(1897) 169 Mass. 7, 61 Am. St. Rep. 265, 47 N. E. 242, it appeared that a corporation held certain notes of the plaintiffs for sale, and was to remit to them the proceeds, less its commissions for selling the same. The Potter-Lovell Company also held notes of others of the defendants, which it had received from them for sale. Instead

of selling the notes mentioned for the benefit of the several makers, the company at different times wrongfully and fraudulently pledged all of them to a bank as security for its own debts to the bank, all the notes being pledged for the same debts. The bank, being a bona fide holder for value without notice, collected enough of these notes from time to time as they fell due, including the notes of the plaintiffs and some others, to satisfy its claims against the Potter-Lovell Company. All of the various persons whose notes were thus fraudulently pledged stood on the same footing, except that the notes were pledged at different times, and fell due and were collected at different times, and except that one of the parties demanded the return of its note from the PotterLovell Company before the same was pledged, and never paid the same, in whole or in part, to the bank. It was held that the loss was to be borne by the makers of the notes in proportion to the amounts of the notes pledged. The court said: "These differences do not vary the equitable rights and liabilities of the parties as among themselves. The liability to contribute does not depend on a contract between the parties who are held liable to contribute, and is not affected by the fact that notes were pledged and fell due and were paid at different

times, or that some of them were paid only in part, or not at all. The notes were all pledged to secure the same indebtedness. The fact that some of them fell due at earlier dates than others creates no equity in favor of those which fell due last. . . . The various parties selected a common agent, and this agent used its power to place them all under a common liability, thus virtually making them all sureties for itself. It might be that under such circumstances the pledgee would prefer to hold one and exonerate another, and it would have power to do so, in the first instance, by proceeding to collect of one, but not of another. But where several different parties have thus been exposed to loss by the fraud of their common agent, it is more equitable that the burden of the loss should be shared pro rata. Under such circumstances equality is equity, without respect to the time of the maturity of the notes. The demand by the North Star Boot & Shoe Company for the return of its note was also immaterial. It was no more fraudulent to pledge this note after such demand than it would have been to pledge it before a demand. All the notes being pledged as security for the same indebtedness, the whole loss in consequence thereof is to be borne by all the makers, in proportion to the amounts of the notes so pledged."

In the case of Re Irving Whitehouse Co. (1923) 291 Fed. 700, the statement of facts by the court was, in part, as follows: "The bankrupt was a stockbroker, a greater portion of his business being marginal transactions. Upon an order for the purchase of specified securities and payment of not less than 20 per cent of the purchase price, the bankrupt advanced the balance and held the security as collateral, obtaining the right to repledge the same, and thereupon borrowed from Hutton & Company, New York brokers, the necessary amount to complete the purchase, and repledge the security, it having on deposit with Hutton & Company a considerable amount of security; and upon receiving an order to purchase listed stock

on the New York Exchange, it was forwarded to Hutton & Company in its own name, and its account debited, and the purchased security was added to the bankrupt's collateral, and the account of the customer was debited by the bankrupt to the difference between the marginal deposit and the purchase price. Some purchasers paid in full, and permitted the stock to remain with the bankrupt, who treated it in the same way as with Hutton & Company, while others deposited their security to cover the marginal deposit, which security was deposited with Hutton & Company with the security purchased. Some securities indorsed in blank were delivered to the bankrupt for safe-keeping, or for sale, and the securities were forwarded to Hutton & Company, to bankrupt's account. When stocks purchased were paid for in full, the purchasers did not press for delivery, and the bankrupt, instead of redeeming such stock from the lien pledge, permitted it to remain with Hutton & Company, and for some time prior to adjudication the bankrupt converted, and caused to be converted, securities of customers to its own use. On August 3, 1921, a receiver was appointed for the bankrupt by the state court. On this day Hutton & Company held as collateral deposited by the bankrupt, $48,000, to secure an indebtedness of $37,690.01. The securities, upon the order of the court, were directed to be sold by the receiver, and the surplus, after the payment of the indebtedness due to Hutton & Company from the bankrupt, was paid to the receiver.

The

petitioners assert preferred claims against these several stocks. The trustee contends that the preferred claim should be denied, and the fund distributed to all of the creditors in proportion to their respective claims." The court, in holding that each petitioner was entitled to a pro rata distribution, said: "There are several classes of claimants, but I think, under the stipulation, those holding securities of the same class stand in the same relation to the fund which they claim. As between the claimants there is no difference between the

fully paid and the partially paid securities, since the sale in either event was complete and title vested, and unpaid securities being held as collateral does not change the status. It is unnecessary to determine whether Lane and Theis had traced their stock into the fund in issue, in view of the conclusion arrived at; the holders of a particular security being in a separate class. . Each petitioner is, therefore, entitled to recover the pro rata of the fund as the security held by him bears to the total of such security sold by the receiver issued by the same obligor.

