statute will not be lost to the holder of an instrument, at the conflicting behest of a rival but inferior body of law, e. e. the law merchant."23 Referring to the practical effect of its decision in this case, the court said: "So far as the Negotiable Instruments Law is concerned, the remedy for the evil, if it be one, is an amendment to the statute that will add to the negotiable instruments there enumerated or described such other classes as the law merchant or custom of the market may from time to time establish." In passing the Hofstader Act, the legislature adopted the court's suggestion in part and rejected it in part. It is significant that the new act24 did not take the form of an amendment to the Negotiable Instruments Law as the court suggested, but was placed in the Personal Property Law, in company with the Bills of Lading Act, the Stock Transfer Act, and the Warehouse Receipts Act.25 Nor was the recent statute as sweeping as the court intimated it might be, for it is limited to Security

23242 N. Y. 38, 50 (1926).

A discussion of the incidents of negotiability based on estoppel and contract are beyond the scope of this article. The possibilities of instruments of this sort seem, as yet, to be comparatively unexplored. In the Morgan case, the court points out that neither of these elements were present.

24The apposite sections of the Hofstader Security Receipts Act are as follows: § 261. Negotiation. I. The title to any security receipt or equipment trust certificate which by its terms entitles the bearer to the benefits thereof, may be transferred by the delivery thereof by any person in possession of the same howsoever such possession may have been acquired.

2. The title to any security receipt or equipment trust certificate which, by its terms, entitles a person named therein to the benefits thereof and which provides, in substance, that title thereto is transferable with the same effect as in the case of a neogitable instrument, may be transferred by delivery thereof by any person in possession of the same, howsoever such possession may have been acquired if endorsed in blank, or if it is endorsed to a specified person and the delivery is made to such person.

3. Á person to whom title may be transferred, as in this section provided, and who shall have taken any such instrument from any other person for present or antecedent value and without notice of prior defenses or equities or claims of ownership enforceable against such other person, shall have absolute title thereto free of any defenses enforceable against or claims of ownership of the signer or any prior holder. Any holder of any such security receipt or equipment trust certificate, unless the same has been endorsed to a specified person other than the holder and has not been endorsed in blank by such specified person, shall be deemed prima facie to have title thereto as aforesaid; but when it is shown that the title of any person who has negotiated such instrument is defective, the burden is on the holder to prove that he or some person under whom he claims acquired the title as a holder for value and without notice as aforesaid.

25 These instruments were all once non-negotiable. See Dixon v. Bovill, 3 Macq. H. L. Cas. 1 (1856), where the court objected to making anything negotiable that was not payable in money. Since that time, statutes have been enacted giving effect to mercantile custom, and we now have all of the above instruments negotiable or partly so. Uniform Stock Transfer Act § 6; New York Laws 1913, Chap. 600; Pers. Prop. Laws 162-185. § 168 corresponds to § 6 of the Uniform Act. Uniform Warehouse Receipts Act § 5; New York Laws 1907, Chap. 732; N. Y. Gen'l Bus. Law § 90-143. Uniform Bills of Lading Act § 38; New York Laws 1911, Chap. 248; Pers. Prop. Law § 187-241. § 191 et seq corresponds to § 38 Uniform Act. Uniform Sales Act § 38, New York Laws 1911, Pers. Prop. Law § 82-158. § 108 et seq. are the equivalent of § 38 Uniform Act.

