and is also the rule adopted by the Negotiable Instruments Law.83 The basis of this rule has been said to be sound business policy and commercial convenience; while a technical consideration has been found in the fact of the undertaking by the pledgee to fix the liability of parties secondarily liable on the instrument by taking the proper steps at maturity, such as presentment, demand, and notice, on penalty of becoming liable himself for any loss resulting from his neglect to take such steps. The doctrine declaring the pledgee here a holder for value is in line, not only with the trend of modern decisions, but also with modern statutory definitions of "value," as in the American Sales Act. This doctrine has been denied, though, by the courts of New York, Ohio, and many other states. 88

84

85

86

87

A pledgee of a negotiable instrument to secure future advances is protected, as a bona fide holder, for all advances made before he

214, 80 Am. Dec. 610; Dixon v. Dixon, 31 Vt. 450, 76 Am. Dec. 128. See, also, Bridgeport City Bank v. Welch, 29 Conn. 475; Manning v. McClure, 36 Ill. 490; President, etc., of Washington Bank v. Lewis, 22 Pick. (Mass.) 24; Fisher v. Fisher, 98 Mass. 303; Armour v. McMichael, 36 N. J. Law, 92; Cobb v. Doyle, 7 R. I. 550. This rule is also the established rule in England. Poirier v. Morris, 2 El. & Bl. 89; Bosarquet v. Dudman, 1 Stark. 1; Price v. Price, 16 M. & W. 232.

83 Section 25: "An antecedent or pre-existing debt constitutes value."

84 RAILROAD CO. v. NATIONAL BANK OF THE REPUBLIC, 102 U. S. 25, 26 L. Ed. 61, Dobie Cas. Bailments and Carriers, 119. And see Penn Bank v. Frankish, 91 Pa. 339; Goodman v. Simmonds, 19 Mo. 106; Grant v. Kidwell, 30 Mo. 455; Brainard v. Reavis, 2 Mo. App. 490; First Nat. Bank v. Strauss, 66 Miss. 479, 6 South. 233, 14 Am. St. Rep. 579; Maitland v. Citizens' Nat. Bank, 40 Md. 540, 17 Am. Rep. 620; Straughan v. Fairchild, 80 Ind. 598; Continental Nat. Bank v. Townsend, 87 N. Y. 10. See, also, cases cited in note 81. 85 Section 76: "Value. An antecedent or pre-existing claim, whether for money or not, constitutes value where goods or documents of title are taken either in satisfaction thereof or as security therefor." See Williston, Sales, § 620.

86 The leading case is Bay v. Coddington, 5 Johns. Ch. (N. Y.) 54, 9 Am. Dec. 268; Coddington v. Bay, 20 Johns. (N. Y.) 637, 11 Am. Dec. 342, opinion by Chancellor Kent. See, also, Stalker v. McDonald, 6 Hill (N. Y.) 93, 40 Am. Dec. 389; Weaver v. Barden, 49 N. Y. 286; Prentiss v. Graves, 33 Barb. (N. Y.) 621; Stevens v. Brennan, 79 N. Y. 254.

87 Roxborough v. Messick, 6 Ohio St. 448, 67 Am. Dec. 346; City of Cleveland v. State Bank, 16 Ohio St. 236, 88 Am. Dec. 445; Pitts v. Foglesong, 37 Ohio St. 676, 41 Am. Rep. 540.

88 Boyd v. Breck, 29 Ala. 703; Ryan v. Chew, 13 Iowa, 589; Nutter v. Stover, 48 Me. 163; Williams v. Little, 11 N. H. 66; Farmers' Nat. Bank of Tecumseh v. McCall, 25 Okl. 600, 106 Pac. 866, 26 L. R. A. (N. S.) 217; Altoona Second Nat. Bank v. Dunn, 151 Pa. 228, 25 Atl. 80, 31 Am. St. Rep. 742; Nichol v. Bate, 10 Yerg. (Tenn.) 429; Atlanta Guano Co. v. Hunt, 100 Tenn. 89, 42 S.