The amount due from the respective holders of named securities which has not been paid shall be deducted from the amount due each and retained by the trustee. I do not think that Lane or others are estopped from asserting this claim because they filed a general claim." The foregoing holding, however, was reversed by the circuit court of appeals, the court saying: "Respondents argue that petitioners should bear the burden equally with other persons whose securities were included in the Hutton pledge, and that there must be equal contribution among all such persons.

The principle that joint contribution may be enforced applies only in cases where the situations of the parties are equal, as 'equality among persons whose situations are not equal is not equitable.' Petitioners have identified their properties in the pledge. No persons except those now before the court have claimed any interest in the fund here involved, in that they did not appear in response to the show-cause order. Petitioners, therefore, are not bound to deliver to the trustee, and thus put themselves in the attitude of contributing jointly in bearing the burden of the pledge with those whose equities are inferior to theirs. It follows that the trustee cannot claim more than could the other customers, whose equities are inferior." See Re Irving Whitehouse Co. (1923) 293 Fed. 287.

Thompkins v. Morton Trust Co. (1904) 91 App. Div. 274, 86 N. Y. Supp. 520, affirmed in (1905) 181 N. Y. 578,

74 N. E. 1126, may be referred to, in this connection. In that case it appeared that a firm of stockbrokers had pledged for its debts stock of a customer which had been left with it for safe-keeping, and also other securities left with it by other customers, on which it had a lien for advances. The securities were pledged without the knowledge or consent of the owners. The stock deposited for safe-keeping was not sold by the pledgee. Following the referee's report, a judgment was entered which, in effect, held that such stock should be sold and the proceeds added to the amount in the hands of the Morton Trust Company, and should be divided among the plaintiff and the several defendants whose securities had been used to realize sufficient to repay the loans made by the Morton Trust Company to Hatch & Foote. On the appeal no case or bill of exceptions was made, but the defendant Hastings appealed from the judgment entered on the report of the referee, and based his objection to this report on his contention that, on the facts found by the referee as to the ownership of this stock deposited by him for safekeeping with Hatch & Foote, he was entitled to it absolutely, and that it was not subject to contribution, or to any claim or interest that either the plaintiff or the other defendants had, as against Hatch & Foote and the Morton Trust Company. The judgment was reversed on appeal, it being held that the owners of the stock which had been sold had no right to contribution from the owner of the stock which had been delivered to the broker for safe-keeping only, and which had been pledged by the latter, but not sold. The court said: "As to all the world, except the pledgee who has actually and in good faith advanced money upon the apparent title conferred by the owner of the shares upon his bailee or agent, the owner is entitled to the stock. Hastings is entitled to this stock as against Hatch & Foote. He is entitled to this stock as against the respondents, who have parted with no property or money based upon the apparent title which

Hatch & Foote had, and unless there is some principle upon which these defendants can insist that this estoppel, which existed in favor of the Morton Trust Company, can be enforced for their benefit, certainly Hastings was entitled to these shares of stock which Hatch & Foote had simply appropriated for their own use, without right or authority. The loan to the Morton Trust Company has been repaid. That is alleged and not disputed. It is in no position to assert any interest in this stock as against Hastings. That loan was paid by the sale of securities pledged to secure it, in which the plaintiff and the individual defendants, other than Hastings, had an interest, and I can see no ground upon which this gives to these defendants any right to appropriate Hastings's stock." Compare Rhinelander v. National City Bank (1898) 36 App. Div. 11, 55 N. Y. Supp. 229.

The case of Re McIntyre (Pippey's Appeal) (1910) 104 C. C. A. 419, 181 Fed. 955, though a case not strictly within the scope of this annotation, is frequently referred to in cases involving the rights inter se of owners of securities which have been wrongfully pledged by a third person. In that case it was held that a security owner finding intact his securities, which had been wrongfully pledged and then relieved by a payment of the indebtedness through the sale of the securities of other owners whose stock had been wrongfully pledged, was entitled to reclaim his securities without contribution. The court said: "The stock was deposited with McIntyre & Company merely as security to protect them against any losses from transactions on the market for Pippey's account. The firm had no right to pledge them for any of its own debts. When it did pledge them to the trust company, the day before its failure, the firm had no transaction pending and was itself indebted to Pippey. This was a larceny of his stock. No one disputes that proposition. By reason of the circumstance that when he left the certificate with the brokers it was duly indorsed with a transfer in blank

executed by himself, he exposed himself to risk of losing his stock if the person to whom it was pledged in good faith, for a valuable consideration, found it necessary to sell it in order to secure payment of his advances. That would be solely because Pippey would be estopped from asserting his title against the person who had parted with value on the faith of the transfer he had signed. But the pledgee has not found it necessary to sell the Pullman stock. It has repaid itself from other items of the pledged property. It no longer has any lien on such property. It can no longer avail of any doctrine of estoppel. Pippey's title to his stock is absolute. He is entitled to the certificate which represents that title. Instead of directing the trustees to return his stock to Pippey, the court has ordered it to be sold and the proceeds put into a fund with the proceeds of the 300 shares International Power Company, and the 200 shares American Can Company, and the $832.16 surplus realized by the trust company from the securities which it sold to repay the $200,000 loan. In this fund Pippey is to share with others whose stock was improperly pledged by the brokers with the trust company and sold by it. The amount coming to him would be less than his stock. This is practically applying the principle of general average to the situation. The pledge is treated as a common adventure, the securities sold as a sacrifice for the common benefit, to which all interests are required to contribute.

