§ 164. The decisions of the English courts to the contrary have been influenced chiefly by a rigid adherence to the technical rules of the common law in relation to instruments under seal, though the policy of the stamp laws is said to have had some influence in the same direction. It is an ancient rule of the common law that an instrument under seal must be wholly written before sealing and delivering it. No blanks in any essential part of such an instrument can be filled in after the delivery of it. Lord Mansfield attempted to break down this rule in the case of Texia v. Evans;' but half a century afterwards this case was overruled, and the ancient rule reestablished. This still remains the rule in England, and is adopted in the greater number of states in this country.2

But while in this country, even in those states in which this rule of the common law prevails, transfers of shares by assignments or powers of attorney in blank are allowed by virtue of the general commercial usage, in England no general exception in regard to such transfers has been made. The case in which Lord Mansfield's new doctrine was finally repudiated arose in regard to the validity of a transfer of shares by an assignment in blank, which was afterwards filled up by inserting the purchaser's name. The charter of the corporation required a conveyance of its shares to be made by an instrument under seal. Baron Parke, delivering the judgment of the court, said: "There is no authority that shows that an instrument which,when executed, is incapable of having any operation, and is no deed, can afterward become a deed, by being completed and delivered by a stranger, in the absence of the party who executed it, and unauthorized by instrument under seal." In a later case the owner of various securities, who kept his

was found as a fact that the transaction was a pledge, so that the question of law was not considered.

Hibblewhite v. M'Morine, 6 M. & W. 200. The principle of this decision has been affirmed in Davidson

1 Cited and stated by Wilson, J., in v. Cooper, 11 M. & W. 778, 793; EnthoMaster v. Miller, 1 Anstr. 225.

'See, on this subject, 1 Jones on

Mortgages, § 90.

JONES PLEDGES-.
s-12

ven v. Hoyle, 13 C. B. 373; Humble v. Langston, 7 M. & W. 517; Eagleton v. Gutteridge, 11 M. & W. 465.

certificates in his broker's safe at a London bank, was fraudulently induced by the broker to execute and deliver to him several deeds of transfer in blank. The broker filled up two of the deeds, making each of them transfer to a confederate five hundred shares of stock in the defendant railway company. The company having transferred the shares to the transferee named, the owner brought suit against the company; and it was held that the transfers were void, and the company was held liable, though the plaintiff had been guilty of culpable negligence.' But if the company's articles of association do not require transfers to be made by deed, they may be executed in blank and the holder may afterwards fill them up.2 The validity of transfers in blank seems also to be recognized, so far as to impose upon the holder the obligation to pay calls upon the shares."

§ 165. A power of attorney to transfer stock, though under seal, may be executed in blank just as the assignment upon the back of the certificate may be executed in this way. Such a power of attorney, delivered with the certificate, is evidence of an implied authority to fill up the power with the name of an attorney to make the transfer upon the books of the corporation. It is customary to make the power in this form, and there is no question in regard to the validity of such a power, when it has been filled up according to the intention of the owner. But when the blank has been once filled, the instru

2 In re Tahiti Cotton Co., L. R. 17 Eq. 273; Ex parte Swan, 7 C. B.(N. S.) 400.

8 Walker v. Bartlett, 18 C. B. 845.

1 Swan v. North British Australian 98), this commercial usage was conCo., 8 Jur. 940. demned, Woodward, J., saying: "The cashier of the bank swears that the name of the transferee is usually not inserted in the power of attorney, and that it is more convenient not to have it inserted. We know that this is commercial usage; it was probably originated by the banks; if not, they have countenanced it, and thus brought people to practice it, and yet it is a vicious usage, which no considerations of convenience are sufficient to

German Union Building Asso. v. Sendmeyer, 50 Pa. St. 67; Persch v. Quiggle, 57 Pa. St. 247; Rice v. Gilbert, 173 Ill. 348, 351, 50 N. E. Rep. 1087.

In an earlier case in this state, however (Denny v. Lyon, 38 Pa. St.

ment becomes complete; and the holder of the power has no authority to alter or erase the name inserted and insert another. Thus, if the owner of a certificate of stock intrusts it to another, with a power of attorney in blank, to enable him to make a specific loan, and the loan is made and afterwards. is paid, and the stock is returned to the borrower, who then erases the name of the pledgee, and inserts the name of a creditor to whom he was already indebted to a large amount, upon the application of the original owner of the shares, the creditor was enjoined from transferring the shares to his own name.1

An assignment of the certificate, and a power of attorney to transfer the stock, may both be executed in blank; and if the owner of the certificate insert his name in that, and in the power the name of another, an effectual demand upon the corporation for a transfer of the stock can be made by the owner, without the attorney's joining in it.2

§ 166. The death of the pledgor of a certificate indorsed by him in blank does not revoke the authority of the pledgee to fill up a written transfer of the certificate to himself or to another; and it does not matter in this respect that the certificate by its terms is transferable only at the office of the corporation by appearance of the holder in person, or by attorney.'