Receipts26 and Equipment Trust Receipts,27 whether payable to bearer or to order.28

Why was the Hofstader Act added to the Personal Property Laws? It may be argued that this is the first step by which the New York legislature is swinging around to the viewpoint that the Negotiable Instruments Law should be limited to bills, notes and checks, and that other instruments29 either be left free to be dealt with by custom,30 or by specific statute.31 Another possible reason for placing the Act without the Negotiable Instruments Law is that there is a more or less hostile attitude towards a series of piecemeal amendments to Uniform Statutes.32 On the other hand, it would seem quite impossible for these instruments, made negotiable by the Hofstader Act, to be classed as title instruments, as for instance, of the character of bills of lading.33 How can these newly negotiable certificates be title instruments when the very reason for their existence is that there is nothing in esse, i. e. “in being" for them to represent at the time of issue? The familiar wording of these certificates made payable "when, as and if delivered," effectually negatives any possibility of their possessing such a representative character. Obviously, if the bonds were ready to be issued and exchangeable, there would be no such business need for the interim certificate.34 Quite often, it is true,

26 Pers. Prop. Law § 260, Part I specifies: "The term 'security receipt' means any writing in and by which the signer sets forth that the person named therein or the bearer is entitled to receive a specified principal amount, par value or number of bonds, notes, debentures, shares of stock, voting trust certificates for shares or stock, scrip or other security or securities of any kind or character, identified or described therein, absolutely or when, as and if received by the signer or upon any other contingency stated or referred to therein."

27Personal Property Law § 260, Part 2 specifies: "The term ‘equipment trust certificate' means any writing in and by which the signer sets forth that the person named therein or the bearer is entitled to an interest or a share of specified principal amount or par value in money in a trust under an identified trust indenture pursuant to the terms of which the title to rolling stock or equipment for use by or on the lines or routes of common carriers or to vessels or other marine equipment, is held by the trustees for the benefit of all the holders of the interests or shares."

28In (1926) 26 COL. L. REV. 884, 886 the question is raised whether an instrument payable to A “or order" is covered by the new law. It is believed that § 261,part 2 (supra note 24) is intended to apply to an instrument payable to order.

29 Aigler, supra note 6, suggests that the Negotiable Instruments Law should apply only to instruments payable in money, because § 1 of the Uniform Law makes specifications that an instrument in order to be negotiable must be payable in money.

30 Supra note 18.

31 Supra note 19.

32 Handbook, Nat. Conference of Commissioners on Uniform State Laws, p. 227 (1923) "The Committee (committee on Uniform Comm. Acts) was of the opinion that inasmuch as the N. I. L. is in force in all states, an amendment . . . would ... destroy the uniformity of the Act." Ibid. p. 244, "The committee reports its unanimous judgment that it would be inadvisable to amend the N. I. L... even if it is considered to be a proper change."

33 Dixon v. Bovill, supra note 25 at 3. "A bill of lading is a mere symbol of property.'

34It is true that definitive bonds are sometimes in being, but are withheld for a more favorable market, or for various other business reasons, but as far as the buyer is concerned, and by his contract, they may as well not be in existence, and he rarely knows that they are.

one large bond covering the entire issue is deposited with the underwriter,35 by way of security for his protection. However, the mere existence of one large bond could not make the interim certificate a title instrument, for as far as the individual investor is concerned his bond is not in existence.36 When a bill of lading is issued it represents specific articles of merchandise.37 The interim receipt is not of the same type. An investor is entitled to a bond "when, as and if delivered" and not to an undivided interest in a several million dollar bond. The wording of the certificate should preclude controversy on this score. It would not do to call an interim certificate a title instrument in one instance, e. g. where there is a temporary bond, and something other than a title instrument in another case, as where no temporary bond had been issued. Nor do the annexed interest warrants purport to be title instruments for they are payable in money. If the legislature intended to treat the interim certificate as a title document it has quite disregarded the requisites of such documents. If, however, the legislature considered the possibility of a third type of negotiable instrument, sounding partly in promise and partly in title, and, for want of a better place, put the new act within the Personal Property Law, there would seem to be no objection.38 The language of the court, in the principal case, called into question the negotiability of certain other instruments long considered by the business community to be negotiable in character. The resulting uncertainty was most unsatisfactory to investment bankers, and plans were at once made for drafting a law to meet the situation, which culminated in the present Act.39

It is important to note that although investors in New York are protected, those outside that state may not be.40 In dealing with

35This was so in the Morgan case, and in the case of Babcock v. Nat. Surety Co. supra note 4.

