Where other than by mere possession the owner authorizes or permits another to deal with the goods as his own, he may be estopped to assert his ownership as to one who has dealt with the possessor as the owner.
Having now considered the cases in which the true owner may assert his title against creditors and purchasers of another, let us consider the cases in which a true owner will not be permitted to set up his title, as against those who have dealt with another as the owner of the property. There are two well defined classes of cases.
Where the true owner of goods allows another to make statements and representations of ownership the true owner cannot assert title against third persons acting on the faith of such representations and statements.
In this case there might or might not be actual fraud. But in either event, the true owner could not assert his title. It would have to be apparent of course that the true owner permitted the representations - stood by and did not deny them or aided the agent in making them.
Example 28. T was in possession of a wagon owned by O, on which T had been permitted to paint his name. T sold to C. O claims the wagon and sues C for its recovery. Held, O, although the true owner, is estopped to assert his ownership against an innocent purchaser. Between the two the loss should fall on O who made the loss possible.74
When the true owner of goods allows another to hold documents of title made out in his own name, registration in his own name, etc., this is clothing the other with such indicia of title that the true owner cannot assert his title against third persons acting on the faith of the apparent ownership.
74. O'Connor v. Clarke, 170 Pa. Rep. 318.
Let us now suppose the case in which the owner, besides conferring possession, also permits the possessor to hold documents of title in his own name, that is, bills of lading, warehouse receipts, etc. In such a case, the true owner is estopped to set up his title against those who deal with the holder of such documents as the apparent owner, and creditors can seize such goods to satisfy their claims.75