W. 482.

receives notice of any defenses to the instrument," or, if he is under a binding contract to make further advances, he is protected for advances so made after notice, up to the amount he is so bound to advance.90 90

A pledgee of negotiable paper can ordinarily pass a good title thereto, though he transfers it in violation of the rights of the pledgor." In other words, he has the power, though he may not have the right. But not if the transferee has notice of the character in which the pledgee holds the paper." Such notice may be given by an indorsement on the instrument that it is transferred to the pledgee as collateral security."

Nonnegotiable Instruments

But a pledgee of a nonnegotiable instrument or chose in action. can acquire only the rights of the pledgor, and takes the instrument. subject to all the equities which existed against the pledgor." So, too, a pledgee, in such cases, can transfer to a third person no better title than he himself has.95

95

In the case of a bona fide purchaser for value of a nonnegotiable chose in action, from one upon whom the owner has, by assignment, conferred the apparent absolute ownership, where the pur

89 Kerr v. Cowen, 17 N. C. 356; Buchanan v. International Bank, 78 Ill. 500; Matthews v. Rutherford, 7 La. Ann. 225.

90 Kerr v. Cowen, 17 N. C. 356, 358.

91 Spaulding v. Kendrick, 172 Mass. 71, 51 N. E. 453; Currie v. Bowman, 25 Or. 364, 35 Pac. 848; Merchants' Nat. Bank of St. Paul v. Allemania Bank, 71 Minn. 477, 74 N. W. 203; Coit v. Humbert, 5 Cal. 260, 63 Am. Dec. 128; Ballard v. Burgett, 40 N. Y. 314, 318; McNeil v. Tenth Nat. Bank, 46 N. Y. 325, 7 Am. Rep. 341; Sargent v. Metcalf, 5 Gray (Mass.) 306, 66 Am. Dec. 368; Stoddard v. Kimball, 6 Cush. (Mass.) 469; Fisher v. Fisher, 98 Mass. 303; Wheeler v. Guild, 20 Pick. (Mass.) 545, 32 Am. Dec. 231; Valette v. Mason, 1 Ind. 288; Trustees of Iowa College v. Hill, 12 Iowa, 462; Patterson v. Deering, 1 A. K. Marsh. (Ky.) 326. In this respect, a pledge of negotiable paper differs from a pledge of ordinary corporeal chattels, for as to the latter, in general, the pledgee can convey no greater interest than he himself has. 92 Vinton v. King, 4 Allen (Mass.) 562; National Bank of North America v. Kirby, 108 Mass. 497; Patterson v. Deering, 1 A. K. Marsh. (Ky.) 326. 93 Haskell v. Lambert, 16 Gray (Mass.) 592; Costelo v. Crowell, 127 Mass. 293, 34 Am. Rep. 367; Robins v. May, 11 Adol. & E. (Eng.) 213.

94 Works v. Meritt, 105 Cal. 467, 38 Pac. 1109; Moore v. Metropolitan Nat. Bank, 55 N. Y. 41, 14 Am. Rep. 173; Fullerton v. Sturges, 4 Ohio St. 529. 95 Cowdrey v. Vandenburgh, 101 U. S. 572, 25 L. Ed. 923; International Bank v. German Bank, 71 Mo. 183, 36 Am. Rep. 468; Weirick v. Mahoning County Bank, 16 Ohio St. 297; People ex rel. Hurd v. Johnson, 100 Ill. 537, 39 Am. Rep. 63; Isett v. Lucas, 17 Iowa, 503, 507, 85 Am. Dec. 572; Burtis V. Cook, 16 Iowa, 194. The payee of a nonnegotiable note, secured by mortgage, who transfers the note and mortgage as collateral security for a debt, is not liable to the transferee for any deficiency arising on foreclosure of the mortgaged premises. Haber v. Brown, 101 Cal. 445, 35 Pac. 1035.

