Tilden & Breed having transferred to Sime & Co., King's note for twenty-nine thousand four hundred and eighteen dollars and six cents, and accompanying stock, as security for the debt of Tilden & Breed to Sime & Co., no action lies against Sime & Co. for the stocks, without first paying or tendering to them the amount of said note; and this, independent of the negotiability of the certificates of stock, and independent of King's ownership, or Sime & Co.'s notice thereof, which in this branch of the case, is afalse quantity. (Tyler on Usury, Pledges and Pawn, pp. 567 to 574, inclusive; Schouler on Personal Property, 523, 4, 5; Halliday v. Holgate, 3 Exqr. L. R. 299; Donald v. Suckling, 1 L. R. Q. B. 584; Lewis v. Mott, 36 N.Y. 395; Johnson v. Stear, 15 C. B. Rep. N. S. 336; or 109 E. C. L. Repts. 330; Bloxum v. Saunders, 4 Barn. & Cress. 941; Winks v. Hassall, 9 Barn. & Cress. 372; Jones v. Rahilly, 16 Minn. 321; Jarvis v. Rogers, 13 Mass. 105.) Sime & Co. having paid Livingstone nine thousand one hundred and forty-four dollars, for which most of the stocks in controversy were pledged to him by Tilden & Breed, became subrogated to his rights, which was that of a holder for value without notice, and no action lies against Sime & Co. for the stocks without payment or tender. This, too, regardless of the question of notice of the equitable rights, if any, in King. (Same authorities cited.)
The stocks were transferable by endorsement and delivery, just as negotiable paper, and Sime & Co. having obtained them from Tilden & Breed, as security for a debt from the latter to the former, of thirty-five thousand eight hundred and forty-three dollars and fifty-eightcents, without notice of King's claim, no action lies against Sime & Co. for the stocks, without first paying or tendering the amount of such debt, which the jury finds was not done, and plaintiff does not pretend was even attempted. (McNeil v. Tenth National Bank, 46 N.Y. 325; Brewster v. Sime, 42 Cal. 139, and cases cited; 1 Hittel, Art. 943; 2 Parson's Notes and Bills, 42-3; Goldstein v. Hart, 30 Cal. 375 bottom, 376 top; Donald v. Suckling, 1 Law Reports Q. B. 584, 616; Halliday v. Holgate, 3 Exqr. 299; Johnson v. Stear, 109 E. C. Law, 332; Story on Bailment, Sec. 327; Leitch v. Wells, 3 Sickles, 585.) The suit of Hyde, assignee, in bankruptcy of Tilden & Breed, against Sime & Co., was a former recovery by King's bailees, Tilden & Breed, and bars this action by King's assignee in bankruptcy. Tilden & Breed, if not the owners of these stocks themselves, were the pledgees of them from King. As such pledgees, they had the right to sue for any conversion of them, and recover the whole value thereof, and such recovery is a good answer to any subsequent suit by the pledgor. (Treadwell v. David, 34 Cal. 606; Green v. Clarke, 2 Kern, 343, 354; Casey v. Suter, 36 M. D. 1; Chicago R. Co. v. Shultz, 55 Ill. 423; Betts v. Mouser, Wright's Ohio, 745; Dillenback v. Jerome, 7 Cow. 300; City of St. Louis v. Bissell, 46 Mo. 157.)
Counsel on the other side claim that the Hyde suit was only to set aside the transfer of Tilden & Breed to Sime & Co., on the ground of a fraudulent preference, and hence it was not for the same cause of action.
But the action of the Bankrupt Court, under the circumstances, was quasi in rem. The possession, right of possession, and legal title of the stocks were in Tilden & Breed, and not in King, on the 31st of August, 1868. At most, King had a mere right to redeem. This property in Tilden & Breed passed to Hyde, as assignee, with all its incidents, and could be adjudicated by the U.S. District Court in Bankruptcy. (Garwood v. Garwood, 29 Cal. 272; McCullough v. Clark, 41 Cal. 302; Canjolle v. Ferrie, 13 Wallace 474; 2 Smith's Ld. Cases, 7 Amer. ed. pp. 808-822; on Estoppels in rem, Duchess of Kingston's case; Scott v. Sherman, 2 Wm. Blackstone, 978.)
