1. Except where the original owner of a non-negotiable demand
which he has endorsed in blank is estopped from asserting his
original claim thereto, the purchaser thereof from any party other
than such owner takes only such rights as the latter has parted
that if the pledgee of such a demand writes a
formal assignment to himself over the blank endorsement made by the
pledgeor, and in that form sells it to a third party for value, the
pledgeor is, as against such third party, estopped from asserting
This was a bill in equity, filed by J. W. V. Vandenburgh, H. L.
Crawford, and L. S. Filbert, trading as J. W. V. Vandenburgh &
Co., against Rudolph Blumenburgh, to compel the surrender of a
certain certificate, of which the following is a copy:
Page 101 U. S. 573
"No. 4441] OFFICE OF AUDITOR, BOARD OF PUBLIC WORKS"
"WASHINGTON, D.C., Dec. 6, 1873"
"I hereby certify that I have this day audited and allowed the
account of J. V. W. Vandenburgh & Co., for work on Columbia
Street, amounting to eight thousand four hundred and fifty-one
dollars and eighty-eight cents."
"J. C. LAY, Auditor"
N. A. Cowdrey was subsequently made a party. A decree was
rendered against him, from which he appealed to this Court.
The remaining facts are stated in the opinion of the Court.
MR. JUSTICE FIELD delivered the opinion of the Court.
The complainants, composing the firm of Vandenburgh & Co.,
of the District of Columbia, had, previously to Dec. 6, 1863,
entered into contracts with the Board of Public Works of the
District for grading, paving, and improving certain streets in the
City of Washington. On that day, their account, amounting to
$8,451.88, for work on one of the streets, was audited and allowed,
and a certificate of the auditor to that effect was issued to them.
On the 17th of February following, the complainants borrowed of the
defendant Blumenburgh the sum of $3,160 for six months, and
deposited with him as collateral security the certificate, to be
returned upon the payment of the money. The certificate was at this
time endorsed by them in blank. When the money became due, they
called with the amount and accrued interest at the former place of
business of Blumenburgh to pay the debt and take up their
certificate, but he had disappeared, and no one there knew when he
had left or whither he had gone. The complainants could not find
him nor anyone representing or acting for him, and, what was of
more consequence, they could not find their certificate, either. He
had clandestinely departed from the city, and they charge in their
bill, in substance, that he always intended to cheat and defraud
them and that without their knowledge, he has disposed of the
certificate to someone who in conjunction
Page 101 U. S. 574
with him is attempting to wrongfully use it, and thus deprive
them of their property.
By the legislation of Congress relating to the District of
Columbia, certificates of allowed and audited accounts, like that
in question, could be surrendered to a board of audit, and
certificates of indebtedness against the District received for
them, and these latter certificates could be exchanged for
interest-bearing bonds of the District. The complainants, informed
that the certificate belonging to them had been presented to the
board of audit by agents of Blumenburgh or of persons to whom it
had been passed for the purpose either of obtaining money therefor
or bonds of the District, filed the present bill to arrest the
further use of the certificate and compel its restitution to them.
Learning afterwards that the appellant, N. A. Cowdrey, of New York,
claimed to be owner of the certificate and was seeking to obtain
for it from the board of audit a certificate of the indebtedness of
the District, for which an interest-bearing bond could be issued,
they amended their bill, and brought him in as a defendant.
In his answer, he admits the possession of the certificate, and
avers in substance that he purchased it in the ordinary course of
business of a broker in Washington for value with other
certificates of a similar character, but does not state what amount
he paid for it; that he was at the time ignorant of the transaction
between complainants and Blumenburgh stated in the bill, and that
the certificate had the blank endorsement of the complainants,
which justified him in concluding that they had parted with their
interest; and he insists that he is therefore entitled to
protection as a bona fide
holder for value without notice.
To the answer a replication was filed, and its affirmative
allegations are unsupported by any proofs. The answer cannot,
therefore, be taken as evidence on his behalf. He must therefore be
treated as one standing in the place of Blumenburgh and holding the
certificate subject to the claim and equities of the original
holder. The certificate was not a negotiable instrument which could
pass by endorsement and delivery. It was not a promise to pay any
sum, nor was it an order upon anyone or upon any fund for the
payment of money, or for the delivery of any thing of value. It was
simply a statement that
Page 101 U. S. 575
the account of the complainants for work done by them upon one
of the streets of Washington had been audited and allowed by an
officer of the city whose duty it was to ascertain and certify as
to the amount and price of the work done by a contractor. Whoever
takes such a certificate, whether with or without notice, takes it
subject to all the rights and equities of the actual owner -- as
much so as if it were tangible property in the streets.
The cases where by law certificates of a similar character are
made negotiable can have no application. It is not pretended that
any law of Congress has made the certificates of the auditors of
the District of Columbia negotiable or given to them any special
character beyond that which they purport on their face to possess.
Nor can any weight be given to the suggestion that by custom these
instruments are considered and treated as negotiable paper in the
District. There was no evidence offered of the existence of any
such custom, even had such evidence been admissible to contravene
an established rule of law.
That the purchasers of non-negotiable demands like the
certificate here from others than the original owner of them can
take only such rights as he has parted with, except when by his
acts he is estopped from asserting his original claim, is
established by all the authorities. He must in such case, as Lord
Thurlow said, abide by the case of the person from whom he buys.
Cutts v. Guild,
57 N.Y. 229; Ingraham et al. v.
421; Bush v. Lathrop,
If the pledgee, Blumenburgh, had written over the blank
endorsement of the complainants a formal assignment to himself of
the claim, and in that form had sold the certificate to Cowdrey for
value, it is possible that the latter might have successfully
insisted that the complainants were estopped from asserting, as
against him, ownership of the claim. The principle is well settled
that when the owner of property in any form clothes another with
the apparent title or power of disposition, and third parties are
thereby induced to deal with him, they shall be protected. The case
of McNeil v. The Tenth National Bank,
in the Court of
Appeals of New York, contains a clear statement of the law on this
head. There, it is true, a certificate
Page 101 U. S. 576
of stock was pledged with a blank assignment and power of
attorney endorsed, which the pledgee afterwards filled up and then
disposed of the stock. It was evident that the owner contemplated
that the blanks in the assignment and power should be filled up if
it should ever become necessary. 46 N.Y. 325.
But the principle stated by the court is as applicable where no
such intention is manifested. The rights of innocent third parties,
as the court there observes,
"do not depend upon the actual title or authority 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 negligence or
mistaken confidence, he caused or allowed to appear to be vested in
the party making the conveyance."
Here, the complainants could have expressed in their endorsement
the purpose of the deposit of the certificate with Blumenburgh --
that it was as security for a specified sum of money -- and thus
imparted notice to all subsequent purchasers or assignees that the
pledgee held only a qualified interest in the claim. But having
endorsed their name in blank, they virtually authorized the holder
to transfer or dispose of the certificate by writing an absolute
assignment over their signature. Had it therefore appeared in this
case that Cowdrey paid any money for the certificate, and took it
with the assignment which he himself afterwards wrote over the
signature of the complainants, we are inclined to think that his
defense would have been sustainable. But as he has not shown that
he parted with any value for the claim, and no assignment was at
the time endorsed over the blank signature, he must be treated as
standing in the shoes of his alleged vendor, Blumenburgh.
MR. JUSTICE SWAYNE dissented.