36A court of equity might take cognizance of his equitable interest in the large bond.

37 Supra note 33.

38 The Act was drafted hastily to meet a serious situation, and in their haste the drafters may have overlooked the important distinction between title and promissory instruments.

39Report, N. Y. Group, Investment Bankers Assoc. of Am. at p. 3 (1926); Legal Service Bulletin, June 25, 1926 issue, p. 8. Commercial and Financial Chronicle, Oct. 23, 1926, p. 2100.

An extensive criticism of the mechanics of the Hofstader Act is made in 26 COL. L. REV. 884, supra note 28.

40 There may be doubt whether such a certificate as was issued in the Morgan case would be considered negotiable even under the Hofstader Act. There is an element of uncertainty in the provisions that the bankers may treat the holder as owner, which means that the bankers have an option. However, the Act stipulates,... any security receipt... which... provides, in substance, that the title is transferable... etc". This provision may cover the difficulty. The question is, whether in view of the element of uncertainty, the certificate is transferable "in substance." The fact that the Statute was drafted with a view to protection of past holders, as well as subscribers to future issuances, may induce the court, if the question should come up, to hold that such receipts are transferable "in substance." It would be desirable for the bankers to change their form of receipt, and, since they are now amply protected by the Statute there is every reason to believe that they will.

such instruments, they face the same risks that were present in New York before the Hofstader Act, that is, all risks attendant upon the taking of non-negotiable paper.

It is possible that the courts of other states, unhampered by the broad language of section 332 of the New York Negotiable Instruments Law might well reach a different conclusion.41 They would be free to accept Professor Chafee's view that the Act includes only bills, notes and checks. To insure the security of business transactions, legislation would seem desirable.

It should also be noted that the Hofstader Act grants negotiability to the temporary or interim certificate, as such, although the definitive bond may be wholly non-negotiable. This is as it should be. They are independent contracts.

Burt Franklin.

Real Property: Dower: Wife's right to dower in equitable estates of the husband.-In Byrnes v. Owen, 243 N. Y. 211 (1926), the plaintiff's husband, in order to deprive her of her dower right, induced her to execute a mortgage on certain premises worth considerably more than the amount of the incumbrance. Subsequently, although able to do so, he refused to pay the indebtedness secured by the mortgage. At his instance, the mortgage was foreclosed, and at the sale, one of his codefendants purchased the premises with money supplied by him. The premises were subsequently transferred to his sister who now holds title. The court allowed the plaintiff to establish her incohoate right of dower.

In Melenky v. Melen, Melenky delivered a deed of property to his son with the oral understanding that the son was to manage the property in his father's absence and reconvey on demand. The same arrangement had been made on previous occasions. Melenky then took a trip to California. There he met the plaintiff and married her. Prior to the marriage, to assure her that she would be well provided for, he told her that he owned the property in question. The plaintiff married him, expressly relying on his statement that he owned the property. Upon Melenky's return with his wife, he demanded a reconveyance from his son, who refused. Later, however, the son conveyed to his father only a life estate in order to defeat the plaintiff's right of dower. The father, old and without funds, did not contest the matter. The court refused to allow the wife her inchoate right of dower in the premises on the ground that her husband never had a legal or equitable estate.

"New York seems to be the only state where the question came up squarely. Supra, note 4.

For discussions of the Morgan case, and suggestions for amendments, see the following periodicals: (1926) 26 COL. L. REV. 884, (discussing Hofstader Act); (1926) 74 U. PA. L. REV. 728; (1926) 39 HARV. L. REV. 875; Banking Law Journal, June (1926); (1926) 35 YALE L.J. 877. For discussions of the case in the lower courts see (1924) 33 YALE L. J. 302; (1924) 24 COL. L. REV. 157; (1925) II CORNELL LAW QUARTERLY 60; (1926) 24 MICH. L. R. 56.