Calhoun Benham, in reply to respondent's point that the plaintiff could not recover without a tender, argued that Sime & Co. were not the owners of the note at the trial, and never were; and a payment of it by King to defendants or to Sime & Co. would not have been a satisfaction of the note. Tilden & Breed did not transfer the note to Sime & Co. as security for their debts to Sime & Co. And, if they did, the transfer was void, as they were insolvent. And if they had so transferred it, Sime & Co. could not have claimed its payment, because they were not owners or holders of it at any time after they surrendered it to Hyde.
That there was no presumption in law that Livingstone had a valid pledge. Omnia presumuntur rite acta does not apply to private individuals.
Also, in reply to respondent's point that the stocks were transferable by indorsement and delivery, he said, this is not an open question. Here was mala fides --a taking by fraud. Stocks are not negotiable, though they pass by indorsement and delivery. Sime & Co. would not have been innocent purchasers or pledgees, quoad Tilden & Breed's debt to them, even though the stocks had been negotiable paper, and actually pledged for the old debt, and they had not had notice of King's title.
They parted, accordingto the theory of this point, with nothing--securities or anything else--as the transfer was a nullity as to Sime & Co., with not even their right to any particular judicial process, which at least is necessary under the rule in California. (Weaver v. Barden, 49 N.Y. 286; Morse v. Godfrey, 3 Story, 389, and cases heretofore cited; Payne v. Bensley, 8 Cal. 260; and Robinson v. Smith, 14 Cal. 94.
JUDGES: Crockett, J.
OPINION
CROCKETT, Judge
By the Court, Crockett, J., on petition for a rehearing.
A rehearing is asked on the ground that by the uncontradicted testimony of Newcomb, when Sime & Co. received the stocks, and particularly those pledged to Livingstone, Sime had express notice that they belonged to King. The jury found otherwise; and it is insisted that the verdict on this point is not only wholly unsupported by any evidence in the cause, but is directly contrary to the testimony of Newcomb. It is to be observed, however, that Sime died pending the action, and his testimony was not obtained. The only evidence of express notice to Sime is to be found in the testimony of Newcomb, relating to a conversation between them at which no one else was present. The conversation occurred on the day of the failure of Tilden & Breed, and amidst the confusion and excitement naturally attending such an event. It was a conversation between a clerk of the bankrupt firm and one of its creditors for a large sum, eagerly in search of information as to its assets. Evidence of a conversation, resting only in the memory of a single witness, is ordinarily the most unsatisfactory of all evidence. Conversations are so easily misunderstood, particularly under circumstances of excitement, and the human memory is so treacherous, that testimony of this character is held by all courts to be the weakest of all evidence. Moreover, Newcomb was contradicted by Hastings in respect to some of the circumstances attending the giving of the check to redeem the stocks from Livingstone, and on his cross-examination he testified that Sime & Co. " knew from me that the stocks in Livingstone's possession belonged to King, or a portion of them, anyway; but I don't testify, and I have not testified that I told them in so many words that they were King's stocks." Under these circumstances, while there is nothing to impeach his integrity, we cannot say that the jury was not authorized to distrust the accuracy of Newcomb's recollection of the conversation. It was incumbent on the plaintiff to prove notice to Sime & Co. of King's equities; and, under the circumstances already stated, it was for the jury to determine whether the evidence on this point was sufficiently satisfactory to establish affirmatively the fact of the notice. Their finding being in the negative, we would not be justified in setting aside the verdict on the ground that it is unsupported by the evidence. But, waiving this question, we think the judgment ought to be affirmed on another ground. There can be no doubt that Tilden & Breed were entitled to hold the stocks as collateral security for King's note. The note itself, and the stocks as collateral security for its payment, were delivered to Sime & Co., as collateral security for the indebtedness of Tilden & Breed. It cannot be doubted that Tilden & Breed, the holders of King's note, had the right to pledge it to Sime & Co., and to deliver to them, as collateral security for the note, the stocks held in pledge to secure its payment. Though this transaction was held to be a fraud on the Bankrupt Law as against the creditors of Tilden & Breed, and void as against them, it was nevertheless, valid as against King. As to him, Sime & Co. became the lawful holders of the note, and of the stocks, as collateral security for it. As pledgee of the stocks, holding them for the security for King's note, it would not have been incumbent on them, upon a redemption of the pledge, to return to the pledgor the same identical certificates which they had received, but it would have been a sufficient discharge of their duty as pledgees to have kept on hand, and to have been ready at all times, on a redemption of the pledge, to restore to the pledgor certificates of stock corresponding to those received of the pledgor. (Atkins v. Gamble, 42 Cal. 86; and cases there cited.) The mere fact, therefore, that Sime & Co. had sold these particular certificates, did not of itself render them liable as for a conversion of the pledge. If they had continued to be the holders of King's note, he could not have put them in default, except by a tender of payment and a demand for the stocks; and they would not have been in default, if upon such tender and demand they had offered to restore to them other similar certificates, and had shown that they had at all times been ready to do so. But he could not have maintained the action without a tender and demand. It appears, however, the District Court of the United States held the transaction between Sime & Co. and Tilden & Breed, to be void as against the creditors of the latter, and compelled Sime & Co. not only to surrender the note, but to account for the value of the stocks. The effect of this decree was to adjudge that as between the assignee of Tilden & Breed and Sime & Co. there had been no valid pledge of King's note, and the stocks as collateral security for its payment. In other words, it restored the note to the assignee with the same rights as though Tilden & Breed had never attempted to pledge it to Sime & Co. But in the meantime, Sime & Co. had disposed of the stocks and converted the proceeds to their own use. In whom was the right of action for the conversion? Was it in King, or in the assignee of Tilden & Breed as the holder of King's note, and as pledgee of the stocks to secure its payment? In Treadwell v. Davis, 34 Cal. 606, we had occasion to consider the question, whether the pledgee, in an action against a stranger for a conversion of the pledge, was entitled to recover the value of the pledge, or only the value of his special interest in it. We say, " the rule appears to be well settled that in an action by the pledgee against a stranger for the conversion of goods, the plaintiff is entitled to recover the full value of the goods, because he is answerable over to the pledgor for the surplus. But if the goods be converted by the owner, or by any one acting in privity with him, the pledgee can recover only the value of his special interest in the pledge; " and we cite in support of this proposition, Story on Bailment, Sec. 352; Lyle v. Barber, 5 Bin. 457; Heyden & Smith's Case, 6 Coke, 486; Ingersoll v. Van Bokkelen, 7 Cow. 670; Pomeroy v. Smith, 17 Pick. 85, to which many other authorities might be added. Assuming this to be the correct rule (of which we have no doubt), the assignee of Tilden & Breed, as pledgee of the stocks, was entitled to recover their full value from Sime & Co., who, on the plaintiff's theory, were strangers to King, and not acting in privity with him. The complaint charges them to be naked wrong doers, who wrongfully and fraudulently obtained possession of the stocks, without the knowledge or consent either of King or Tilden & Breed; and the plaintiff now contends that they wrongfully and unlawfully obtained possession of the stocks, and converted them to their own use, with full notice of King's rights. If this be so, they were wrong doers, and could not have acted in privity with King. In an action against them, the assignee of Tilden & Breed, as pledgee of the stocks, was therefore entitled to recover their full value as he appears to have done. The effect of this recovery and the satisfaction of it by Sime & Co., was to vest in them a title to the stocks or their proceeds. In any event, it cannot be doubted that the assignee of Tilden & Breed, as pledgee of the stocks, was entitled to recover the value of his special interest in them; and it appears that the stocks, at the time of their conversion, were worth much less than the debt for which they were pledged to Tilden & Breed. This value was ascertained by the judgment of the Court, and was paid by Sime & Co. to the assignee of Tilden & Breed. No interest was left in King on which he or his assignee could maintain an action against Sime & Co. The point is made that the proceedings in the Bankruptcy Court were not admissible in evidence under the pleadings; but we are of a contrary opinion.