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form, would not create such an estoppel. "But the laches of the insured and his practical abandonment of the policy by neglecting for eleven years to take active measures to recover possession of it, or to keep it alive by paying the premiums on it, but allowing it to lapse unless the assignee saw fit to pay the premiums at his own expense, would estop him from now claiming any rights under or benefits from the policy, as against the assignee or the bank."1

§ 468. The rule is the same whether the delivery of a certificate with a power of transfer be regarded as passing the legal title or merely an equitable one. If it passes the legal title, then the owner having clothed his pledgee with the whole title, and consequently an unlimited power of disposition, can not set up an unknown equity against a title acquired by a subsequent assignee in good faith for a valuable consideration, and in the due course of trade. If such a transfer passes only an equitable title, still the owner having intrusted his pledgee not only with the possession of the certificate of stock, but also with written evidence over his own signature of title thereto, and of unconditional power of disposition over it, he is estopped to dispute the title which he has apparently conferred, and set up a prior equity in himself."

§ 469. Precedent debt.-But to entitle a purchaser to protection against the legal title or a prior equity upon the ground that he has dealt with the person having the apparent ownership or right of disposition, he must appear to be a purchaser for value. What constitutes a valuable consideration is generally a question that is easily answered; for it is everywhere agreed that a payment of purchase-money or any part of it, or the parting with something of value upon the faith of the purchase, or a loan made at the time, or an agreement to extend the time of payment of an existing debt constitutes a valuable

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consideration. It is also the prevailing rule that a transfer of property in payment or security of a pre-existing debt is a sufficient consideration. But formerly in New York the rule was adopted as to negotiable paper, that a person taking it in payment or as security for an antecedent debt without giving further credit, surrendering any security or incurring any further obligation, is not a bona fide holder for value, as against third persons having prior equities; and the same rule is also, for stronger reasons, applied to transfers of stock; and it is accordingly held that the mere existence of a precedent debt will not support a transfer of stock as against the rightful owner, or as against the equities of others, although the assignor be clothed with the apparent ownership or right of disposition. If the stock be transferred partly in consideration of a precedent debt and partly for a new consideration paid at the time, the taker will be regarded as a holder for value so far as the assignment was made for a consideration paid at the time, but not a holder for value for the amount of the precedent debt.*

§ 470. Collaterals taken in exchange for other collaterals are taken for value to the extent of the consideration given in exchange. This is the rule where collaterals for a pre-existing debt are not regarded as taken for value. When old collaterals are surrendered and others taken in their place, the creditor in fact pays a consideration for the new securities, and the extent of that consideration is the value of the securities surrendered."

§ 471. Under the old usury laws, which happily have now mostly disappeared, a person who took a pledge upon a usurious contract was not considered as a bona fide holder, in the

'Cherry v. Frost, 7 Lea (Tenn.) 1, Int. 400; Dovey's Appeal, 97 Pa. St. 21 Am. Law Reg. (N. S.) 57. 153.

* §§ 115-117.

Weaver v. Barden, 49 N. Y. 286; Ashton's Appeal, 73 Pa. St. 153, 162; Moodie v. Seventh Nat. Bank, 33 Leg.

Weaver v. Barden, 49 N. Y. 286; Gould v. Farmers' Loan & Trust Co., 23 Hun (N. Y.) 322.

'Cherry v. Frost, 7 Lea (Tenn.) 1, 21 Am. L. Reg. (N. S.) 57.

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usual course of business.' "A note or stock taken to secure a loan of money which is illegal and forbidden at law, is not taken in the ordinary course of business, and such a transaction does not give the holder a superior right to that of a real owner who has been defrauded of his property by the person who passed it away on the usurious contract. Therefore, if a re-hypothecation of stock be made under a contract void for usury, the pledgee will not be considered a bona fide purchaser without notice, and he will not therefore be protected in the possession of the stock as against the owner, who is entitled to recover it without even paying the original debt secured.'


§ 472. Actual notice.-When, however, one dealing with the apparent owner of stock has notice, actual or constructive, of the rights of the true owner, he can acquire no better title than the apparent owner can lawfully transfer. A judgment creditor buying at an execution sale stock already transferred by the debtor by indorsement and delivery of the certificate, without any transfer on the books of the company, but with notice of such unrecorded transfer, obtains no better title than his debtor had."

1 Ramsdell v. Morgan, 16 Wend. (N. Y.) 574; Dean v. Howell, Hill & Den. (N. Y.) 39; Sands v. Church, 6 N. Y. 347.

Thus, if the owner of corporate stock indorses upon the certificate an absolute power to transfer and delivers it to his broker as collateral security to protect the broker in carrying other stock, and the broker re-hypothecates the stock to a bank which has full knowledge of the ownership of the stock, and of the broker's want of authority to re-pledge it, the bank can not retain it as against the owner."

It would seem to be upon this ground that where the owner


'Porter v. Parks, 49 N. Y. 564.

Newberry v. Detroit & Lake Su

perior Iron Co., 17 Mich. 141.


