18 Del. Ch. 170 | New York Court of Chancery | 1931
There is no evidence which would warrant the conclusion that the claimants knew that Mc-Atamney had purloined the certificates evidencing the shares which they purchased from him.
The question therefore is whether an innocent purchaser for value whose title to the shares is derived from a thief can under the circumstances here shown, be recognized as the owner.
Before answering that question, it should be pointed out, that the Uniform Stock Transfer Act of New York
The certificates held by the receivers in New York were properly endorsed for transfer in blank by the record holders of the shares named in them. They were thus in condition to be passed on by McAtamney with the appearance of regularity in the matter of their transfer from the registered owners. The claimants contend that if the receivers left the certificates in that condition in their offices in the custody of McAtamney as their employee, they were guilty of such negligence that neither they as receivers, nor the corporation in whose place they stood as its representatives, should be allowed to question the title which the claimants as innocent purchasers from McAtamney of the endorsed certificates were entitled to have transferred in their own names. It was the duty, the claimants contend, of the receivers to mark the certificates by stamping or perforations so as to show they were cancelled and thereby render it impossible for McAtamney or any one else to purloin them from the safe and pass them off with all the indicia of regularity to innocent purchasers. The mere fact, say the claimants, that the receivers permitted the certificates to remain in their offices without such protective means against their currency is enough in iself to warrant the raising of an estoppel in favor of the purchasers from McAtamney.
And it is further contended that the receivers’ alleged
Neither can negligence be attributed to the receivers on the theory that they had a dishonest man employed as custodian of their offices and papers. No attempt has been made to show that McAtamney had ever done anything in the past that would justify a suspicion that he was not to be trusted. The receivers had a right to believe that Mc-Atamney was honest and would not appropriate any of the assets to his own use.
While a certificate of stock endorsed for transfer by the registered holder possesses a degree of negotiability, yet its negotiability is not so complete as is that of commercial paper endorsed before maturity. Knox v. Eden Musee American Co., 148 N. Y. 441, 42 N. E. 988, 992, 31 L. R. A. 779, 51 Am. St. Rep. 700. The case in which this ruling was made is a case quite similar in its facts and in the principles involved to the instant one. In that case three certifi
Barring the element of negligence in the selection and retention in service of the servant who turns out to be dishonest (and there is no such negligence in this case), the question upon which the liability of the corporation for shares of its stock acquired by an innocent purchaser from such a servant turns, is the nature and extent of his employment. It is a question primarily of agency. If the duties of the agent, expressly conferred or impliedly deducible from circumstances created by the corporation’s conduct, were such as had to do with the issuance, delivery, or sale of stock, the fact that the employee exceeded the limits of his actual authority would constitute no defense for the corporation. That the nature of the wrongdoer’s agency and its extent is the test by which the corporation’s liability is to be measured is not only recognized in the Eden Musee Case, cited supra, but is expressly decided in Hudson Trust Co. v. American Linseed Co., 232 N. Y. 350, 134 N. E. 178, 181. In that case the court said after discussing certain cases,
“As will be observed in the cases referred to, the fraudulent certificates had been issued by officers and agents of the various*178 defendants authorized to issue the same, and in many of the cases, signatures of officers required appeared upon the face of the certificates issued; thus the decisions cited and relied upon are clearly distinguishable from the case at bar. Here there was absence of authority on the part of Corwin to issue certificates or take part in a transfer of the same. His act in abstracting the certificate from the volume wherein the same was bound was perpetrated solely with a view to his private gain, and was not connected with any semblance of authority possessed by him as an officer, agent, or servant of the defendant.”
McAtamney was not empowered by the receivers to sell' stock held by them. The transfer agent was in the habit of calling him for the purpose of checking their records so as to know if stock offered for transfer stood in the name of the transferor. He thus acted in only a clerical capacity for the accommodation of the transfer agent, He was not vested by either the corporation or the receivers with any duty to issue certificates.
It is contended by the claimants that the receivers were negligent in not keeping a watch over McAtamney and looking over the papers in the office at frequent intervals in order to make sure that he was not stealing the things entrusted to his custody. I do not think so. They had no reason to be spying upon him. If they had, they doubtless would have discharged him. They had every reason to béIieve that he was honest.
The exceptions to the claims of stockholders which are based on the certificates stolen by McAtamney, will be sustained. The claimants are not entirely free from negligence. They bought stock from a man who told them he was selling stock for the receivers. If the receivers were selling stock through McAtamney, they were engaged in a rather unusual activity unless a court order authorized it. The claimants ought to have known this. A simple investigation on their part in the form of an inquiry addressed to the receivers would have revealed whether McAtamney’s representations of authority were true. They made no such inquiry. They chose to take McAtamney’s word in every
Order sustaining the exceptions.