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the representation of Wuerpel, that it was the property of the Peo-
ple's Savings Institution ; that plaintiff had collected of the other
collaterals only the sum of $2,040.26 ; that plaintiff had presented
to said assignee, Fisse, said certified check of $4,500, for allowance,
and that the same had been allowed, that said assignee had subse-
quently declared a dividend of two and one-half percent, but that

Digitized by


OCTOBER TERM, 1879. 471

iDterDational Bunk v. German Bank.

plaintiff bad collected no part thereof. These are. the facts and

The pleadings are: A petition filed by plaintiff, March 11,
1875, against the German Bank, upon the certificate of deposit
above set out, wiiich petition is in the usual form. The answer of
the German Bank admits the issue of said certificate, but sets out
that Hermann Boecke and said assignee, Fisse, both, also demand
the amount due on said ccrtificat;*; alleges its readiness to pay over
the money or to bring it into court, and asks that said parties may
be ordered to become parties to this suit and to interplead. There-
upon plaintiff moved to strike out from said answer all allegations
showing that any other party made a claim to the certificate, which
motion was overruled. Hermann Boecke filed also a petition in
this on April 20, 1875, praying that he be permitted to
interplead. This petition was granted and such leave given.
Thereupon Boecke filed his interplea on May 15, 1875. October
27, 1875, John H. Fisse, assignee of the People's Savings Insti-
tution, by leave of court, also filed his interplea, claiming that
defendant, the German Bank, should first pay the two notes made
by Boecke. On January 5, 1876, plaintiff filed a reply to the
interplea of Boecke. Ou January G, 1876, the German Bank
moved, and it was accordingly ordered that it pay into the court
the sum of $3,050, that it pay $40 to its attorneys, and that it be

On January 15, 1876, the case went to trial before Judge
John Wickham, under the pleadings and facts above stated. The
plaintiff prayed for three instructions, all of which the court
refused to give.

These instructions are as follows: 1. The court declares the
law of this case to be, that if the People's Savings Institution, by
Edmund Wuerpel, its cashier, on the 30th day of January, frauds
ulently or by fraudulent representation obtained possession of the
certificate of deposit, and the plaintiff afterward replevied said
certificate out of the hands of the People's Savings Institution,
then the People's Savings Institution acquired no right to or inter-
est in said certificate by reason of such possession, nor did plaintiff
lose any right or interest therein, but he is entitled to the same
rights that he would have had if the certificate had remained in
his possession continuously up to the time of bringing this suit.

2. The court declares the law of this case to be as follows: It

Digitized by



InternatioDal Bank y. Qemian Bank.

being admitted by all the parties that the certificate of deposit on
which suit is brought was indorsed in blank b; Boecke, the payee,
and by him delivered before maturity to the People's Savings Insti-
tution, the effect of such indorsement and delivery was equivalent
to an acknowledgment on the part of Boecke that he had parted
with the ownership of said certificate, and he is estopped from set-
ting up any claim to or interest in the same us against the rights
of the plaintiff, provided plaintiff took the certificate from the
People's Savings Institution as collateral for a loan, before matur-
ity, without any notice of Boecke's ownership or claim, but upon
the representation of Wuerpel, the cashier, that the People's Sav-
ings Institution was the true and lawful owner of the certificate.

3. If the court, sitting as a jury, believe from the evidence that
the certificate of deposit on which this suit is brought was indorsed
by Hermann Boecke, the payee, before its maturity, and that said
certificate, after such indorsement and before maturity, was assigned
to plaintiff as collateral security for a loan obtained upon the faith
and credit of that and other securities, that plaintiff took said cer-
tificate in good faith, without any notice of any defect in the title
thereof, or of any equities existing against the payment of the same,
and if the court further believe from the evidence that the said
loan has not been wholly paid, then the court will find for the

Thereupon the interpleader, Boecke, prayed for the following in-
structions, which the court gave: 1. The court declares the law to
be, that if the plaintiff took a check for the amount of the note
for which the certificate of deposit in controversy was given as a
collateral, and voluntarily surrendered up the note and certificate,
then plaintiff has no claim upon Boecke's equity of redemption to
said certificate of deposit, even although the money was never paid
on said check.