We do not think Pippey can be thus required to contribute. If he had been left undisturbed to prosecute the replevin suit, he would have recovered the specific piece of property, which he owned, had identified, and was entitled to. By not appealing from the original order, and by prosecuting his claim of his stock in the bankruptcy court, he did not abandon any of his legal rights, nor obligate himself to contribute to the reimbursement of anyone whose stock had been sold.

So much of the order as relates to Pippey's stock is reversed, and cause remanded, with instructions to

direct the trustee to return his stock

to him, or, if it has been sold, to turn the proceeds over to him."

The reported case (ASYLUM of ST. VINCENT DE PAUL V. MCGUIRE, ante, 1214), says of the foregoing decision that its effect was somewhat impaired by the fact that the other owners whose securities had been sold and in whose favor contribution had been adjudged were not present on the appeal, and also that it was impaired by the decisions in other

cases.

In the case of Re J. C. Wilson & Co. (1917) 252 Fed. 631, the court referred to and distinguished the case of Re McIntyre (Fed.) supra, saying, in conclusion: "From the foregoing abstract it will be seen that the circuit court of appeals had before it only the claims of Pippey and Mrs. Hudson. Both Pippey and Mrs. Hudson had traced their stocks, and those stocks, having survived the liquidation, were in existence and available. Undoubtedly, the claims of Mrs. Miller and Mrs. Stone, for illustration, were equal in equity to the claim of Pippey. As,' however, those similarly situated with Pippy did not appeal, the circuit court of appeals had no grievance before it on the part of those claimants.

In Pippey's Case, Pippey was claiming his specific Pullman stock by virtue of his title, and there was no other claimant before the circuit court of appeals who was similarly situated. If, however, Mrs. Miller, or Mrs. Stone, and the others similarly situated, had also appealed, is it to be supposed that the court would have held that Pippey could reclaim all of his stock, and others similarly situated must leave the court empty-handed, because of the fortuitous circumstance that the pledgee, after bankruptcy, had sold the stock of Mrs. Miller and Mrs. Stone, for instance, and had not sold the stock of Pippey? It is true that the opinion of the court uses certain general language, but that language, must be construed in respect of the facts before the court. The court was not called upon to adjust equities between Pippey and others, similarly' situated, who did not complain."

The case of Re McIntyre (Fed.) supra, was also distinguished in the case of Re McIntyre (1910) 104 C. C. A. 424, 181 Fed. 960, involving the rights of several owners of the same kind of stock, wherein it was said: "The bankrupts disposed of securities which belonged to several of their customers, and deposited the proceeds in one of their general bank accounts. Their drawings exhausted their own funds therein, and also such proceeds. Subsequently deposits were made, and at the time of failure there was over $11,924.83 balance in the bankrupt's favor. The proposition presented is this: When a trustee has drawn out moneys which belonged to several different persons,

and thereafter

makes a deposit, shall such deposit be considered as a general restoration, in which all the defrauded cestuis que trust will share ratably, or is it to be treated as making good, so far as it will go, the separate amounts converted from each in the order in which they were abstracted? We concur with the special master and the district judge in the conclusion that it

is to be assumed the defaulter intended whatever repayment he made to apply on the entire default, and did not intend to prefer the person whose money he first abstracted, by first making him whole at the expense of all the others. Bankrupts bought 200 shares of a certain stock for a customer. They did not keep this stock, but used it as they would their own in the general transaction of their business. They did the same with other customers who had bought like stock. When they failed there were 95 shares of this kind of stock among the Bank of Commerce collateral, 10 shares were pledged on another loan, and there were 2 shares in their vault. They owed their customers 1,651 shares of this variety of stock. We cannot find from the record any satisfactory identification of the 95 shares (or any of them) as being those bought for this particular customer, rather than those bought for someone else. He is not in the position of Pippey (see opinion filed to-day in Re McIntyre (1910) 104 C. C. A. 419. 181 Fed. 955), and is not entitled to the certificates." H. C. J.

Dams, § 6

Trial, § 325 admonition.

instruction

3. An instruction in an action for damages to real property by percolating water, that the jury should decide the case on the evidence and apply the law as given in the instruction,