transfer from the railroad company, instead of obtaining it directly. But the negligent act, which especially imposed upon the bank a liability in this case, was that it delivered the forged instrument to the borrower, assigned in blank, and authenticated by the signature of its proper officer, thus giving it a currency which it would not have possessed had the transfer been made directly to the borrower. If the bank had intended merely to revest in the borrower whatever it acquired from him, it would have been perfectly easy to have limited the transfer to that extent only. If the conditions upon which the apparent right of control which the bank conferred upon the borrower were not expressed upon the face of the instrument, but remained in confidence between the bank and the borrower, the case is not distinguishable in principle from that of an agent who receives secret instructions qualifying or restricting an apparently absolute power. One of two innocent parties must suffer; and the courts have repeatedly held that the party must suffer who has exhibited the greater degree of negligence.

V. Transfer by Delivery of Certificate as Between the Parties.

§ 168. The effect of a transfer of stock by delivery of the certificate with a power of transfer is, therefore, to be considered : 1. As between the parties to the transfer; 2. As between them and the corporation itself; and 3. As between them and attaching creditors.

Whatever be the view taken of the necessity of a transfer upon the books of a corporation in order to protect the title of such assignee as against subsequent attaching creditors of the assignor, it is agreed that, as between the parties themselves, the title passes by indorsement and delivery of the certificate, without any entry of the transfer upon the books of the corporation; or even without filling up the transfer, where this has been signed in blank."

1 Johnston v. Laflin, 103 U. S. 800; Bank v. Lanier, 11 Wall. 369; Nat. Bank v. Watsontown Bank, 105 U. S. 217; Ex parte Dobson, 2 Mont., D. & De G. 685; Dickinson v. Central Bank, 129 Mass. 279, 37 Am. Rep. 351;

Sibley v. Quinsigamond Nat. Bank, 133 Mass. 515; Fitchburg Savings Bank v. Torrey, 134 Mass. 239, Mass. Law Rep., May 3, 1883; Cherry v. Frost, 7 Lea (Tenn.) 1, per Cooper, J. 2 Otis v. Gardner, 105 Ill. 436, 15

A by-law requiring a transfer to be made upon the books of a corporation does not restrict the owner in his right to transfer his stock, or give the corporation the power to refuse to register a bona fide transfer. As between the parties, the sale is complete when the certificate is assigned with power to make a transfer upon the books of the corporation.1

Iowa: Des Moines Nat. Bank v.
Warren Co. Bank, 97 Iowa 204, 66 N.
W. Rep. 154; Courtright v. Deeds, 37
Iowa 503.
Kentucky: Bank of America v. Mc- ton, 11 S. C. 486.
Neil, 10 Bush 54.

Maryland: Baltimore City Passenger R. Co. v. Sewell, 35 Md. 238.

Massachusetts: Andrews v. Worcester, N. & R. R. Co., 159 Mass. 64, 33 N. E. Rep. 1109; Dickinson v. Cent. Nat. Bank, 129 Mass. 279, 37 Am.

§ 169. By a delivery of a stock certificate with an indorsement in blank or with a power of transfer, the title passes as between the parties to the transaction; and in this respect, it matters not whether such transfer be deemed to pass a legal or an equitable title.' In a case relating to such a transfer of shares of a national bank, Mr. Justice Field, in delivering the judgment of the supreme court of the United States, said:2 "The entry of the transaction on the books of the bank, where stock is sold, is required, not for the translation of the title, but for the protection of the parties and others dealing with the bank, and to enable it to know who are its stockholders, entitled to vote at their meetings and receive dividends when declared. It is necessary to protect the seller against subsequent liability as a stockholder, and perhaps also to protect the purchaser against proceedings of the seller's creditors. Purchasers and creditors are only bound to look to the books of registry of the bank. But as between the parties to a sale, it is enough that the certificate is delivered with authority to the purchaser, or any one he may name, to transfer it on the books of the company, and the price is paid."

When the owner of corporate stock has indorsed his certificate in blank, and delivered it as security for a pledge, he has put it in the power of the pledgee to negotiate the stock for value, and if the first pledgee transfers the certificate to another in pledge the original owner can not recover the stock from the last pledgee without refunding, or offering to refund, the amount

Texas: Seeligson v. Brown, 61 Tex. 114; Strange v. Houston and Texas Cent. R. Co., 53 Tex. 162, 10 Rep. 28. Vermont: Noyes v. Spaulding, 27 Vt. 420.

West Virginia: Donnally v. Hearndon, 41 W. Va. 519, 23 S. E. Rep. 646. Wisconsin: Plankinton v. Hildebrand, 89 Wis. 209, 61 N. W. Rep. 839. National Bank v. Watsontown Bank, 105 U. S. 217, 4 Morrison's Trans. 400; Johnston v. Laflin, 103 U.

