In the original action of McKusick against Seymour, Sabin & Company, an insolvent corporation, on May 12, 1884, the respondent, O’Gorman, was appointed receiver of the property of the corporation under the provisions of chapter 76, G. S. 1878 (G. S. 1894, §§ 5889-5911). The appellant, the Windham County Savings Bank, a creditor, duly filed its claim with the receiver, who contested its allowance. The trial court found as a fact that the bank had converted certain stock held by it as collateral security for the payment of its claim, which exceeded in value the amount of its claim, and as a conclusion of law disallowed the claim. The bank appealed from an order denying its motion for a new trial.
The principal contention of the bank in this court is that there was no conversion of the collateral stock shown, and that the trial court erred in so finding and deciding. The record fully sustains this contention, for it does not show that either Seymour, Sabin & Co. or the receiver ever owned or had any interest in the collateral stock, or that it was the primary fund from which the bank’s claim was to be paid. But, on the contrary, the record shows that the stock was owned, respectively, by F. A. Seymour and J. A. Williams, subject to *362the rights of the bank thereto, and that they each consented to and authorized the exchange of the stock for that of another corporation, which exchange the receiver claims was a conversion of the stock as to him, as the representative of the creditors of Seymour, Sabin & Co.
The record in this case discloses the following undisputed facts: The bank held three promissory notes against Seymour, Sabin & Co.,— two for $5,000 each and one for $4,000, in all $14,000, — payable to the order of D. M. Sabin, dated January 12, 1884, each of which was indorsed by the payee and three other indorsers. The bank held as security for the payment of each of these notes 18 certificates, each representing 20 shares of the preferred stock of Seymour, Sabin & Co., in all 360 shares, of the par value of $50 each. This stock was guarantied by the Northwestern Manufacturing & Car Company, a corporation. Twelve of these certificates were issued to F. A. Seymour, whose name appears on the face of each as the person entitled to the stock, and it was certified therein that he was the owner thereof. The other six shares were of like import, and were issued to J. A. Williams. Both Seymour and Williams were strangers to the notes; that is, neither was a party thereto. There is a statement on each note that it is secured by the stock, giving the number of the certificates.
When or by whom these certificates were delivered to the bank does mot appear, except that they must have been so delivered prior to February 10, 1885; nor whether there was ever any assignment of them to the bank. But on the back of each of the Seymour certificates there is an undated assignment, executed by him, selling and transferring the shares of stock to the Minnesota Thresher Manufacturing Company; and attached to the Williams certificates there was a power of attorney executed by him, dated July 16, 1885, authorizing the bank, as his attorney, to transfer the stock to the Thresher Company. This assignment and power of attorney were executed after the stock was delivered to the bank, but, as already stated, the specific time when the stock was delivered to the bank does not appear. Neither does it appear from the evidence that either Seymour or Williams ever received any consideration whatever for the pledge of their stock for the payment of the notes of the bank. It is apparent from the record that the reason why there was no evidence on this and other material points was, as we shall presently see, that the *363receiver’s claim that the hank converted this stock as to him was an afterthought, asserted for the first time daring the trial.
The bank, on March 7, 1885, filed its complaint of intervention in the original action, setting up its ownership of the three promissory notes against the corporation, and asking that the amount thereof be allowed and that it be permitted to share as a creditor in the distribution of the assets of the corporation. The complaint also stated that it held the stock in question. On May 5, 1885, the receiver, filed his answer, alleging, in substance, that the stock held as collateral by the bank was his property, as such receiver, subject to the rights of the bank thereto; that such stock was guarantied by the Northwestern Manufacturing & Car Company; that it was primarily liable for the payment of the stock; that a receiver of the property of the Car Company had been appointed May 12, 1884; and that the bank had proved its claim on such guaranty against the estate of such corporation, and that the assets in the hands of the receiver were sufficient to pay the claim in full. The reply of the bank put in issue the allegations of the answer, except that it admitted the appointment of a receiver for the Car Company, and that it had filed its claim on the guaranty as alleged.
No further action was had in the matter for more than seven years after issue was thus joined. The Minnesota Thresher Manufacturing Company, the corporation named in the assignment of the certificates of stock by Seymour and in the power of attorney of Williams, to which reference has been made, purchased at a receiver’s sale all of the assets of the Car Company, and the bank surrendered the preferred stock so held by it to the Thresher Company, and took in exchange as a substituted collateral the preferred stock of the Thresher Company to the amount of $19,250 par value, which it still holds.
