The certificates of stock which lie at the foundation of this controversy are regularly signed by the president and treasurer of the corporation, bear the corporate seal of the company, and were regularly issued to the individuals named-in the several certificates, who indorsed in blank an assignment with a power of attorney to execute a transfer upon the stock books, which indorsement was witnessed. That the stock was properly issued, and the transfer indorsed thereon, duly signed in blank by the shareholder, is unquestioned, and thus, according to the established usage in the commercial world, they were acceptable to lenders or purchasers without,inquiry or other formality than that of delivery, because of the recognized assurance that the stock which the certificates represented could not be transferred, except upon the delivery and cancellation of the- certificate. It is true that the president of the company, who had become the holder and owner of the shares, surrendered them to the company, in order that new shares might be issued in their place to one who had purchased the stock of him, and of right the stock should have been canceled. But it was not, and later, for value, it passed into-the possession of one whom, for the purpose of the present inquiry, we' shall speak of as a “bona fide holder.” While they had been delivered, to the officers of the corporation for cancellation, nothing had been written or stamped upon- the certificates which evinced that fact, and they came first to the attention, and next to the possession, of the plaintiff without anything upon them which in the least tended to disclose that other certificates had been issued in their place. It is difficult to see any reason why the purchaser of a certificate of stock, under such circumstances, should not be held to be in the same legal position as if he were the purchaser of a promissory note payable to bearer before maturity. Both are transferable by delivery, and the certificate bears upon its face the promise of the corporation that a new issue of stock in its stead would not thereafter be permitted without a surrender of the certificate. The object of the assurance was to induce the public to purchase them the more readily because of their easy convertibility; and when we consider the volume of daily transactions in stocks, and have in- mind that stocks of railroad corporations, in this country alone, aggregate a little over 4,600,000,000, with shares in banking, business, and other corporations, almost without number, it would seem to be of the highest importance that the public should be reliably assured that certificates of stock purchased by them in good faith, with a transfer indorsed in blank, entitle them to protection not only against a. claim by a prior owner that he has not parted with it, (McNeil v. Bank, 46 N. Y. 325,) but also from a claim- by a corporation that the stock is invalid, because surrendered up for cancellation, and new stock issued in its place. There seems to be no good reason why, to such an extent at least, such certificates should not be deemed to have so much of the attribute of negotiable securities as to make them, unassailable in the hands of purchasers in good faith and for value. It must be admitted that the weight of au*485thority, numerically considered at least, has pronounced against the applicability of the word “negotiable” as describing the quality of stock certificates. Beach, Priv. Corp. § 677; Cook, Stock & S. § 412. Mr. Beach, in his work on Private Corporations, as well as some other text writers, have manifested a disposition to regard the expression “quasi negotiable” as more aptly descriptive of the character of the instrument, which carries with it, to its purchaser in good faith, assurance of protection, grounded on the doctrine of estoppel; the foundation upon which the estoppel is rested being that the title of an innocent purchaser necessarily comes through acts of the real owner, which makes it possible for any one to purchase the certificates, in the belief that his vendor is vested with title and authority to make a valid and effective sale, and does not-depend upon the rights of the apparent owner in any degree. “This doctrine has been so extended that a bona fide purchaser of stock for value is protected by estoppel in almost every case in which he would be as the holder of a negotiable instrument.” If this be a correct statement of the rule, the necessities of the commercial world in dealing in stocks are as fully recognized, in so far as the protection of the good faith purchaser is concerned, as if certificates of stock were treated as or termed “negotiable.” Protection of the good faith purchaser is the matter of moment; what it may be termed is of least account. Morawetz, in his work on Private Corporations, (2d Ed., § 185,) bases the statement following on the decisions mainly of New York courts:
“By general mercantile usage, shares in a corporation are assignable by indorsement and delivery of the certificate issued to the owner as evidence of his rights. It is well settled that, after a certificate for shares has been indorsed by the holder, with an assignment and power of attorney to execute a transfer upon the stock books, the name of the transferee and attorney being left blank, the certificate thus indorsed may be passed from hand to hand, and the last holder will be entitled to fill up the assignment and power of attorney, and complete the transfer by entry upon the books of the company.”
