Nat. Bank v. Richards, 6 Mo. App. 454; CORNICK v. RICHARDS, 3 Lea (Tenn.) 1, Dobie Cas. Bailments and Carriers, 117.

21 Johnston v. Laflin, 103 U. S. 800, 26 L. Ed. 532; Chouteau Spring Co. v. Harris, 20 Mo. 382; Parker v. Bethel Hotel Co., 96 Tenn. 252, 34 S. W. 209, 31 L. R. A. 706; Scott v. Pequonnock Nat. Bank (C. C.) 15 Fed. 494.

22 New York & N. H. R. Co. v. Schuyler, 34 N. Y. 30; Johnston v. Laflin, 103 U. S. 800, 26 L. Ed. 532.

23 See Colt v. Ives, 31 Conn. 25, 81 Am. Dec. 161; Van Zile on Bailm. & Carr. p. 231.

24 Boston Music Hall Ass'n v. Cory, 129 Mass. 435; Fisher v. President, etc., of Essex Bank, 5 Gray (Mass.) 373. See, also, Smith v. Crescent City LiveStock Landing & Slaughter House Co., 30 La. Ann. 1378; CORNICK v. RICHARDS, 3 Lea (Tenn.) 1, Dobie Cas. Bailments and Carriers, 117; Jones on Collateral Securities (3d Ed.) §§ 158-162; Otis v. Gardner, 105 Ill. 436; Shipman v. Etna Ins. Co., 29 Conn. 245; Merchants' Nat. Bank v. Richards, 74 Mo. 77.

the charter of a corporation are public acts of a state, with which those dealing with a corporation are charged with notice, while the by-laws of the corporation are mere rules enacted by a private corporation for its own government, the Massachusetts rule has much to commend it, and is believed to be sound.

Bills of Lading

A bill of lading issued by a carrier is at the same time both a receipt for the goods delivered to the carrier and also a contract containing the terms of the agreement for the transportation of the goods.25 It is one of the most important of commercial documents, and we shall have frequent occasion to refer to it, in many connections. The bill of lading forms a convenient means of dealing with goods that are in the course of shipment by the carrier. Though the safest delivery of a bill of lading in pledge is by a delivery of the bill to the pledgee with the proper indorsement, usually in blank, an indorsement is not essential; and a delivery of the bill of lading with the intention of pledging it is entirely sufficient, without any indorsement at all."

Warehouse Receipts

Warehouse receipts are issued by warehousemen, stating that certain goods have been deposited with the warehouseman, and are held by him subject to the order of the person making the deposit.27 Like a bill of lading, to which in legal effect it is practically similar, the warehouse receipt is a symbol of the goods, and the transfer of such a receipt is equivalent to a delivery of the goods.2a Like the bill of lading, it is not strictly negotiable, and may also be pledged by a mere delivery of the receipt with that intention. without any indorsement.20

25 The Delaware, 14 Wall. 600, 20 L. Ed. 779; Gage v. Jaqueth, 1 Lans. (N. Y.) 210. Civ. Code Cal. § 2126.

26 Gibson v. Stevens, 8 How. 384, 12 L. Ed. 1123; First Nat. Bank of Cairo v. Crocker, 111 Mass. 163, 167; First Nat. Bank of Green Bay v. Dearborn, 115 Mass. 219, 15 Am. Rep. 92; Michigan Cent. R. Co. v. Phillips, 60 Ill. 190; Haille v. Smith, Bos. & P. (Eng.) 563; Holbrook v. Wight, 24 Wend. (N. Y.) 169, 173, 35 Am. Dec. 607; Grosvenor v. Phillips, 2 Hill (N. Y.) 147; Bank of Rochester v. Jones, 4 N. Y. 497, 55 Am. Dec. 290; Gibson v. Stevens, 8 How. 384, 12 L. Ed. 1123; Allen v. Williams, 12 Pick. (Mass.) 297; Peters v. Elliott, 78 Ill. 321.

27 Miller v. Browarsky, 130 Pa. 372, 18 Atl. 643; Merchants' Warehouse Co. v. McClain (C. C.) 112 Fed. 789.

28 Bush v. Export Storage Co. (C. C). 136 Fed. 918; FIRST NAT. BANK OF PARKERSBURG v. HARKNESS, 42 W. Va. 156, 24 S. E. 548, 32 L. R. A. 408, Dobie Cas. Bailments and Carriers, 109; Young v. Lambert, L. R. 3 P. C. (Eng.) 142; Western Union R. Co. v. Wagner, 65 Ill. 197.

29 Danforth v. McElroy, 121 Ala. 106, 25 South. 810; Gibson v. Stevens,

In the absence of statute, it is generally held that a warehouseman may issue a warehouse receipt for goods of his own which he has in store, and may make a valid pledge by the delivery of such receipt.30

RIGHTS AND DUTIES OF THE PLEDGOR

75. Unless varied by a special contract, the principal rights and duties of the pledgor are as follows:

(a) He impliedly warrants his title or interest.

(b) His interest is assignable.

(c) At common law the pledgor's interest seems not to have been subject to judicial sale, but this is now changed in

most states by statute.

(d) He can sue third persons for injuries to the pledged goods. (e) He has a right to redeem the pledged goods, which continues until it is lost:

(1) By a valid sale of the goods by the pledgee after the default of the pledgor.

(2) By a subsequent release by the pledgor of his right of

redemption.

(3) By the running of the statute of limitations.

The rights and liabilities of the parties to a pledge may be varied, as in other bailments, by a special contract containing such terms as they see fit to insert."1 In the absence of such agreements, the law annexes certain conditions to a pledge, which control the rights of the pledgor and pledgee and their duties to each other and to third persons.

Warranty of Title or Interest by the Pledgor

In the very act of creating a pledge, the pledgor impliedly warrants that he has sufficient title, interest, or authority as to the

8 How. 384, 12 L. Ed. 1123; Wilkes v. Ferris, 5 Johns. (N. Y.) 335, 4 Am. Dec. 364; Hoor v. Barker, 8 Cal. 609; St. Louis Nat. Bank v. Ross, 9 Mo. App. 399.

30 Minhiser Mfg. Co. v. Gallego Mills Co., 101 Va. 579, 44 S. E. 760; National Exch. Bank v. Wilder, 34 Minn. 149, 24 N. W. 699; Merchants' Bank of Detroit v. Hibbard, 48 Mich. 118, 11 N. W. 834, 42 Am. Rep. 465; Alabama State Bank v. Barnes, 82 Ala. 607, 2 South. 349. But see, contra, Franklin Nat. Bank v. Whitehead, 149 Ind. 560, 49 N. E. 592, 39 L. R. A. 725, 63 Am. St. Rep. 302; Jones, Collateral Securities, §§ 325a, 326.

81 St. Losky v. Davidson, 6 Cal. 643; Lee v. Baldwin, 10 Ga. 208; Lawrence v. McCalmont, 2 How. 426, 451, 11 L. Ed. 326; Drake v. White, 117 Mass. 10.