Afterwards, on November 16, 1892, the receiver filed an amended answer to the bank’s complaint of intervention (which, of course, took the place of the original), in which he made no claim that he, as such receiver, or the corporation of Seymour, Sabin & Co., had, or ever had, any interest in the preferred stock held by the bank. On the contrary, he denied in his answer that the corporation ever made the notes held by the bank, or received any consideration therefor, and alleged that certain pretended officers of the corporation, secretly and without authority, and for their own benefit, issued the notes in the *364name of the corporation. He further alleged on information and belief that the special preferred stock held by the bank was issued without the authority or knowledge of Seymour, Sabin & Co., its stockholders or directors, and in violation of their directions. This amended answer was verified by the receiver. The allegations of this answer were deemed denied by stipulation of the parties.
There was no evidence in the cáse that the corporation of Seymour,, Sabin & Co. was authorized to own, hold, or pledge its own stock, preferred or otherwise. On the trial the principal claim of the receiver, which he sought to establish, was that the corporation never made the notes in question, and was not liable thereon; but, after it appeared from the evidence that the bank had exchanged the collateral stock for the stock of the Thresher Company, he claimed that the bank had converted the stock originally held by it, and the trial court so found and decided.
If it had been shown in this case that Seymour, Sabin & Co. owned or had any interest in the pledged stock, or that it was the primary fund for the payment of the notes held by the bank, it would be true, as claimed, that, the corporation being insolvent, and its affairs in process of being wound up by a receiver, an equity would arise in favor of the other creditors, which would require the bank to exhaust or surrender to the receiver its collateral before participating in tin; fund in court. In such a case this equity could not be impaired by the bank releasing or exchanging the collateral without the consent of such creditors, and the exchange of the stock of Seymour, Sabin & Co. for that of the Thresher Company by the bank, without such consent, would be a conversion as to the receiver representing creditors. But this is only an abstract proposition in this case, for there is nothing in the record to support the hypothesis upon which it rests.
It is suggested that it does not appear from the evidence that the owners of this stock pledged it as security for the debt of the corporation without any consideration from it, and for its accommodation. The burden, in view of the special facts in this case, was on the receiver to establish that the corporation had some interest or equity in the stock; not on the bank to prove a negative, that it had no such interest. The bank was not the original payee of the note, but D. M. Sabin; and there is nothing in the case to show that the stock in question was ever pledged by its owners as security for the pay*365ment of these notes until they were transferred by Sabin to the bank, ■or that the stock was not so pledged for the accommodation of Sabin. But, whatever the fact may have been, the relation of the corporation to this stock, and its interest therein, if any, were matters peculiarly within the knowledge of the corporation and the receiver. The bank was without such knowledge. In exchanging the collateral it ■acted without any notice of any supposed claim of the corporation, upon the apparent absolute ownership of the stock by Seymour and Williams, and exchanged the stock for the substituted collateral by virtue of the assignment and power of attorney made by such owners after the stock had been pledged. This shows that they still claimed to be the owners of the stock, and were exercising acts of ownership as to it.
It is claimed in the brief of the respondent that the failure of the receiver to show that either he or the corporation had any interest or equity in the stock was not urged in the court below. This is substantially true. But the question of conversion was not litigated, except incidentally. The receiver stood upon the defense made in his amended answer, that the corporation never made the notes, and that it never issued the stock; that is, he repudiated any claim to the stock, and insisted that it had no legal existence. That there was no abandonment of the issues tendered in the amended answer, >or addition of any new ones, is apparent from the claim of the attorney of the receiver, made near the close of the trial, who then for the first time stated that there were only three propositions in this case: (1) the conversion of the collaterals; (2) whether, under the •.stipulation, that conversion can be shown as a defense; (3) whether, under the circumstances that these notes were issued, the corporation •exceeded its powers, and whether, as a matter of law, that can be ■considered as a defense. It is unnecessary to discuss the stipulation referred to, for it did not change the issues, or allude in any manner to the conversion of the stock.
In a word, the record shows that the exchange of collaterals was made by the bank with the consent and express authority of the parties owning the stock originally pledged, and it does not show that Seymour, Sabin & Co., or its receiver, had any interest or equity therein, but does show that the receiver repudiated both the notes and the -stock pledged for their payment. The finding and decision of the *366trial court that the bank converted the stock is, therefore, wholly unsupported by the evidence, and a new trial must be granted.
With reference to such trial, it is only necessary to add that, if it shall be established that Seymour, Sabin & Co. was the owner, equitable or otherwise, of the stock, or that it was the primary fund for the payment of the notes, then the exchange of collaterals by the bank without the consent of the receiver was a conversion of the original stock, and it must account with the receiver in the adjustment of the amount of its claim against the corporation for the value of the stock at the time of such exchange or conversion. And, further, that the fact that J. C. O’Gorman, the receiver, witnessed the transfer of the stock, does not prove that he consented, as receiver, to such exchange of collaterals. He could not so assent without the permission and authority of the court.
Order reversed, and new trial granted.