Foster, J.
The court have bestowed upon this case a degree of attention commensurate with the importance of the principles on which its decision must depend and the magnitude of the amount involved. One of two innocent parties must bear a heavy loss, caused by the gross fraud of a third person.
Under the circumstances disclosed by the evidence, it was a flagrant breach of trust and a criminal fraud to transfer the certificates of stock to Spencer, Vila & Co. They were the property of the plaintiff, who is entitled to reclaim them from any one but a bond fide holder for value without notice. Charles Mellen, a member of the firm of Mellen, Ward & Co., as collateral security for a debt due from that firm to Spencer, Vila & Co., handed to them two certificates of stock in the Calumet Mining Company for one thousand shares each, standing in the name of another member of that firm, namely, “ E. Carter, trustee,” and by him transferred in blank. Spencer, Vila & Co. received the certificates thus indorsed in blank with' the name of E. Carter, trustee, for a valuable and adequate consideration without other notice of any defect in title than such as the law may impute from the word “ trustee ” in the body of the certificates and after the signature of Carter upon the blank transfers.
It is clear that a certificate of stock transferred in blank is not a negotiable instrument. Sewatt v. Boston Water Power Co. 4 Allen, 282. Each of these certificates is expressed on its face to be “ transferable only on the books of the company by the holder hereof in person or by a conveyance in writing recorded in said books, and surrender of this certificate.” No commercial usage can give to such an instrument the attributes of negotiability. However many intermediate hands it may pass [389]*389through, whoever would obtain a new certificate in his own name must fill out the blanks, as they were filled in the present instance, so as to derive title to himself directly from the last recorded stockholder, who is the only recognized and legal owner of the shares.
It cannot possibly be material whether the manual delivery of the certificates was by Mellen or by Carter himself. Unless the word “ trustee ” may be regarded as mere descriptio persones, and rejected as a nullity, there was plain and actual notice of the existence of a trust of some description. A trust as to personalty or choses in action need not be expressed in writing, but may be established by paroi. And that the mere use of the word 16 trustee ” in the assignment of a mortgage and note imports the existence of a trust, and gives notice thereof to all into whose hands the instrument comes, has been expressly decided by this court. Sturtevant v. Jaques, 14 Allen, 523. See also Bancroft v. Consen, 13 Allen, 50, and Trull v. Trull, Ib. 407. It is insisted on behalf of the defendants, that, even if there was actual notice of the existence of a trust, there was no notice of its character, and that the trust might have been such as to authorize the transfer which was made by Carter. But, in our ppinion, the simple answer to this position is, that, where one known to be a trustee is found pledging that which is known to be trust property, to secure a debt due from a firm of which he is a member, the act is one primd facie unauthorized and unlawful, and it is the duty of him who takes such security to ascertain whether the trustee has a right to give it. The appropriation of corporate stock held in trust, as collateral security for the trustee’s own debt, or a debt which he owes jointly with others, is a transaction so far beyond the ordinary scope of a trustee’s authority and out of the common course of business, as to be in itself a suspicious circumstance, imposing upon the creditor the duty of inquiry. This would hardly be controverted in a case where the stock was herd by “ A. B., trustee for C. D.” But the effect of the word “trustee,” alone, is the same. It means trustee for some one whose name is not disclosed ; and there is no greater reason for assuming that a trustee is author[390]*390ized to pledge for his own debt the property of an unnamed cestui que trust than the property of one whose name is known. In either case it is highly improbable that the light to do so exists. The apparent difference between the two springs from the erroneous assumption that the word “trustee” alone has no meaning or legal effect.
Inasmuch as such an act of pledging property is primd facie unlawful, there would be little hardship in imposing on the party who takes the security, not only the duty of inquiry, but the burden of ascertaining the actual facts at his peril. Where a partner assumes to give for his own private debt the note of his firm, the creditor who takes it must show that it was given with the assent of the other partners, because it is an apparent misuse of the name of the firm and primd facie evidence of fraud. Eastman v. Cooper, 15 Pick. 290. But we need not go to that length in deciding the present case. Notice of the existence of a trust is by all the authorities held to impose the duty of inquiry as to its character and limitations. And whatever is sufficient to put a person of ordinary prudence upon inquiry is constructive notice of everything to which that inquiry might have led.