Among the early cases in this state where a stock certificate, after an indorsement in blank upon the back of it by the holder, for the purpose of having it used as collateral security for a loan, was pledged by the party to whom it was delivered, to obtain a loan in his own behalf, was Kortright v. Bank, 20 Wend. 91. The certificate was for 100 shares of bank stock, and the bank refused to transfer the certificate on its books when requested to do so, notwithstanding the assignment and power of attorney, over the signature of the original owner of the stock, had been duly filled out. The court said that the assignment and power of attorney were in—
“Strict conformity with the universal usage of dealers in the negotiation and transfer of stocks according to the proof in the case. Even without the aid of this usage, there could be no great difficulty in upholding the assignment. The execution in blank must have been for the express purpose of enabling the holder, whoever he might be, to fill it up. * * * 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 upon the books.”
*486Railroad Co. v. Schuyler, 34 N. Y. 30, was a suit in equity to have certain alleged false and fraudulent certificates and pretended stock) of the corporation adjudged void, and to compel the certificates to be brought into court and canceled. The court, in discussing the character of stock certificates, said, at page 82:
“Now, while the. corporation could not give to a certificate of this kind ‘negotiability,’ in its legal commercial sense, it could and did approximate to that characteristic, as nearly as legally possible, for the purpose of making its stock more valuable by the ease with which its certificates could pass from hand to hand by simple delivery. * * * But it was essential to make these certificates in a form to secure public confidence, and this could only be done by making them solemn assurances of rights. Hence, by its by-laws, the' corporation declared that the stock represented by them should never be transferred, except upon the delivery and cancellation of the certificates; and •this provision, in effect, is embodied in the certificate itself. To the purchaser of the stock from its stockholders it assured safety in purchasing the certificates, by declaring that the stock should only be transferred upon its surrender and cancellation.”
In McNeil v. Bank, 46 N. Y. 325, the plaintiff delivered to his brokers a certificate of certain shares of stock to secure any balance of account, having previously indorsed thereon the form of an assignment and a power of attorney to make all necessary transfers. The name of the transferee and attorney and the date were left blank. Subsequently the brokers, without authority, and without plaintiff’s knowledge, pledged the scrip, to secure a loan to themselves. Defendant paid the loan, and received the securities. It was held that it was estopped from asserting its title, as against the plaintiff. Judge Rapallo, speaking for the court, said:
“The holder of such a certificate and power possesses all the external indicia of title to the stock, and an apparently unlimited power of disposition over it. He does not appear to have, as is said in some of the authorities cited concerning the assignee of a chose in action, a mere equitable interest, which is, said to be notice to all persons dealing with him that they take subject to all equities, latent or otherwise, of third parties, but, apparently, the legal title,, and the means of transferring such title in the most effectual manner.”
Judge Rapallo thus makes the distinction which obtains between what is assignable (as are choses in action, generally) and instruments which contain certain elements of negotiability. The one passes by assignment, and is taken subject to equities, while that which is negotiable is taken free from all equities, and secures to the bona fide purchaser the entire legal and equitable right. This element of negotiability was presented in another form in Leitch v. Wells, 48 N. Y. 585. The-doctrine of constructive notice-by lis pendens filed in a pending action was sought to "be made applicable to a subsequent purchaser of certain stock. Plaintiff’s contention was not upheld, the court saying, at page 613:
“Stocks are articles of commerce, and the" dealings in them every business day of the year far surpass in value the dealings in any other species of personal property. They pass from hand to hand in commercial transactions, like negotiable notes or bills of exchange. They are sold and pledged, and- in-many ways form the basis of credit.” “Since the decision of the case of-McNeil v. Bank, above cited, certificates of stock, with blank assignments- and powers of attorney attached, must be nearly as negotiable- as commercial-' paper. The doctrine of constructive notice by lis pendens has never been.applied to such property.”
*487In the case of Fifth Ave. Bank v. Forty-Second St. & G. St. Ferry R. Co., 137 N. Y. 231, 33 N. E. 378, the court recently said:
“While certificates of stock in railroad and other business corporations do not possess the qualities of ‘commercial paper’ in the full sense of the term, yet, as evidence of title, when the transfer indorsed thereon is signed in blank by the shareholder, they become in' effect, so far as the public is concerned, as if they had been issued to bearer. They are then readily transferable by delivery, and have an element of negotiability, which renders them an important factor in the financial and commercial transactions of the country. * * * The plaintiff must therefore be accorded whatever advantage belongs' to a holder in good faith of a chose in action of this character.”
