The question in this cause is whether, if one steals property and sells it and loans the proceeds, receiving a promissory note payable to bearer, and then transfers the note after maturity, and the holder brings an action against the makers, they can set these facts up in defence.
It will be observed that the owner of the stolen property was not made a party to the action, though the defendants offered to show that she had agreed and undertaken to indemnify them.
This is not the case of loaning the precise thing stolen,e.g., the bailment of stolen goods. Mrs. Newton, whose property (United States bonds) had been stolen, never owned the money which was lent to the defendants. The only possible ground *Page 178 on which she could have claimed it, even from the thief, was, that she chose to ratify his act and make him her trustee. He would have been, in that case, a trustee ex maleficio, but still a trustee. The case will be made more clear by assuming that such chattels as diamonds had been stolen or converted into money. The owner could ratify the sale, declare the wrong-doer an agent and bring an action against him for money had and received to her use. The same rule must be applied to the proceeds of the sale of negotiable securities. If the money had been invested in land or stocks of any kind, the owner of the property would have an election to demand that a trust should be impressed upon the property in her favor, or she might still follow the property that had been stolen, except, of course, in the case of money itself or negotiable securities. Accordingly, when Warner invested the proceeds of the stolen bonds in notes, like the one in litigation, Mrs. Newton had a right to have a trust impressed upon the note in her favor, in the same manner as if he had bought railroad stock with the proceeds. It is thus plain that the real question in this cause is, whether a cestui que trust of a note can intervene and prevent the holder of the legal title from recovering the amount due upon it, simply by prohibiting the makers from paying the person with whom they contracted, or his assignee. In making this claim, Mrs. Newton necessarily ratifies the loan. She says, in substance, to the borrowers: "True, you borrowed this money and executed a note for it, which, in equity, belongs to me, but you need not pay the person of whom you borrowed and with whom you made the contract of loan, simply because I notify you not to pay it." I do not think that such a notice is of any avail, to prevent the holder from collecting the note. The only way in which Mrs. Newton can make any claim against the defendants, is to stand upon the sale of the bonds, and the power of Warner to make the loan and to have him, in substance, declared her trustee. To accomplish this result, she should have been a party to the action, and could, undoubtedly, have been brought in by proper amendment. It is not necessary to decide whether this should have been accomplished *Page 179 by means of a proceeding analogous to a bill of interpleader. In some appropriate form, all the parties should have been before the court, so that the defendants could have paid over the money, and the conflicting rights of the plaintiff and Mrs. Newton have been adjusted.
The offer of Mrs. Newton to indemnify the defendants does not change the posture of the case. A judgment in the plaintiff's favor would not bind her, notwithstanding the indemnity. There was no claim on the argument that the injunction prevented the plaintiff from taking further proceedings in the cause. The judge, at the trial, found that the plaintiff was the holder of the legal title to the note. This was found upon conflicting evidence, and the finding is not reviewable here. We hold that under such circumstances a party like Mrs. Newton having, as is assumed, equitable rights, cannot intervene by mere notice so as to prevent the holder from collecting the note, but can only assert her rights in the usual mode: that is, by becoming a party to an action in which the respective rights of the parties can be adjudicated.
The judgment of the court below should be affirmed.
All concur.
Judgment affirmed.