and power of attorney to transfer the same in the usual form, signed by himself, and this assignee or pledgee wrongfully sells them to an innocent purchaser for value in the regular course of business, such original owner is estopped from asserting, as against this purchaser in good faith, his own higher title and the want of actual title and authority in his own immediate assignee or pledgee. This principle, thus applied to the peculiar state of facts described, and to the particular kind of securities, is in no respect necessarily antagonistic to the general doctrine in relation to things in action before stated in the text. The court rested its decision exclusively upon the form of the blank assignment and power of attorney executed by the assignor and delivered to the assignee, which clothed him with all the apparent rights of ownership which are recognized by business men in their usual course of dealing with like securities, as sufficient to confer a complete title and power of disposition upon the assignee. The decision was nothing more than the application of the doctrine of estoppel in circumstances to which it had not before been applied.1

1 McNeil v. Tenth Nat. Bank, 46 N. Y. 325, reversing S. C. 55 Barb. 59. The Supreme Court held (1) that certificates of stock were in no respect negotiable, and (2) the rule as laid down by Denio J. in Bush v. Lathrop. The law of estoppel was not invoked nor alluded to. In the Court of Appeals the doctrine of latent equities was discussed; the decision of the court in Bush e. Lathrop, and the reasoning of Mr. Justice Denio, were expressly recognized as correct, and as applicable to all cases in which the facts do not warrant the application of the principle of estoppel. Mr. Justice Rapallo, in his able judgment, does not discuss the rule in relation to things in action of all kinds; he confines himself exclusively to the particular species of security then before the court, certificates of stock in stock corporations; and, while he does not claim for them absolute negotiability, he does in fact render them indirectly nego tiable by means of the estoppel which arises upon dealing with them in the manner described, which is the mode universally prevalent among business men. In respect to the opinion of Denio J. he says (p. 339): “But in no part of his learned and exhaustive opinion does

he seek to apply its doctrine to shares in corporations or other personal property the legal title to which is capable of being transferred by assignment; and the free transmission from hand to hand is essential to the prosperity of a commercial people. The question of estoppel does not seem to have been considered in that case, and perhaps it would not have been appropriate." He expressly approves the rule frequently laid down as to chattels, and, while invoking the aid of estoppel, is very careful to state the narrow limits within which it may be used, and the kind of facts which are necessary to its

use.

He says (pp. 329, 330): “Simply intrusting the possession of a chattel to another as depositary, pledgee, or other bailee, or even under a conditional executory contract of sale, is clearly insufficient to preclude the real owner from reclaiming his property in case of an unauthorized disposition by the person so intrusted. (Ballard v. Burgett, 40 N. Y. 314.) The mere possession of chattels, by whatever means acquired, if there be no other evidence of property or authority to sell from the true owner, will not enable the possessor to give good title. But if the owner intrusts to another not merely

§ 161. This decision, and the rule which it establishes in reference to certificates of stock, are doubtless in the interests of modern business methods. For several years these certificates of stock, with an assignment in blank and a blank power of attorney to affect their surrender and transfer, have been practically regarded by business-men as negotiable instruments; they have been used, transferred from hand to hand, and assigned by delivery, in exactly the same manner as bills and notes payable to bearer, and millions of property are constantly ventured upon their use. It was a matter of absolute necessity that the courts should pronounce these securities practically negotiable; a contrary ruling would have interrupted and jeoparded the whole financial system of the country. It would have been well if the court had boldly met the question face to face, and had expressly held these securities to be negotiable to all intents and purposes. This course of decision would have produced no unexpected interference with other general doctrines, and it has a precedent in the acts of the American courts holding that municipal and corporation coupon bonds of the ordinary form are negotiable. As the court did not pursue this course, it accomplished the same purpose by resorting to the doctrine of estoppel; and I repeat, that when confined to these peculiar forms of securities which had been made practically negotiable by the course of business, the judgment and its ratio decidendi do not affect the general principle in relation to the transfer of things in action which has been stated and illustrated in preceding paragraphs. But the same court has, in a still later case, gone far beyond both the

the possession of the property, but also written evidence over his own signature of title thereto, and of an unconditional power of disposition over it, the case is vastly different." The following would seem to be the general rule as thus approved by the court: If the owner of a thing in action delivers it to an assignee for a special purpose, with a simple written assignment thereof, even though absolute on the face, this is not enough to raise the estoppel; but if, with this assignment, the owner gives a further writ ing containing "an unconditional power of disposition" over the thing in action, then the estoppel may be invoked. In Holbrook v. N. J. Zinc Co., 57 N. Y. 616,

622, 623, the doctrine of estoppel was applied to the corporation itself whose stock had been transferred in good faith, and in the usual manner, to the plaintiff. McNeil v. Tenth Nat. Bank, supra, and Leitch v. Wells, 48 N. Y. 585, were held to be controlling; and Ledwich v. McKim, 53 N. Y. 307, was said not to conflict in any manner. It is decided in Nevada that certificates of stock in the ordinary form are not negotiable instruments, so that when such certificates had been stolen and transferred in the customary manner to a bona fide purchaser for value, the latter acquired no title as against the owner. Bercich v. Marye 9 Nev. 312.