The objection that in the present case the only persons of whom inquiry could have been made were Mellen and Carter, who committed the breach of trust, is sufficiently answered by the words of Sir John Romilly, master of the rolls, in a recent and leading case. “ With respect to the argument that it was unnecessary to make any inquiry, because it must have led to no results,” be says: “ I think it impossible to admit the validity of this excuse. I concur in the doctrine of Jones v. Smith, 1 Hare, 55, that a false answer, or a reasonable answer, given to an inquiry made, may dispense with the necessity of further inquiry; but I think it impossible beforehand to come to the conclusion that a false answer would have been given which would have precluded the necessity of further inquiry. A more dangerous doctrine could not be laid down, nor one involving a more unsatisfactory inquiry, namely, a hypothetical inquiry as to what A. would have said if B. had said something other than what he did say.” Jones v. Williams, 24 Beav. 62. These remarks also [391]*391explain the cases, cited by the defendants, of Buttrick v. Holden, 13 Met. 355, and Calais Steamboat Co. v. Van Pelt, 2 Black, 377. In each of these cases the party did make inquiry, and relied upon the answers received, which were of a character calculated to put him off his guard.
If it be asked of whom the defendants could have inquired as to the meaning of the words “ E. Carter, trustee,” the nature of the trust thereby indicated, and the existence of the power to pledge for the debts of the firm of Mellen, Ward & Co., which Carter was assuming to exercise, the answer is, that the inquiry could have been made of Mellen, and if he replied that he did not know the nature of the trust, then the duty of the defendants would have been to ask Carter himself for an explanation, which it certainly was in his power to give. It is not to be assumed that false answers would have been made, and the defendants have been thereby deceived and misled. On the contrary, the probabilities are that such an investigation would have led to the discovery of the truth.
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Foster, J.
The court have bestowed upon this case a degree of attention commensurate with the importance of the principles on which its decision must depend and the magnitude of the amount involved. One of two innocent parties must bear a heavy loss, caused by the gross fraud of a third person.
Under the circumstances disclosed by the evidence, it was a flagrant breach of trust and a criminal fraud to transfer the certificates of stock to Spencer, Vila & Co. They were the property of the plaintiff, who is entitled to reclaim them from any one but a bond fide holder for value without notice. Charles Mellen, a member of the firm of Mellen, Ward & Co., as collateral security for a debt due from that firm to Spencer, Vila & Co., handed to them two certificates of stock in the Calumet Mining Company for one thousand shares each, standing in the name of another member of that firm, namely, “ E. Carter, trustee,” and by him transferred in blank. Spencer, Vila & Co. received the certificates thus indorsed in blank with' the name of E. Carter, trustee, for a valuable and adequate consideration without other notice of any defect in title than such as the law may impute from the word “ trustee ” in the body of the certificates and after the signature of Carter upon the blank transfers.
It is clear that a certificate of stock transferred in blank is not a negotiable instrument. Sewatt v. Boston Water Power Co. 4 Allen, 282. Each of these certificates is expressed on its face to be “ transferable only on the books of the company by the holder hereof in person or by a conveyance in writing recorded in said books, and surrender of this certificate.” No commercial usage can give to such an instrument the attributes of negotiability. However many intermediate hands it may pass [389]*389through, whoever would obtain a new certificate in his own name must fill out the blanks, as they were filled in the present instance, so as to derive title to himself directly from the last recorded stockholder, who is the only recognized and legal owner of the shares.