2. The court declares the law to be, that the instrument sued on
in this case is not a negotiable instrument, and that therefore it is
subject in the hands of plaintiff to all the defenses which would
exist against the People's Savings Institution, and plaintiff could
acquire no other or greater title or claim to said instrument than
the said People's Savings Institution had therein when transferi*ed
by it to the plaintiff.

3. The court declares the law to be that the certificate of deposit
in controversy is not a negotiable promissory note, and plaintiff.

Digitized by


OCTOBER TERM, 1879. 473

International Bank v. German Bank.

the International Bank, must therefore show that it paid value for
said certificate, even though it obtained said certificate before ma-

The court thereupon rendered judgment, that out of the fund
deposited by the German Bank, the two notes made by Boecke to
the People's Savings Institution should bo paid to John BE. Fisse,
and the balance to U. Boecke, and nothing to plaintiff. Plaintiff
appealed to the Court of Appeals, which reversed the judgment
below and rendered a judgment substantially the same as that of
the Circuit Court, so far as Boecke was concerned, but adjudged
the $450 borrowed of the People^s Savings Institution to the plaint-
iff, and the case comes to this court by appeal from this last judg-

The principles upon which a determination of this case depends
are well established and recognized by this court in prior adjudica-
tions, and rest on solid foundations of justice and equity; but the
application of these principles, which all recognize to be right, has
occasioned considerable diversity of opinion, partly on account of
the facts i)eculiar to each case, and partly owing to statutory regu-
lations peculiar to the State where the questions arose. I am not
aware of any case like the present having ever come before this
court, and although we have been referi*ed to cases in California,
New York, Ohio, Pennsylvania and Massachusetts, they are mostly
in reference to mining stocks and bank stocks, and their mode of
transfer regulated by State laws. We have examined all of these
cases that are accessible, and endeavored to ascertain from them
how far the transfer of the certificate of deposit in this case ought,
upon the principles agreed on, to be governed by these decisions.

I propose to discard from consideration any investigation into
the questions largely discussed by the counsel on either side, and
apparently entering largely into the consideration of the Circuit
Court, which originally decided the case, and of the Court of Ap-
peals where it was last disposed of, whether the certificate of deposit
by Boecke was a negotiable instrument or not. That it was trans-
ferable by delivery and indorsement is not disputed. *• The term
'negotiable,'*' as was observed by Judge Scott in Odell \. Oray,
15 Mo. 342, "in its enlarged signification, applies to any written
security which may be transferred by indorsement or delivery, so as
to vest in the indorsee the legal title, so as to enable him to main-
tain a suit thereon in his own name. In this sense of the term, a
Vol. XXXVI— 60

Digitized by



iDtemational Bank v. Oermaii Bank.

bond under tho statute concerning bonds and notes may be said to
be negotiable, and in this sense is the term understood when ap-
plied to paper in cases similar to that now under consideration. In
this State, where there exist both bonds and promissory notes
which are negotiable, but yet have none of the properties of a bill
of exchange, but their being suable upon in the name of the in-
dorsee, and notes with all of tlie characteristics of a bill of exchange,
the term * assignable ' is usually applied to the former and * negoti-
able ' to the latter class of those instruments."

We shall assume therefore, that the certificate of deposit was a
nou-hegotiable instrument in the restricted sense of the term
** negotiable," referred to by Judge Scott. It was assignable how-
ever, and was assigned by an indorsement in blank of Hermann
Boecke. What was the object and effect of this blank indorsement?
It is said the object was safe keeping, and as collateral security for
the loan oi $450 borrowed of the bank. So far as safe keeping is
concerned, one would think that it could be as safely kept without
his name on the back as with it. As collateral security, it could
only be of use as an authority to write over the name of the in-
dorser that of the indorsee, or that of any one else to whom he
might sell or pledge it, with a view to collect the certificate, or to
raise money on its transfer.