conclusions and the reasoning of its judgment in McNeil v. Tenth National Bank, and has virtually obliterated the distinction between negotiable and non-negotiable things in action, at least so far as the relations between assignors and assignees of them are concerned. The doctrine of estoppel, which had been used to protect the customary modes of transacting business with certificates of stock, is now extended to all species of things in action, and the effect of an estoppel is declared to be produced from a mere assignment of the security, absolute on its face, executed by the original owner, and delivered to his assignee. In short, whenever the owner of a non-negotiable thing in action delivers the same to another person, and accompanies the delivery by an assignment thereof, absolute on its face, and this person transfers the same to a purchaser for value who relies upon the apparent ownership created by the written assignment, and has no notice of any thing limiting that apparent title, the original owner is estopped from asserting as against such purchaser any equities existing between himself and his immediate assignee, and any interest or property in the security which he may have, notwithstanding the written transfer. The Court of Appeals, in reaching this conclusion, expressly overrules the decision made upon the facts involved in Bush v. Lathrop; but at the same time declares that it does not intend to shake the general doctrine controlling the transfer of non-negotiable things in action upon which that decision is based. It is plain, however, that the ancient and, as it was supposed, well-settled doctrine is substantially abrogated by this last application of the principle of estoppel. The estoppel is made to arise from a mere naked transfer in writing, absolute in form; the rationale of the decision is the apparent ownership thus bestowed upon the assignee; and these elements of the judgment will clearly apply to so many cases that things in action are practically rendered negotiable in their nature as between the series of successive holders, the assignors and assignees. This point being attained, it will be a short and easy step to apply the doctrine of estoppel to the debtor himself, the obligor or promisor who utters the security. If negotiability is produced by means of estoppel between the assignor and assignee, arising from the fact and form of a transfer from one to another, by parity of reasoning the debtor may be regarded as estopped by the fact and form of his issuing the undertaking and delivering

it to the first holder, and thus creating an apparent liability against himself. In short, there is exactly the same reason for holding the debtor estopped from denying his liability upon a written instrument which apparently creates an absolute liability, when that instrument has passed into the hands of a purchaser who has no notice of the actual relations between the original parties, as for holding an assignor estopped from denying the completeness of a transfer made by him absolute on the face. This result, if reached, would render all things in action practically negotiable.1

§ 162. As the result of adjudications of which the foregoing are examples, the rules of the law as established independently of the codes may be summed up in the following manner: (1) All defences, either legal or equitable, which existed in favor of the debtor himself against the original creditor at the time of the assignment, or of notice to him of the assignment, of a nonnegotiable thing in action, avail to him against the assignee who seeks to enforce the demand against such debtor; (2) When the owner and holder of a non-negotiable thing in action transfers it to an assignee for a special purpose-such as security for a loan, and the like- by an assignment absolute on its face, but

1 Moore v. Metropolitan Nat. Bank, 55 N. Y. 41. Moore, the owner of a certificate of indebtedness of $10,000, delivered the same to Miller for a certain special purpose, but not intending to transfer any property therein; in fact, Miller was to procure the same to be discounted, and to account for the proceeds, or else return the certificate. Moore, however, gave Miller the following writing, indorsed on the instrument: "For value received, I hereby transfer, assign, and set over to Isaac Miller the within described amount, say ten thousand dollars. Levi Moore." Miller assigned the certificate to the defendant for value, who took it on the faith of this written assignment, without notice of the true relations between Moore and Miller. The action was brought to recover possession of the certificate. The court held, per Grover J. (pp. 46-49), that the case is controlled by that of McNeil v. Tenth Nat. Bank, and that the judgment in the latter is inconsistent with the reasoning of Denio J. in

Bush v. Lathrop, and with the decision made on the facts of that case. Grover J. does not allude to the careful distinction drawn by Rapallo J. between the circumstances of the two cases, nor his approval of the general doctrine and course of reasoning contained in Judge Denio's opinion. Nor does Judge Grover make the slightest allusion to the narrow limits placed by Rapallo J. upon the use of the estoppel; namely, to those cases in which the assignor, by a written instrument over his signature, confers not only the apparent title, but the unconditional power of disposition over the security. While the judgment of Rapallo J. in McNeil v. Tenth Nat. Bank was guarded and cautious, and eminently proper in respect to the peculiar class of securities, that of Grover J. is, I think, opposed to doctrines the most elementary, and can only produce confusion in a branch of the law which had been settled for generations.

as between himself and his assignee retains an interest in or claim upon the demand, and this assignee assumes to transfer the same absolutely to a second assignee who purchases in good faith without notice and for value, the first assignee in fact transfers no higher title than he possesses, and the second assignee takes the thing in action subject to the equities and claims of the original assignor; but (3) in the State of New York a modification of this second rule has been introduced in very recent decisions, and in pursuance thereof, if the original owner accompanies the delivery of the thing in action with a written assignment thereof absolute in form, and therefore apparently vesting the complete ownership in his immediate assignee, an innocent purchaser for value from the latter is protected against any claims, demands, or equities existing in favor of the first assignor; the latter is estopped from asserting his true right and property in the security. This modification, which was at first confined to certificates of stock transferred by means of the customary blank assignment and power of attorney, has been extended to all things in action. § 163. What construction has been put by the courts upon the provision of the codes embodying and reaffirming these general rules? I shall consider in the first place the effect of this provision upon the defence of set-off. No substantial change has been made in the rights of the several parties. The assignee takes the demand assigned subject to all the rights which the debtor had acquired prior to the assignment, or prior to the time when notice was given, if there was an interval between the execution of the transfer and the notice; but he cannot be prejudiced by any new dealings between the original parties after notice of the assignment has been given to the debtor. When two opposing debts exist in a perfect condition at the same time, either party may insist upon a set-off. If therefore the holder of such a claim already due and payable assign the same, and the debtor at the time of this transfer holds a similar claim against the assignor, which is also then due and payable, he may set off his debt against the demand in the hands of the assignee. If, however, the assignment is made before the opposing demand becomes mature, and the latter does not thus become actually due and payable until after the transfer, the debtor's right of setoff is destroyed by the mere fact of the assignment, and no notice thereof to him is necessary to produce that effect. The following