DOB.BAILM.-14

chase is made upon the faith of such apparent ownership, such purchaser acquires here, as in the case of sales of corporeal chattels (under the doctrine of agency by estoppel), a title valid even as against the owner. For the same reason, an innocent pledgee from one having such indicia of ownership would also (to the extent of his interest as pledgee) take free from the claims of the real owner. It will thus be seen that the doctrine of agency by estoppel (applicable to all classes of property) is not the same principle as negotiability, though either may operate to the benefit of the innocent purchaser or pledgee from one who exceeds his right or actual authority in making such sale or pledge.

Certificates of Corporate Stock

Certificates of stock in a corporation are not regarded as negotiable instruments in the sense in which that term is properly used, viz., that a negotiation cuts off latent equities and thus confers on the transferee a better title than that of the transferror.98 They do not run to bearer or to the order of the party named in the certificate, nor do they contain words of negotiability. They are not, like checks, the immediate representative of money; they were not designed, like promissory notes, to circulate in place of money; nor, like corporate bonds, are they promises by the corporation to pay money. Certificates of stock are simply the muniments and evidence of the holder's title to a given share in the property and franchises of the corporation of which he is a member.""

96 Combes v. Chandler, 33 Ohio St. 178; Moore v. Metropolitan Nat. Bank, 55 N. Y. 41, 14 Am. Rep. 173, overruling Bush v. Lathrop, 22 N. Y. 535. See, also, Mechanics' Nat. Bank v. Comins, 72 N. H. 12, 55 Atl. 191, 101 Am. St. Rep. 650.

97 International Bank v. German Bank, 71 Mo. 183, 36 Am. Rep. 468; Weirick v. Mahoning County Bank, 16 Ohio St. 297; Combes v. Chandler, 33 Ohio St. 178; Weyh v. Boylan, 85 N. Y. 394, 39 Am. Rep. 669; Appeal of Ashton, 73 Pa. 153; Cowdrey v. Vandenburgh, 101 U. S. 572, 25 L. Ed. 923; Merchants' Banking Co. of London v. Phoenix Bessemer Steel Co., 5 Ch. Div. (Eng.) 205, 217; Goodwin v. Robarts, L. R. 10 Exch. (Eng.) 76. The pledgee, however, must be without notice. Swan v. Produce Bank, 24 Hun (N. Y.) 277. 98 George H. Hammond & Co. v. Hastings, 134 U. S. 401, 10 Sup. Ct. 727, 33 L. Ed. 960; Sewall v. Boston Water Power Co., 4 Allen (Mass.) 277, 81 Am. Dec. 701; Weaver v. Barden, 49 N. Y. 286; Barstow v. Savage Min. Co., 64 Cal. 388, 1 Pac. 349, 49 Am. St. Rep. 705. The assignment of shares of railroad stock as collateral security for a pre-existing debt, not contracted on the faith of the security, confers upon the assignee no better title than his assignor had, and he takes subject to equities. City of Cleveland v. State Bank, 16 Ohio St. 236, 88 Am. Dec. 445.

* President, etc., of Mechanics' Bank v. New York & N. H. R. Co., 13 N. Y. 599; Wilson v. Little, 2 N. Y. 443, 447, 51 Am. Dec. 307; Appeal of Roberts, 85 Pa. 84; Weston v. Bear River & Auburn Water & Mining Co., 5 Cal. 186, 63 Am. Dec. 117; Pinkerton v. Manchester & L. R. R., 42 N. H. 424, 447; City

Pledges of corporate stock, then, being subject in general to the same rules as pledges of other nonnegotiable instruments and pledges of corporeal property, it follows that a pledge of stock certificates ordinarily confers on the pledgee no higher rights than those of the pledgor. Here, as elsewhere, a pledge by one having a void title is invalid; while a pledge of goods by one having a voidable title, before his title is avoided, like a sale under similar circumstances, confers valid rights on the pledgee.