In New York, it seems that certificates of stock in a bank are
usually made transferable only on the books of the bank by the
owner of the stock, or his attorney, yet the Supreme Court of that
State held, in Kortright v. Buffalo Commercial Bank, that a cer-
tificate of stock is transferable by a blank indorsement, which may
*be filled up by the holder, by writing an assignment and power of
attorney over the signature indorsed. The court observes : "The
execution in bhuik must have been for the express purpose of
enabling the holder, whoever he might be, to fill it up. If intended
to be filled up in the name of the first transferee, there would have
been no necessity for its execution in blank. The filling up is but
the execution of an authority clearly conveyed to the holder, is
lawful in itself and convenient to all parties, as it avoids the
necessity of needlessly multiplying transfers on the books." 20
Wend. 93. This case was taken to the Court of Errors (22 Wend.
360), where the judgment of the Supreme Court was affirmed, with
the dissent of the chancellor and two or three senators. So far as
the point we are now considering is concerned, the opinion of the

Digitized by


OCTOBER TERM, 1879. 475

International Bank v. German Bank.

court is chiefly aimed to show that a sealed transfer in blank of bank
stock, which seems to be admitted requisite, by reason, I presume, of
the terms of the bank charter or some by-law on the subject, would
authorize the transferee to write a full assignment and a power of
attorney over the signature thus made under seal. It is unnecessary
to insert the reasoning of the court or its conclusions on this point,
since it will not be and has not been pretended that any seal is
necessary to an assignment of a bank certificate of deposit, or any
power of attorney in this State or elsewhere. If an assignment in
blank, under seal, in cases where a seal is requisite, will sfill author-
ize the holder to write over it the necessary power of attorney, it
surely must follow a fortiori that such assignments, or indorsements,
without seal, where none is required and where no power of attorney
is required, will have equal efficacy in transferring the legal title to
the indorsee, assignee or holder.

This question was again discussed in McKeil v. Tenth Xational
Bank, 40 N. Y. 329; s. c, 7 Am. Rep. 341, before the Court of
Appeals, composed of seven judges, in which all the judges who
exj)ressed any opinion concurred. In that case, the judge delivering
the opinion of the court observes : *'The true point of inquiry in
this case is, whether the plaintiff did confer upon his brokers such
an apparent title to, or. power of disposition over, the shares in
question as will thus estop him from asserting his own title, as
against parties who took hona fide through the brokers." This, it
will be perceived, is also a case of a transfer of bank stock, but
what is said has a bearing on the present case, and we therefore
copy it: "It is said in some English cases that blank assignments
of shares in corporations are irregular and invalid, but that opinion
is expressed in cases where the shares could only be transferred by
deed under seal, duly attested, and is placed upon the ground that
a deed cannot be executed in blank. Without referring to the
American doctrine on that subject, it is sufficient to say that no
such formality was requisite in this case. It was only necessary to
a valid transfer, as between the parties, that the assignment and
power should be in writing. The common practice of passing the
title to stock by delivery of the certificate with blank assignment
and power has been repeatedly shown and sanctioned in cases which
have come before our courts, * * and in the case of Kortrtghi
V. Commercial Bank of Buffalo, 20 Wend. 91, and 22 id. 348, the
same usage was established as existing in New York and other

Digitized by



Intemational Bank v. Qerman Bank.

States, and it was expressly held that even in the absence of such
usage a blank transfer on the back of the certificate to which the
holder has affixed his name is a good assignment, and that a party
to whom it is delivered is authorized to fill it up by writing a trans-
fer and power of attorney over the signature. It has also been
held by repeated adjudications, that as between the parties, the deliv-
ery 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, etc."