1233 N. Y. 19, 134 N. E. 822 (1922).

In the Byrnes case, the court held that there was fraud on the part of the husband who manoeuvered so as to secure the benefits which would accrue from divesting his wife of her inchoate right of dower. It fails, however, to state expressly in what the fraud consists. It is conceded that fraud in securing the wife's signature,2 or in preventing competitive bids at the sale3 would not divest the wife of her inchoate right of dower except as against an innocent purchaser for value. The sale, if legal, divested the wife of any right she had." In this case and in the Melen case, the plaintiffs are in a similar position-the husband of each had an equitable right to the property. In either case, had there been an express trust in writing, the husband would have had an equitable estate. But the court held the trust in both cases to be oral and unenforceable unless equity would declare a constructive trust to exist. There are sufficient circumstances to warrant such a declaration. However, in the Melen case, the court follows the doctrine that the wife's inchoate right of dower attaches only to equitable estates of the husband and not to a mere equitable right such as the husband had there. Yet the lower court states that the son had made written statements that the property belonged to his father. That, if true, was sufficient to establish an express trust when taken with the circumstances attending the transaction. Cardozo, J. mentions nothing of the writing in his opinion, but states that a writing would have allowed the plaintiff to recover.

In the Melen case, Cardozo, J. says: "He (the husband) is not subject to the reproach of plotting a fraud on his wife." His election not to go into equity is regarded as a fraud on no one. The court overlooks the fact, however, that the father's representation to his

"Whiting v. Whiting, 114 Me. 382, 96 Atl. 500 (1916).

Turner v. Kuehnle, 70 N. J. Eq. 61, 62 Atl. 327 (1905).

'Hinchliffe v. Shea, 103 N. Y. 153, 8 N. E. 477 (1886). Durnher v. Rau, 135 N. Y. 219, 32 N. E. 49 (1892); Albany County Savings Bank v. Bartow, 115 Misc. 233, 189 N. Y. Supp. 659 (County Ct. 1921).

"Burhans b. Burhans, 94 N. J. Eq. 740, 121 Atl. 749 (1923); Hawley v. James, 5 Paige 318, 453 (N. Y. 1835); Clark v. Clark, 147 N. Y. 639, 42 N. E. 275 (1895); Starbuck v. Starbuck, 62 App. Div. 437, 71 N. Y. Supp. 104 (2nd Dept. 1901); Nichols v. Park, 78 App. Div. 95, 79 N. Y. Supp. 547 (1st Dept. 1903); Melenky v. Melen, 233 N. Y. 19, 134 N. E. 822 (1922).

"N. Y. Cons. Laws (1909) c. 52 § 242.

'BOGERT, TRUSTS, (1921) 116 ff. Where there is a confidential relation between the parties and a violation of an oral promise to reconvey, equity will declare a constructive trust to exist in order to prevent unjust enrichment of the person holding the property. See also: Henderson v. Murray, 108 Minn. 76, 121 N. W. 214 (1909); Fox v. Fox, 77 Neb. 601, 110 N. W. 304 (1906); Wood v. Rabe, 96 N. Y. 414 (1884); Goldsmith v. Goldsmith, 145 N. Y. 313, 39 N. E. 1067 (1895); Apgar v. Connell, 79 Misc. 531, 140 N. Y. Supp. 705 (Sup. Ct. 1913). "When one, through confidential relation, acquires title to property which he can not conscientiously retain, the court, to prevent abuse of confidence, will grant relief." Wood v. Rabe, supra, at 425. See also: Bitter v. Jones, 28 Hun 492 (1882); Fletcher v. Manhattan Life Ins. Co., 197 App. Div. 484, 189 N. Y. Supp. 453 (1st Dept. 1921). The Statute of Frauds does not apply to trusts created by operation of law. See Kimball v. Tripp, 136 Cal. 631, 69 Pac. 428 (1902); Carr v. Craig, 138 Iowa, 526, 531, 116 N. W. 720 (1908); Wood v. Rabe, supra, at 423.

"Thompson v. Thompson, 1 Jones 430 (N. C. 1854).