While protection to the bona fide purchaser of stock indorsed in blank has been worked out by means of the doctrine of estoppel, it seems to have at last reached a point in the process of development which justifies the statement following, ’which we take from Cook on Stock and Stockholders:
“This law of estoppel protects the purchaser against, not only the rights of previous holders, but against the claims of the corporation itself. Indeed, to such an extent has the law of estoppel been applied to protect a bona fide purchaser of stock that he is protected now in almost every instance where he would be protected if he were purchasing a promissory note or other negotiable instrument.”
The holder of a certificate of stock who indorses it in blank, which is subsequently wrongfully converted to the use of another, is es-topped from asserting his title as against a bona fide purchaser. For the same reason this defendant would seem to be estopped from challenging the validity of this certificate. Under the seal of the corporation, supported by the genuine signatures of two of its officers, the present holder was informed, by statements appearing upon the face of the certificate, that the shareholder named therein was entitled to a certain number of shares of stock, which could be transferred upon the books of the corporation in person, or by attorney, whenever the certificates should be surrendered, but not otherwise. In the language of Davis, J., in Bank v. Lanier, 11 Wall. 378:
“This is a notification to all persons interested to know that whoever in good faith buys the stock, and produces to the corporation the certificates, regularly assigned, with power to transfer, is entitled to have the stock transferred to him; and the notification goes further, for it assures the holder that the corporation will not transfer the stock to any one not in possession of the certificates.”
It is difficult to see how it is possible for the corporation to make a statement calculated to more thoroughly persuade a purchaser that the stock was still outstanding and valid; and, the plaintiff having acted upon the faith of such assurance, the corporation cannot be permitted to say that it was not true.
If the position thus taken be correct, there remains for consideration the question whether plaintiff is a bona fide holder. The learned referee, however, predicated defendant’s liability upon the ground of negligence, which is a well-recognized foundation upon which to rest an estoppel in cases arising out of wrongful transfer of stock. His finding of negligence on the part of the officers of *488the corporation, if it has support in the evidence, commands the conclusion reached by him that the defendant is estopped from challenging the validity of the certificates in controversy. That the finding is justified by the evidence adduced is readily apparent. It has for a long time been, the rule with corporations to provide that, where certificates of stock were exchanged or returned to the corporation, such certificates should be first canceled, and returned to their original place in the certificate books, before a new certificate should be issued in its place. This experience had taught to be necessary: First, in order to protect the corporation against the returned certificates being wrongfully put into circulation again by officers, employes, or others who might in some way obtain access to them; second, as the public are invited to purchase securities, it is the policy of corporations to have them regarded equally as safe to deal in as negotiable securities. .The protection of the corporation was attempted to be secured by a by-law, requiring surrender .and cancellation before the issue of a new certificate. But, to assure the public against any possible apprehension of difficulty lest a new certificate should have been issued in the place of the one offered for sale, the certificates on their face declared that a new certificate should only issue after the surrender, cancellation, and return to its place in the certificate book of the old one. Now, this corporation had a similar by-law, and made a like representation on the face of the stock certificates issued by it. The occasion for it was well understood. It constituted a part of the business learning of the time. The necessity of carrying out the by-law and the promise of the certificate was as apparent as that the occasion required both the by-law and the promise. Neglect of the officers to follow the by-law under such circumstances could not be otherwise than wrongful as against one who, were it not so held, would suffer from the neglect. The situation is not one where the officers of a corporation can say, “It never happened to us before, and therefore we had no reason to apprehend it;” for it was the experience of other corporations, which they knew so well, and they attempted to guard against misadventure in the manner described. But, while the bylaw was duly made, it was not enforced; and, in failing to comply with this rule of well-recognized necessity, which it pledged itself to comply with on the face of its certificates, it neglected to perform a duty which it owed to this plaintiff, as one of the public. That neglect having resulted in injury to this plaintiff, by reason of it, there is secured to him the right to be indemnified by the defendant.