The case of Moore v. Metropolitan Bank, 56 N. Y. 41; s. c, 14
Am. Bep. 173, was not a case of bank stock, but of a certificate of
indebtedness of the State of New York, issued by the capitol com-
missioners, and this certificate was not assigned in blank, and
therefore the case has no application to the question now under
consideration. It however reviewed and reaffirmed the decisions
heretofore cited, all the court (seven judges) concurring, except
Allek, J., who dissented, and it was decided (there being no ques-
tion about an assignment in blank) that a bona fide purchaser for
value of a non-negotiable chose in action from one upon whom the
owner has by assignment conferred the apparent absolute owner-
ship, where the purchase is made upon the faith of such apparent
ownership, obtains a valid title as against the real owner, who is
estopped from asserting a title in hostility thereto. Had the
assignment been in blank it would have been precisely the same
question with the one presented by the case before us, and we will
therefore take occasion to refer to it again when we pass to the
main point in this case.

The same principle is asserted in Weirick v. Mahoning Co. Bank,
16 Ohio St 296. This was the case of a deposit in one bank to the
credit of another bank. The depositor, without the knowledge of
the last bank, took a letter from the bank where the money was

Digitized by


OCTOBER TERM, 1879. 477

International Bank v. German Bank.

deposited, to the bank to whose credit it was j^laced, advising it of
the deposit, and afterward delivered the letter to a third person
named Wolfe, with his own name indorsed in blank thereon, for
presentation to the bank to whose credit the deposit was made.
The bearer of the letter wrote the following order over the signa-
ture of the depositor: " Pay the within to T. M. Wolfe," and it was
held that the bearer of the letter had authority to control the fund
and to write the above order over the signature in blank, and that
a payment to Wolfe was authorized. The court observed that ** it
is well settled that if one intrusts his name in blank to another to
procure a discount, he is liable to the full extent to which such
other may see fit to bind him when the paper is taken in good
faith, without notice that the authority given is exceeded. The
authority conferred by such blank signatures is said to be that of a
general letter of credit. It is no defense against a bona fide holder
to prove that the person to whom the paper was intrusted was only
authorized to use it for a particular purpose, and had fraudulently
converted it to a different purpose, or that he was only authorized
to fill the blank upon a certain condition which had not happened."
It will be observed that this was an application of the principles,
which govern in negotiable paper, not merely to a blank assignment
of a non-negotiable certificate, but to a mere letter written by the
bank in which the deposit was made, addressed to the bank where
the note of the depositor was due, and indorsed to a friend as a
matter of convenience, in order that the depositor might get credit
for the amount, but the court held "that the indorsement in blank
having been made, and with the voucher delivered to Wolfe, the
bank, in the absence of any just ground to suspect the bona fides
of Wolfe, had a right to presume him invested with full authority
over the fund, and might safely pay him the money or apply it as
he might direct."

The case of Combes v. ChandUr, decided in the Ohio Supreme
Court, in 1878, is not accessible, the volume containing the decis-
ion in October of that year not being in the State Library, but the
report of its substance in the Albany Law Journal (vol. 18, p. 358)
is doubtless correct* This report represents the decision as follows:
"A bona fide purchaser for value of a non-negotiable chose in action,
from one upon whom the owner has by assignment conferred the
apparent absolute ownership, when the purchase is made upon the

♦ Reported, 33 Ohio St. 178.— Rbp.

Digitized by



International Bank v. Gennan Bank.

faith of such appai*ent ownership, obtains a valid title against the
real owner, who is estopped from claiming title thereto."