2

All that has been said in the previous section about agency by estoppel in general and about clothing one with the indicia of title (for example, by transferring the stock certificate with a blank indorsement thereon) is equally true here, and in practice finds frequent application. In this connection, and elsewhere, we find, too, the law as to pledges of stock closely interwoven with the principles of agency and corporations.

Bills of Lading

A bill of lading is a symbol of, and stands for, the goods that it represents. Accordingly, a pledge or other transfer of the bill of lading confers the same rights (and no greater ones) as an

Fire Ins. Co. v. Olmsted, 33 Conn. 476, 480; Platt v. Hawkins, 43 Conn. 139; Platt v. Birmingham Axle Co., 41 Conn. 255, 267; Shropshire Union Railway & Canal Co. v. Reg., L. R. 7 H. L. (Eng.) 496; Shipman v. Etna Ins. Co., 29 Conn. 245; Hall v. Rose Hill & E. Road Co., 70 Ill. 673.

1 Pratt v. Taunton Copper Mfg. Co., 123 Mass. 110, 25 Am. Rep. 37; Davis v. Bank of England, 2 Bing. (Eng.) 393.

2 Machinists' Nat. Bank v. Field, 126 Mass. 345; Bercich v. Marye, 9 Nev. 312; Tayler v. Great Indian Peninsula Ry. Co., 4 De Gex & J. (Eng.) 559.

McNeil v. Tenth Nat. Bank, 46 N. Y. 325, 7 Am. Rep. 341; Moore v. Miller, 6 Lans. (N. Y.) 396; Crocker v. Crocker, 31 N. Y. 507, 88 Am. Dec. 291; Appeal of Wood, 92 Pa. 379, 37 Am. Rep. 694; Appeal of Burton, 93 Pa. 314; Appeal of Pennsylvania R. Co., 86 Pa. 80; Otis v. Gardner, 105 Ill. 436; Walker v. Detroit Transit Ry. Co., 47 Mich. 338, 11 N. W. 187; Strange v. Houston & T. C. R. Co., 53 Tex. 162; Mount Holly, L. & M. Turnpike Co. v. Ferree, 17 N. J. Eq. 117; Thompson v. Toland, 48 Cal. 112; Stone v. Marye, 14 Nev. 362; Borland v. Clark, 26 Kan. 349.

4 Otis v. Gardner (1883) 105 Ill. 436; Strange v. Houston & T. C. R. Co., 53 Tex. 162; Fraser v. City Council of Charleston, 11 S. C. 486. And see cases cited in preceding note. One who pledges stock is not thereby estopped to assert his claims against the corporation for money owing him, and therefore his assignee for the benefit of creditors can enforce such claims, though it render the stock worthless. Janney v. Merchants' & Planters' Nat. Bank of Montgomery, 98 Ala. 515, 13 South. 761; Appeal of Wood, 92 Pa. 379, 37 Am. Rep. 694; Bentinck v. Bank, 3 Reports, 120, [1893] 2 Ch. (Eng.) 120; Persch v. Quiggle, 57 Pa. 247; Jarvis v. Rogers, 13 Mass. 105. The owner of stock certificates, fraudulently pledged by one holding them as trustee, is not estopped from claiming them of the pledgee, by standing by, after having notified the pledgee of his claim, and demanding the stock, and without protest witnessing the pledgee pay an assessment theretofore made on

actual delivery of the goods under similar circumstances. A thief cannot make a valid pledge or sale of the stolen goods, even by an actual delivery of such goods; no more could he make a valid. sale or pledge by shipping the goods and transferring the bill of lading, which represents them. This necessarily leads to the conclusion, then, that the bill of lading is no more negotiable (strictly speaking) than the goods for which it stands. Therefore, ordinarily, the pledgee of such bill of lading acquires rights no more valid than those of the pledgor. Since the bill of lading, however, is one of the best examples that the law knows of indicia of title, this results in the frequent application of the principle of estoppel as