This brings us to the question whether the plaintiff was a bona fide holder. It was so fully discussed by the referee as to require but little more than a statement that his conclusion is indorsed. The plaintiff was applied to by Reynolds for a loan upon the notes of Jurgens and himself. He refused to make the loan without security. Thereupon the certificates in question were offered and accepted as such. He had no actual notice of any want of title on the part of Jurgens and Reynolds. But it is urged that as Jurgens was the general superintendent of the defendant, and Reynolds an employe, of which fact plaintiff had knowledge, he was put *489on inquiry touching the validity of the certificates; in other words, that, if an intending purchaser of stock knows that the would-be seller is an officer or employe of the corporation which issued the stock, he is put on inquiry, and thus becomes chargeable with constructive notice of everything to which that inquiry would reasonably have led. In Wilson v. Railroad Co., 120 N. Y. 145, 24 N. E. 384, the party discounting the notes of the corporation had knowledge that the proceeds were being applied to the personal use of the president of the corporation; and it was held that prima facie the act was unlawful, and, unless actually authorized, the purchaser would be deemed to have taken them with notice of the rights of the corporation,—a rule which accords with a sound public policy, for corporations have no authority to loan their notes or securities to their officers for use in their own personal transactions. So when a person is invited to buy or loan money, upon the faith of securities, to an officer of a corporation, and such securities or obligations appear to belong to the corporation, he is charged with the duty of inquiry, because agents do sometimes exceed their authority; and, when the situation presented is such as to lead an ordinarily prudent man to question the right of the agent to do a certain act, he who deals with him does so at his peril. Public policy requires such a rule. If it were otherwise, so that it would be sufficient to shut the eyes, and say, “I did not see,” dishonest, although trusted, agents, would have no difficulty in finding ready capital to aid them in enterprises undertaken on the strength of the assets of corporations. A type of the cases which call for the application of the rule is ■furnished by Bank of New York v. American Dock & Trust Co., (Sup.) 24 N. Y. Supp. 406. But, as the rule is well grounded in reason, it has never been so far extended as to embrace such a case as this; ■These certificates do not purport to belong to the corporation. On the contrary, they appear to have been, as was the fact, issued to the shareholder named in each of them, and by her indorsed in blank, so as to be readily transferred by delivery from person to person, until some holder should desire a new certificate. They contain nothing which would induce the suspicion that new certificates had been issued in their place. On the contrary, they severally have the assurance of the president and treasurer that this could not be done until the certificate should be canceled. As neither Reynolds nor Jurgens occupied the position of either president or treasurer, it was evident that they were without the opportunity to issue new stock. But further discussion of this question need not be indulged in. It is apparent that the possession of a certificate of stock of a corporation, regularly issued to a shareholder named therein, and by him indorsed in blank, by an officer of the corporation, other than one having a part to perform in the execution of the certificate, is not of itself sufficient to charge a buyer with the duty of inquiry.
There was a fourth certificate, not in controversy here, which was not indorsed in blank, but regularly filled out, and it is said that plaintiff was thus put in possession of a fact which should have led him to doubt the ownership of the certificate by Jurgens and Reyn*490olds. In the first place, the evidence, which the referee fully credits, is to the effect that plaintiff did not observe that it had been filled, out. That being so, the situation presented is that of a party attempting to assert, as against the corporation issuing them, the validity in his hands of these certificates of stock, under circumstances which command his success, unless his failure to observe-an indorsement upon the back of a certificate not in suit, but delivered at the same time, operates to prevent it. It is difficult to see any basis upon which to charge his carelessness with such consequences. The appellant contends that he cannot recover because of his contributory negligence. Here were four certificates presented to him. He found some of them, and he supposed all of them, indorsed in blank. In that he was mistaken. His examination was not sufficiently careful. By reason of it, he took one certificate which he cannot enforce against the corporation;- but does that deprive him of the right to enforce his cause of action upon each of the other certificates? There was no negligence as to them, or either of them. They proved to be indorsed as he had supposed. The situation does not admit of the application of the doctrine of constructive notice. The appellant suggests otherwise, but does not support the suggestion with decisions. The judgment should be affirmed, with costs. All concur.