If a creditor hold a collateral note under a blank indorsement of the payor, the latter may before maturity of the note sell and assign it with the creditor's knowledge without further indorsement, or without filling up the blank; and such assignee will acquire it free from all equities other than the lien of the pledgee, although it be not delivered by the latter to such assignee until after maturity.' § 365. One taking an assignment from the pledgor of his contract of pledge, acquires only the latter's rights, inasmuch as he is chargeable with notice of all that he might learn upon inquiry in respect to the contract and the rights of the parties under it.2 An assignee for the benefit of creditors of the pledgor has only the rights of the pledgor, and can not rightfully take possession of the pledged property. He can not attack the sufficiency of the possession of the pledgee, if that was sufficient as against the pledgor.' § 366. A right reserved by the pledgor to sell the thing pledged, to be exercised at any time upon payment of the debt secured, gives him no right to sell it until he has first paid the debt. If the pledgor obtain possession of the property and sell it without the pledgee's consent, he is liable for a conversion of it." The pledgor's assignee may enforce in his own name or in the name of his assignor such rights in the pledge as he does acquire. Where bonds and stocks are pledged as collateral security, under a contract stipulating that in the event of the reduction of the indebtedness, the pledgor should be entitled to select and withdraw from the securities so pledged an 2 1 Grimm v. Warner, 45 Iowa 106. Taggart v. Packard, 39 Vt. 628; Smith v. Lee, 84 Fed. Rep. 557. 3 George v. Pierce, 123 Cal. 172, 55 Pac. Rep. 775; affirmed 56 Pac. Rep. 53; Francisco v. Aguirre, 94 Cal. 180, 29 Pac. Rep. 495. See Goodbar v. Locke, 56 Ark. 314, 19 S. W. Rep. 924. George v. Pierce, 123 Cal. 172, 55 Pac. Rep. 775; affirmed 56 Pac. Rep. 53. 5 Prescott v. Prescott, 41 Vt. 131. amount equal to the reduction, one to whom the pledgor has sold and transferred a part of such securities can maintain his right to them, as against the pledgee, where it is shown that prior to such transfer the pledgor had paid, or caused to be paid, on such indebtedness, a sum in excess of the value of the securities so transferred.' § 367. Notice to a purchaser of goods of a pledgee's lien thereon for advances, charges the purchaser with its payment, if he has such notice before or at the time of accepting the goods. Thus, if the purchaser receives the goods upon the order of the general owner, which directs the delivery of the goods upon the payment of a certain sum to the pledgee, who is authorized to give the purchaser credit therefor, and the pledgee delivers the goods accompanied by a bill or invoice charging the amount due him, in an action therefor, the purchaser can not offset a claim he has against the general owner.' And so, if one holding a fund against which he knows a claim is made by another as pledgee, although not aware that the pledge extends beyond a specific loan which has been paid, pays over the fund to the general owner, he does so at his peril.' The holder of a fund against which he knows that a claim is made by another as pledgee, is chargeable with interest if First Nat. Bank v. Root, 107 Ind. to induce action in the defendants in 224, 8 N. E. Rep. 105. reliance upon a belief that the plaint 2 Nottebohm v. Maas, 3 Robt. (N. iffs meant to relinquish it. The act Y.) 249. of delivery of the oil to the defendants was accompanied by an invoice, which, in its contents, was a written claim for fifteen dollars per barrel. The defendants took the oil with that claim. They were bound to make inquiry, or to refuse and return the oil, or to take it with the obligation on their part to make payment of that sum at a proper time." Moors v. Washburn, 159 Mass. 172, 34 N. E. Rep. 182. he has used the fund, or has not kept it as a separate trust fund.' § 368. If the pledgor's assignee give notice of his ownership to the pledgee, the latter is liable if he afterwards delivers the property to the pledgor or to any one else, without the assignee's consent.2 By agreement of a pledgor and pledgee the latter may hold the security pledged for the benefit of another creditor of the pledgor; and in that case any sum received by the pledgee from the security above the amount necessary to satisfy his claim should be applied on the pledgor's debt to such other creditor. The agreement of the parties operates as an equitable assignment of such surplus, should there be any.3 § 369. For a conversion of the pledge which has taken place before the pledgor's assignment of it, the assignee can not recover against the pledgee or other person in his own name. A demand for the chattel by such assignee upon the