the stock. Shaw v. Spencer, 100 Mass. 382, 97 Am. Dec. 107, 1 Am. Rep. 115. Where a bank wrongfully pledged stock deposited with it, the facts that the stock was issued in the name of the owner, and that the power of attorney to transfer it was a detached paper, and not acknowledged before a notary public, as required by the rules of the stock exchange, do not charge the pledgees with notice of the defect in the pledgor's title. Smith v. Savin, 141 N. Y. 315, 36 N. E. 338. The law of estoppel here has been developed to such an extent as to render sales or pledges of corporate stock almost as effective to confer good title on bona fide buyers and pledgees as a like sale or pledge of negotiable instruments. Moore v. Metropolitan Nat. Bank, 55 N. Y. 41, 14 Am. Rep. 173; Mt. Holly, L. & M. Turnpike Co. v. Ferree, 17 N. J. Eq. 117; Walker v. Detroit Transit Ry. Co., 47 Mich. 338, 11 N. W. 187.

The subject of bills of lading as collateral security is discussed at length in Jones, Collateral Securities (3d Ed.) §§ 227-279. The Carlos F. Roses, 177 U. S. 655, 20 Sup. Ct. 803, 44 L. Ed. 929; Rowley v. Bigelow, 12 Pick. (Mass.) 307, 23 Am. Dec. 607; FORBES v. BOSTON & L. R. CO., 133 Mass. 154, Dobie Cas. Bailments and Carriers, 236; Hathaway v. Haynes, 124 Mass. 311; First Nat. Bank of Green Bay v. Dearborn, 115 Mass. 219, 15 Am. Rep. 92; First Nat. Bank of Cairo v. Crocker, 111 Mass. 163; Allen v. Williams, 12 Pick. (Mass.) 297; De Wolf v. Gardner, 12 Cush. (Mass.) 19, 59 Am. Dec. 165; Bank of Rochester v. Jones, 4 N. Y. 497, 55 Am. Dec. 290; Holbrook v. Wight, 24 Wend. (N. Y.) 169, 35 Am. Dec. 607; Cayuga County Nat. Bank v. Daniels, 47 N. Y. 631; Farmers' & Mechanics' Nat. Bank of Buffalo v. Logan, 74 N. Y. 568; First Nat. Bank of Cincinnati v. Kelly, 57 N. Y. 34; Holmes v. German Security Bank, 87 Pa. 525; Peters v. Elliott, 78 Ill. 321, 326; Michigan Cent. R. Co. v. Phillips, 60 Ill. 190; Taylor v. Turner, 87 Ill. 296; Security Bank of Minnesota v. Luttgen, 29 Minn. 363, 13 N. W. 151; Emery v. Irving Nat. Bank, 25 Ohio St. 360, 18 Am. Rep. 299; Adoue v. Seeligson, 54 Tex. 593; McCants v. Wells, 4 S. C. 381; First Nat. Bank of Peoria v. Northern R. R., 58 N. H. 203; Gibson v. Stevens, 8 How. 384, 12 L. Ed. 1123; Shaw v. North Pennsylvania R. Co., 101 U. S. 557, 564, 25 L. Ed. 892; Dows v. National Exchange Bank, 91 U. S. 618, 23 L. Ed. 214.

• Pollard v. Vinton, 105 U. S. 7, 26 L. Ed. 998; Kirkpatrick v. Kansas City, St. J. & C. B. R. Co., 86 Mo. 341; Barnard v. Campbell, 55 N. Y. 462, 14 Am. Rep. 289; Allen v. Williams, 12 Pick. (Mass.) 297; Davenport Nat. Bank v. Homeyer, 45 Mo. 145, 100 Am. Dec. 363; Canadian Bank of Commerce v. McCrea, 106 Ill. 281; Burton v. Curyea, 40 Ill. 320, 89 Am. Dec. 350; Evansville & T. H. R. Co. v. Erwin, 84 Ind. 457, 466; The Idaho, 93 U. S. 575, 23 L. Ed. 978.