§ 167. The signing of a transfer in blank on a certificate of stock is a warranty of the genuineness of the certificate. The rule is the same, and rests upon the same grounds, as that established with reference to negotiable instruments, to the effect

justify. Malus usus abolendus est. A power of attorney, signed, generally sealed, and duly delivered, what is it but a finished legal instrument? Who may alter that paper writing to the prejudice of another, without incurring liability to the charge of forgery? If commercial usage permits the insertion, erasure, and subsequent reinsertion here, what other legal in

strument may not commercial usage tamper with in like manner?"

1 Denny v. Lyon, 38 Pa. St. 98, 80 Am. Dec. 463.

2 Cushman v. Thayer Manufacturing Jewelry Co., 76 N. Y. 365, 32 Am. Rep. 315.

Fraser v. Charleston, 11 S. C. 486; Leavitt v. Fisher, 4 Duer (N. Y.) 1, per Duer, J.

that every indorser holds himself out as possessing a clear title to the paper, and as conferring such a title upon his indorsee.

It becomes of importance, therefore, that one taking a certificate in his own name, as security for a loan, should know the genuineness of the certificate, not only with a view to the security of the loan, but with a view to avoiding a loss greater, perhaps, than the whole of the loan, through putting the certificate in circulation after the payment of the loan, by indorsing a transfer of it in blank. This point is forcibly illustrated in the case of Matthews v. Massachusetts National Bank.' This bank made a loan upon a certificate of stock issued as collateral directly to the bank for two shares of the stock of the Boston and Albany Railroad Company, which certificate the borrower, before delivering to the bank, fraudulently altered, so as to purport to be for two hundred shares. The bank received the certificate in good faith as security for a loan, and upon the payment of the loan the bank, by its cashier, signed a transfer in blank upon the back of the certificate, and delivered it to the borrower. A short time afterwards the same borrower obtained from a third person another and larger loan, upon a pledge of the certificate, still having the bank's assignment in blank upon it. This lender took the certificate in good faith, supposing it to be genuine, but very soon discovered the fraudulent alteration, and brought suit against the bank for the recovery of the damages he had sustained. The question presented was whether the bank had, by signing the blank transfer, so far warranted the genuineness of the certificate that it was estopped from setting up the forgery as a defense to the action, and the bank was held liable.

It was contended in behalf of the bank that the transfer created no liability to any subsequent holder of the certificate, because the circumstances under which it was taken and surrendered indicated that the transfer was made solely for the purpose of restoring the pledge to the borrower after he had

11 Holmes 396. See note to this case, 14 Am. Law Reg. N. S. 153.

paid this loan. But the court replied that there was nothing to show that the subsequent lender had any knowledge of any such intention on the part of the bank; that although the certificate purported that the bank held the shares as collateral, it did not show for whose debt they were collateral; that such a certificate, with a transfer in blank, might, in the ordinary course of dealing, pass through the hands of many successive purchasers, and the possession of it would afford no indication that the holder of it was the person who had originally transferred it to the bank as collateral; that if the bank had enforced payment of the loan by a sale of the stock, and had assigned the certificate in this form, the purchaser would have been in the same condition as the subsequent pledgee; and if this pledgee had dealt with the purchaser, he would have received no better evidence of title against the bank than he in fact received from the borrower himself. The mere words "as collateral" in the instrument do not tend to put the purchaser on inquiry, except so far as relates to the authority of the bank to dispose of the collateral as between the bank and its debtor. If inquiry had been made of the bank, it would only have resulted in the information that the bank had made a loan upon the certificate, and the loan having been paid, the assignment was made in blank by the joint act and consent of the debtor and the bank. There would have been nothing in this information to lead the inquirer to doubt the genuineness of the certificate to which the bank had given currency by its signature. Neither could the bank contend, with any show of reason, that the subsequent pledgee was negligent in not inquiring at the office of the railroad corporation. If the duty of making such inquiry was incumbent on any one, it was incumbent on the bank to ascertain the genuineness of the instrument before giving currency to it, and lulling suspicion and doubt by the responsibility of its signature. One taking the certificate in this form might reasonably suppose that the bank had obtained the certificate itself from the railroad company in the usual way, thus preventing the possibility of fraud or forgery. The bank, in fact, negligently placed confidence in the borrower to obtain a