pledgee, and his refusal to give it up, because he had already parted with its possession, does not constitute a conversion. Neither can such assignee claim by virtue of a previous demand by the pledgor. But if the pledgor has assigned not merely the property but also his cause of action for a conversion already made by the pledgee, then the assignee could maintain an action either in his own name or that of his assignor, according to the code of procedure under which the action is brought, for such prior conversion." § 370. A pledgor's assignee is entitled to redeem the pledge, or to recover judgment for a subsequent conversion of it by the pledgee or other person. The assignee is at all times en 6 titled to redeem the pledge, by paying such a sum as would have cancelled and discharged the pledgee's claim at the time of the assignment. If the pledgee sell the pledge, the prior assignee is entitled to the surplus money, and in a suit to recover it the pledgee can set off no claim which he has against the pledgor other than the specific debt, to secure which the pledge was made.' If the pledgor sells the pledged property while it is in the hands of his pledgee and the purchaser does not redeem it, but the pledgee sells it at auction at a sale fairly conducted for less than the price agreed upon between the pledgor and his vendee, the latter, if purchasing with notice of the pledge, is liable to an action to recover the difference between the contract price, less the amount paid, and the proceeds of sale realized by the pledgee.' § 371. A pledgee of corporate bonds or other like collateral securities does not affirm their genuineness, by delivering them to one purchasing from the owner, although he receives the purchase-money directly from the purchaser, and after deducting the amount of the debt secured pays over the residue to the owner. In the absence of fraud the purchaser can not recover back the purchase price in case the securities prove to have been forged. A pledgee upon receiving payment is bound to deliver the securities to whomsoever the pledgor may direct, and the fact that the whole proceeds are paid to him, and that he pays over only the surplus to the pledgor, does not change the character of the transaction from a payment to the pledgee to a sale by him. Nor does the circumstance that the original transaction was in the form of a purchase of bonds by the pledgee at the request of the pledgor, with an agreement that the former would within a definite time sell the bonds to the latter for the amount of the loan applied for and Dupré v. Fall, 10 Cal. 430; Durfee v. 1 Van Blarcom v. Broadway Bank, 37 N. Y. 540. 2 Habenicht v. Lissak, 77 Cal. 139, 19 Pac. Rep. 260; Civ. Code of California, § 3311. made, change the character of the transaction, though this form was given to it to avoid the usury laws. The pledgee may, notwithstanding, show the real transaction, and avoid all responsibility for the genuineness of the bonds.' Nor is there any such responsibility on the part of a creditor who, upon the order of his debtor, transfers the debtor's note and pledge of a spurious certificate of stock to another upon receiving the amount of the note, both parties being ignorant of the spuriousness of the certificate. The person so taking the certificate can not recover back the purchase-money from the pledgee, as upon a sale of the note and stock, for the transaction is not a sale. "The case then is strictly this: the Schuylers owe the defendant money, and they procure the plaintiffs to pay that money. As security for such payment, or upon some other consideration not disclosed, they at the same time procure the defendant to transfer to the plaintiffs a certificate of stock, of which the defendant held the formal title, but which belonged wholly to the Schuylers, and was subject to their control. Both the plaintiffs and the defendant thought the certificate valuable, but it is in truth worthless, and the plaintiffs have lost their money. With whom did the plaintiffs deal for the stock? Not with the defendant, who did not have and did not profess to have any beneficial title to it, but with the Schuylers, who, when their debt to the defendant was paid, were the owners. The defendant assumed nothing, warranted nothing. What he had received on the loan to the Schuylers he was bound and was willing, the loan being paid, to give back to them, if they chose to take it, or if not, to the parties whom they should name to be the recipients of the title. They named the plaintiffs, and the defendant made the transfer to them. I can see no reason why such an act should involve any responsibility on the part of the defendant."" 1 Baker v. Arnot, 67 N. Y. 448; affirming 5 T. & C. 215. 2 Ketchum v. Bank of Commerce, 19 N. Y. 499. 3 Ketchum v. Bank of Commerce, 19 N. Y. 499, per Denio, J. |