It cannot possibly be material whether the manual delivery of the certificates was by Mellen or by Carter himself. Unless the word “ trustee ” may be regarded as mere descriptio persones, and rejected as a nullity, there was plain and actual notice of the existence of a trust of some description. A trust as to personalty or choses in action need not be expressed in writing, but may be established by paroi. And that the mere use of the word 16 trustee ” in the assignment of a mortgage and note imports the existence of a trust, and gives notice thereof to all into whose hands the instrument comes, has been expressly decided by this court. Sturtevant v. Jaques, 14 Allen, 523. See also Bancroft v. Consen, 13 Allen, 50, and Trull v. Trull, Ib. 407. It is insisted on behalf of the defendants, that, even if there was actual notice of the existence of a trust, there was no notice of its character, and that the trust might have been such as to authorize the transfer which was made by Carter. But, in our ppinion, the simple answer to this position is, that, where one known to be a trustee is found pledging that which is known to be trust property, to secure a debt due from a firm of which he is a member, the act is one primd facie unauthorized and unlawful, and it is the duty of him who takes such security to ascertain whether the trustee has a right to give it. The appropriation of corporate stock held in trust, as collateral security for the trustee’s own debt, or a debt which he owes jointly with others, is a transaction so far beyond the ordinary scope of a trustee’s authority and out of the common course of business, as to be in itself a suspicious circumstance, imposing upon the creditor the duty of inquiry. This would hardly be controverted in a case where the stock was herd by “ A. B., trustee for C. D.” But the effect of the word “trustee,” alone, is the same. It means trustee for some one whose name is not disclosed ; and there is no greater reason for assuming that a trustee is author[390]*390ized to pledge for his own debt the property of an unnamed cestui que trust than the property of one whose name is known. In either case it is highly improbable that the light to do so exists. The apparent difference between the two springs from the erroneous assumption that the word “trustee” alone has no meaning or legal effect.
Inasmuch as such an act of pledging property is primd facie unlawful, there would be little hardship in imposing on the party who takes the security, not only the duty of inquiry, but the burden of ascertaining the actual facts at his peril. Where a partner assumes to give for his own private debt the note of his firm, the creditor who takes it must show that it was given with the assent of the other partners, because it is an apparent misuse of the name of the firm and primd facie evidence of fraud. Eastman v. Cooper, 15 Pick. 290. But we need not go to that length in deciding the present case. Notice of the existence of a trust is by all the authorities held to impose the duty of inquiry as to its character and limitations. And whatever is sufficient to put a person of ordinary prudence upon inquiry is constructive notice of everything to which that inquiry might have led.
The objection that in the present case the only persons of whom inquiry could have been made were Mellen and Carter, who committed the breach of trust, is sufficiently answered by the words of Sir John Romilly, master of the rolls, in a recent and leading case. “ With respect to the argument that it was unnecessary to make any inquiry, because it must have led to no results,” be says: “ I think it impossible to admit the validity of this excuse. I concur in the doctrine of Jones v. Smith, 1 Hare, 55, that a false answer, or a reasonable answer, given to an inquiry made, may dispense with the necessity of further inquiry; but I think it impossible beforehand to come to the conclusion that a false answer would have been given which would have precluded the necessity of further inquiry. A more dangerous doctrine could not be laid down, nor one involving a more unsatisfactory inquiry, namely, a hypothetical inquiry as to what A. would have said if B. had said something other than what he did say.” Jones v. Williams, 24 Beav. 62. These remarks also [391]*391explain the cases, cited by the defendants, of Buttrick v. Holden, 13 Met. 355, and Calais Steamboat Co. v. Van Pelt, 2 Black, 377. In each of these cases the party did make inquiry, and relied upon the answers received, which were of a character calculated to put him off his guard.
If it be asked of whom the defendants could have inquired as to the meaning of the words “ E. Carter, trustee,” the nature of the trust thereby indicated, and the existence of the power to pledge for the debts of the firm of Mellen, Ward & Co., which Carter was assuming to exercise, the answer is, that the inquiry could have been made of Mellen, and if he replied that he did not know the nature of the trust, then the duty of the defendants would have been to ask Carter himself for an explanation, which it certainly was in his power to give. It is not to be assumed that false answers would have been made, and the defendants have been thereby deceived and misled. On the contrary, the probabilities are that such an investigation would have led to the discovery of the truth. Or if Spencer, Vila & Co., before taking the stock certificates as collateral security, had been prudent enough to require a transfer to be made to them on the books of the corporation, this step would have brought them into contact with Quincy A. Shaw, and have exposed the whole attempted fraud. Some of the cases say that constructive notice is imputed only on the ground of gross negligence. But, if it be so, a court of equity must hold it to be a want of ordinary prudence, or crassa negligentia, to omit all inquiry, where there is actual notice that a trust of some kind exists, and the use proposed to be made of the trust property is primd facie a misappropriation.