In California there have been three cases decisive of the questiou
under consideration, the last one made in 1879. This was the case
of Winter v. Belmont Mining Co., 53 Cal. 428. In this case it was
held that where the owner of certain mining stocks caused them to
be transferred on the books of the corporation to another, who was
there called " trustee," and tlie certificate was issued to such trustee,
and such trustee indorsed the certificate in blank and delivered it
to a third i)erson, from whom it was stolen and put on the market
by the thief, the purchaser in good faith and for value acquired a
valid title to the stock as against the owner. In this case the per-
son who committed the theft happened to be the " trustee," but 1
presume the party to whom it had been delivered with a blank in-
dorsement would have been equally competent to pass the title. It
had been previously held that the addition of the word *^ trustee"
to the name in which the stock was registered and a blank assign-
ment in such name, did not show that the person so styling him-
self had not full power to deal with it as his own, and gave no
notice to the party buying the certificate that any other person had
an interest in it; on the contrary, though indicating that he had a
cesttii que trust, yet the reasonable presumption was that as the legal
holder lie had the right to dispose of it. Thompson v. Tolnnd, 48
Cal. 99. In this case the court remarked that the owner had per-
mitted the certificates to remain in the hands of the person in whose
name they had been registered, and indorsed in such manner as to
pass by delivery, and with nothing on their face to indicate that he
had any interest in them, or that they were not the property of the
registered owner whom he clothed with all the usual indicia of the
ownership of mining stock. '* He had," observes the court, " placed
them in a position to deal with the stocks as though they were the
absolute owners. * ♦ * He clothed them with such an appa-
rent ownership as to mislead the public. ♦ ♦ * Under such
circumstances the party who places another in a position to practice
the fraud should suffer the loss, rather than an innocent person
who deals with him on the faith of the usual indicia of ownership
with which the true owner has invested him."

We deem these authorities sufiicient to show that the blank in*
dorsement of Boecke upon the certificate of deposit and the deliv-
ery to the cashier of the People's Savings Institution with this

Digitized by


OCTOBER TERM, 1879. 479

International Bank t. German Bank.

indorsement was such a transfer of the title as to authorize those
dealing with the latter to infer an absolute ownership in the Peo-
ple's Savings Institution, and a full authority on their part to sell
or pledge the certificate.

It is said however that the writing in red ink on the back of
this certificate was sufficient to put a party purchasing on inquiry,
thereby distinguishing it from an ordinary non-negotiable promis-
sory note. Wo are unable to perc»five any importance to be
attached to this writing. It could only be regarded as an idle and
superfluous declaration on the part of the bank of rights of lien,
which the law gave them without any declaration, and it seems no
such fees as are specified accrued. It did not concern tho inter-
pleaders and did not affect the question between them. It was
placed on the certificate for the protection of the bank where the
deposit was made. This bank placed in court the whole amount of
the deposit and was discharged.

The question then between the interpleaders resolves itself into
the propriety of the doctrine that where one of two innocent per-
sons must sustain a loss, occasioned by the fraud of a third, it must
fall upon the one that puts it in the power of the third pei*son to
commit the fraud. This doctrine has been repeatedly recognized
by this court, and no citation of authorities is thought necessary.
But it is said that when applied to the transfer of non-negotiable
paper, it conflicts with the equally well established doctrine that in
regard io every security, other than negotiable paper, the vendor
or pledgor can convey no greater or better title than he has him-
self. No better answer to this objection can be made then was by
the judge who delivered the opinion of the Court of Appeals, in
New York, in the case of McNeil v. Tenth National Bank. ''This
doctrine " says the learned judge in that case, " is a truism, predica-
ble of a simple transfer from one party to another, where no other
element intervenes. It does not interfere with the wdll-established
principle, that where the true owner holds out another, or allows
him to appear as the owner of, or as having full power of disposi-
tion 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 author-
ity 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

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Shane y. EauBaa City, etc.. Railroad Company.

negligence or mistaken confidence, he caused or allowed to appear
to be vested in the party making the conveyance." 46 N. Y. 329 ;
Pickering v. Busk, 15 East, 38 ; Gregg r. Wdls, 10 Ad. & Ell. 90 ;

Online LibraryIrving Browne Isaac Grant ThompsonThe American reports: containing all decisions of general ..., Volume 36 → online text (page 54 of 123)