S. 800; Carroll v. Mullanphy Savings Bank, 8 Mo. App. 249; Merchants' Nat. Bank v. Richards, 6 Mo. 454; Johnson v. Underhill, 52 N. Y. 203; McNeil v. Tenth Nat. Bank, 46 N. Y. 325, 7 Am. Rep. 341; Castle v. Smith, 7 Hawaii 579.

Johnston v. Laflin, 103 U. S. 800; and see National Bank v. Watsontown Bank, 105 U. S. 217; Sibley v. Quinsigamond Nat. Bank, 133 Mass. 515.

advanced upon it by the last pledgee.' Where the true owner holds out another, or allows him to appear, as the owner of, or as having full power of disposition over the property, and innocent third parties are thus led into dealing with such apparent owner, they will be protected. Their rights in such cases do not depend upon the 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.*

§ 170. Some authorities hold that, as between the parties, the delivery of the certificate, with assignment and power indorsed, passes the entire title, legal and equitable, in the shares, notwithstanding that, by the terms of the charter or by-laws of the corporation, the stock is declared to be transferable only on its books; that such provisions are intended solely for the protection of the corporation, and can be waived or asserted at its pleasure, and that no effect is given to them except for the protection of the corporation; that they do not incapacitate the shareholder from parting with his interest, and that his assignment, not on the books, passes the entire legal title to the stock, subject only to such liens or claims as the corporation may have upon it, and excepting the right of voting at elections. In the case of Kortright v. Commercial Bank of Buffalo, Chancellor Walworth, in a dissenting opin

1 McNeil v. Tenth Nat. Bank, 46 N. Y. 325, 329, 7 Am. Rep. 341; Brittan v. Oakland Bank, 124 Cal. 282, 57 Pac. Rep. 84.

2 McNeil v. Tenth Nat. Bank, 46 N. Y. 325, 329, 7 Am. Rep. 341, per Rapallo, J.

New York: Cushman v. Thayer Manufacturing Jewelry Co., 76 N. Y. 365, 371, 32 Am. Rep. 315, per Miller, J.; McNeil v. Tenth Nat. Bank, 46 N. Y. 325, 7 Am. Rep. 341, per Rapallo,

J.; Smith v. American [Coal Co., 7 Lans. 317; Hill v. Newichawanick Co., 48 How. Pr. 427; Leitch v. Wells, 48 N. Y. 585; Grymes v. Hone, 49 N. Y. 17, 10 Am. Rep. 313.

In Holbrook v. New Jersey Zinc Co., 57 N. Y. 623, it is declared that "one who takes an assignment of a stock certificate, as between him and the transferrer takes the whole title, both legal and equitable."

ion, strenuously maintained, in conformity with his previous decision in Stebbins v. Phoenix Ins. Co.,' that by a transfer not on the books, the transferee acquired only an equitable right to or lien on the shares, and that, having but an equitable right or lien, he took subject to all prior equities which existed in favor of any other person from whom such assignment was obtained. But his view was overruled by the majority of the court. The action was at law in assumpsit, brought by the holder of the certificate and power, for a refusal to permit him to make a transfer on the books, and the question of his legal title was necessarily involved in the case. The judgment therein must therefore be regarded as a direct adjudication that, as between the parties, the legal title in the shares will pass by delivery of the certificate and power. This was reasserted in the New Haven Railroad case, notwithstanding what was said in the Mechanics' Bank case."

2

The Court of Appeals of New York, in a case already cited, say: "By omitting to register his transfer, the holder of the certificate and power fails to obtain the right to vote, and may lose his stock by fraudulent transfer on the books of the com- . pany by the registered holder to a bona fide purchaser; but in this respect he is in a condition analogous to that of the holder of an unrecorded deed of land, and possesses a no less perfect title as against the assignor and others. He would have an action against the corporation, for allowing such a transfer in violation of his rights. He also takes the risk of the collection of dividends by his assignor, and the risk of any lien the corporation may have on the shares. But in other respects his title is complete."

13 Paige (N. Y.) 350, 356. 234 N. Y. 30, 80.

3 13 N. Y. 625.

McNeil v. Tenth Nat. Bank, 46 N. Y. 325, 332, 7 Am. Rep. 341, per Rapallo, J.

5 New York & N. H. R. Co. v.

Schuyler, 34 N. Y. 30, 80. See, also, Smith v. Am. Coal Co., 7 Lans. (N.Y.) 317.

6 See, also, Cushman v. Thayer Manufacturing Jewelry Co., 76 N. Y. 365, 371, 32 Am. Rep. 315.