Westinghouse v. German Nat. 'Felt v. Heye, 23 How. Pr. (N. Y.) Bank, 188 Pa. St. 630, 41 Atl. Rep. 359, per Ingraham, C. J.


'Felt v. Heye, 23 How. Pr. (N. Y.)

of stock executed and delivered to an agent a power of attorney in blank, with the understanding that it should be used to secure a particular creditor, whose name the agent inserted in the power, but erased after that creditor had been satisfied, and inserted another name, it was held that the agent's authority was exhausted by the first transaction, and the principal was entitled to a return of the stock.' It was contended on the one hand that the issuing of the power in blank implied the intention of the owner to pledge the stock to any creditor who should loan money to the attorney authorized to make the transfer; on the other, that the filling up of the blank in the first instance argued that any subsequent transferee knew that the owner had issued the power only for the benefit of the person whose name was first inserted in the power. Then the creditor replied that erasing the first name and inserting his own made the transfer under the power legal and valid; and the owner rejoined that the attorney's power was exhausted when he first filled the blank. "And out of this forensic game of shuttlecock and battledore," say the court, "we are expected to educe the equities that shall determine the title to the stock;" and they accordingly hold that the owner having proved his allegation that he transferred the stock only to secure the creditor whose name was first inserted, and that this creditor having been fully paid, he was entitled to a return of the stock.

§ 473. The mere fact that a certificate of stock re-hypothecated by the pledgee, was in the name of the first pledgor, accompanied with his power of attorney to transfer it, is not of itself sufficient to charge the second pledgee with notice of the first pledgor's rights, or even to charge him with sufficient knowledge of those rights to put him upon inquiry. To pass

'Denny v. Lyon, 38 Pa. St. 98, 80 Am. Dec. 463; and see Sitgreaves v. Farmers' & Mechanics' Bank, 49 Pa. St. 359, 365; May v. Cleland, 117 Mich. 45, 75 N. W. Rep. 129, 44 L. R. A. 163; McLean v. Charles Wright

Medicine Co., 96 Mich. 479, 56 N.
W. Rep. 68; Mandlebaum v. North
American Min. Co., 4 Mich. 465.
2 Felt v.
Heye, 23 How. Pr. (N. Y.)
359; Colonial Bank v. Cady, 15 App.
Cas. 267.

the title to stock, in equity at least, it is not necessary that it should be transferred upon the books of the corporation.' The pledgee may hold the certificate with the power of attorney, and have all the rights he could have from a transfer of the stock upon the books.

So, if a certificate of stock be assigned to one by a transfer not filled in, that is, by a transfer signed in blank, the holder of the certificate may effectually pledge it in that condition, though in doing so he makes an improper use of the stock. Equity will not give the assignor relief against a bona fide pledgee of the certificate, though the assignee pledges it in that condition, without having the stock first transferred to himself on the books of the corporation.*

III. His Rights when Dealing with One Holding a Fiduciary Relation.

§ 474. One holding stock as "trustee" has prima facie no right to pledge it to secure his own debt growing out of an independent transaction; and whoever takes it as security for such debt, without inquiry, does so at his peril. If a certificate of stock issued in the name of "A. B., trustee," be pledged by him to secure his own debt, the pledgee is, by the

1See §§ 169-171, 219, 220.

Broadway Bank, 156 N. Y. 459, 51 N.

2 Otis v. Gardner, 105 Ill. 436, 15 E. Rep. 398, 42 L. R. A. 139; Budd v. Rep. 332. Munroe, 18 Hun (N Y.) 316; Simons v. S. W. Railway Bank, 2 Am. L. Reg. 546; Ham v. Ham, 58 N. H. 70. See Ashton v. Atlantic Bank, 3 Allen (Mass.) 217, for a case decided on its own peculiar facts, but still going too far, perhaps, in protecting the lender from liability arising from a presumption of his knowledge that the pledge was made in violation of the trustee's duty. In connection with this case, see Loring v. Salisbury Mills, 125 Mass. 138, and Shaw v. Spencer, 100 Mass. 382, 391, 97 Am. Dec. 107, 1 Am. Rep. 115.

Shaw v. Spencer, 100 Mass. 382, 1 Am. Rep. 115, 97 Am. Dec. 107; Loring v. Salisbury Mills, 125 Mass. 138; Smith v. Burgess, 133 Mass. 511; Loring v. Brodie, 134 Mass. 453; O'Herron v. Gray, 168 Mass. 573, 47 N. E. Rep. 429; Duggan v. London & Canadian L. & A. Co., 19 Ontario 272, 278; Jaudon v. National City Bank, 8 Blatchf. 430; Duncan v. Jaudon, 15 Wall. 165; Gaston v. American Exch. Nat. Bank,29 N. J. Eq. 98; and see Sprague v. Cocheco Mauufacturing Co., 10 Blatchf. 173; Swan v. Produce Bank, 24 Hun (N. Y.) 277; First Nat. Bank v. National

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