The case of Ashton v. Atlantic Bank, 3 Allen, 217, is not in conflict with these views. It does not proceed on the ground that there was no duty to inquire, but that upon inquiry and examination of the will creating the trust it would have appeared that the trustee might have the right to use the trust funds as he did. He raised money upon the stocks by a discount of his own note with them as collateral; and the court said that it might have been incident to his duties “ to discount the trust [392]*392funds for the sake of making a permanent investment,” or “the purchaser might reasonably assume that the money was wanted to discharge liability incurred under the will. Such a case was well warranted by the will creating the trust.” In short, the court came to the conclusion that the act of the trustee was in itself lawful in that particular case, and that his fraud consisted only in the misuse of the money when obtained. If this was true, of course the purchaser was not bound to see to the application of the purchase money.
Hutchins v. State Bank, 12 Met. 421, was the case of a sale of shares of bank stock by an executrix. It is the established rule of equity that “ purchases from executors of the personal property of their testator are ordinarily valid, notwithstanding it may be affected with some peculiar trust or equity in the hands of the executor ; for the purchaser cannot be presumed to know that the sale may not be required in order to discharge the debts of the testator, to which they are legally liable before all other claims. But if the purchaser knows that the executor is converting the estate into money for an unlawful purpose, the purchase will be set aside.” Smith on Eq. tit. 1, c. iv. 10, “ Where an executor disposes of or pledges his testator’s assets in payment of, or as security for, a debt of his own, the person to whom they are disposed of or pledged will take them subject to the claims of creditors and legatees.” Elliot v. Merryman, 1 Lead. Cas. in Eq. 89. Hill v. Simpson, 7 Ves. 152. The same doctrine was held by Chancellor Kent in 1823 in Field v. Schieffelin, 7 Johns. Ch. 150, who, upon a review of all the cases down to the time of that decision, thus sums up the result: “ The great difficulty has been to determine how far the purchaser dealt at his peril, when he knew, from the very face of the proceeding, that the executor was applying the assets to his own private purposes as the payment of his own debt. The later and the better doctrine is, that in such a case he does buy at his peril.” Chief Justice Gibson, in Petrie v. Clark, 11 S. & K. 377, expressly announces the doctrine “that an executor’s applying the assets in payment of his own debt is of itself a circumstance of suspicion, which ought to put the purchasing creditor upon inquiry as to the propriety of the transaction.”
[393]*393The rule was thus laid down in 1861 in the house of lords : “ Where an executor parts with any portion of the assets of the testator under such circumstances as that the purchaser must be reasonably taken to know that they were sold not for the benefit of the estate but for the executor’s own benefit, the result is, that the purchaser holds the assets as if he were himself in respect of those assets the executor.” Walker v. Taylor, 4 Law Times, (N. S.) 845. See also 2 Redfield on Wills, c. viii. § 32.
The power of disposition over a testator’s assets, which an executor has, is as extensive as that of a trustee, and the conversion of the testator’s personal estate into money is within the ordinary line of an executor’s duty. Consequently the authorities which have been cited as to the liability of those dealing with executors are fully applicable to the case of one who takes trust property from a trustee as security for his private indebtedness.
We proceed to consider the testimony offered by the defendants and excluded by the judge at the hearing.
The fact that it is usual for dealers in stock to take certificates with blank transfers upon them and to fill them up with the names of purchasers, was wholly immaterial. Such a practice, as we have already observed, does not make the shares negotiable, and the purchaser whose name is written into the transfer must always derive his title immediately and solely from the stockholder of record. The point is hot made by the plaintiff that a transfer in blank is out of the usual course of business, or a suspicious circumstance; so that evidence of usage was not requisite to repel such an inference.
The fact that it is common to issue certificates of stock in the name of one as trustee, when no trust actually exists, has no legal bearing on the decision of the present case. The rules of law are presumed to be known by all men ; and they must govern themselves accordingly. The law holds that the insertion of the word “trustee” after the name of a stockholder does indicate and give notice of a trust. No one is at liberty to disregard such notice and to abstain from inquiry for the reason [394]*394that a trust is frequently simulated or pretended when it really does not exist. The whole force of this offer of evidence is ad» dressed to the question whether the word “ trustee ” alone has any significance and does amount to notice of the existence of a trust. But this has been heretofore decided, and is no longer an open question in this Commonwealth. Sturtevant v. Jaques, 14 Allen, 523.
The circumstance that stock certificates issued in the name of one as trustee, and by him transferred in blank, are constantly bought and sold in the market without inquiry, is likewise unavailing. A usage to disregard one’s legal duty, to be ignorant of a rule of law, and to act as if it did not exist, can have no standing in the courts.
It is to be borne in mind that the question under discussion is not whether one holding stock as trustee may sell it in the market and pass a good title to the purchaser. We do not intimate that this cannot be done. The distinction between a sale and a pledge of trust property is palpable and manifest. Nor is the present question whether a trustee may borrow money on the pledge of stock held in trust. We do not decide that such a transaction may not under some circumstances be sustained. These questions are left to be adjudged when they arise. The point now decided is, that one holding stock as trustee has primd facie no right to pledge it to secure his own debt growing out of an independent transaction ; and that whoever takes it as security for such a debt, without inquiry, does so at his peril. All the proffers of evidence taken together fall short of showing any usage to do this; and no evidence of usage could legalize such conduct. Because Spencer, Vila & Co. took these certificates of stock to secure an antecedent debt from Mellen, Ward & Co. to them, with notice that they were held in trust, and made no inquiry as to Carter’s authority to use trust property for such a purpose, they cannot retain the security against the equitable owner of the stock, when it appears that Carter in making the pledge was guilty of a fraudulent breach of trust.
The remaining questions relate to the effect of the payment on the 18th of March of the assessment of ten thousand dollars [395]*395on this stock by Spencer, Vila & Co. to Q. A. Shaw, treasurer and transfer agent, in the presence of S. P. Shaw, the plaintiff. On the 2d of March, Spencer, Vila & Co. had received written notice from Q,. A. Shaw that Carter had no right to transfer the stock to them, and that their title to it was contested. By receiving the money, which Spencer, Vila & Co. voluntarily offered to pay, the Messrs. Shaw did not induce them to change their position, or deprive them of any rights. They had taken the stock certificates nineteen days before they made the payment, and, when it was made, they had no reason to believe that either S. P. Shaw or Q,. A. Shaw intended to abandon their claim, or to waive any of their rights. Q,. A. Shaw could not have done so by any act of his own. S. P. Shaw did no act, and only omitted to object to the payment of the assessment. The payment was evidently the voluntary act of Spencer, Vila & Co. intended to fortify their own position, and to entitle them to a new certificate of the stock if their title should prove good. It was made for their own benefit and protection, and no act or declaration of the Messrs. Shaw deceived or misled, or induced them to make it. A waiver is an intentional relinquishment of a known right. An estoppel of the description relied on in this case can be maintained only on the ground that, by the fault of one party, another has been induced innocently and ignorantly to change his position for the worse, in such a manner that it would operate as a virtual fraud upon him to allow the party by whom he has been misled to assert the right in controversy. These simple definitions of the terms “ waiver ” and “ estoppel ” exclude the possibility of applying either doctrine to the effect of the payment of this assessment.
The amount paid, with interest, must be refunded before any decree can be made requiring the defendants to retransfer the certificates to the plaintiff. As the bill contains no special prayer for this relief, and no offer to refund the money, it will require amendment before such a decree can be entered. But the injunction heretofore granted is made perpetual.