134 N.Y.S. 617 | N.Y. App. Div. | 1912
Lead Opinion
Plaintiff, claiming to be the owner of twenty-five shares of the capital stock of the Standard Oil Company standing in the name of the defendant William S. Blakslee, brought this suit against the said company and the said Blakslee praying that
The position of the company is that of a mere stakeholder. The Special Term has held that the defendant Blakslee is the sole owner of the said certificate; that the plaintiff has no right, title or interest therein; that he be directed to forthwith surrender and deliver the same to the defendant Blakslee and that the complaint be dismissed upon the merits, with costs to each of the defendants. From said judgment plaintiff appeals.
The plaintiff is a banker and commission merchant in the city of New York. William E. Nichols & Co. were stockbrokers to whom the plaintiff had been making loans for several years. On November- 8, 1907, Nichols & Oo; called up the plaintiff on the telephone and asked if he would make a loan on twenty-five shares of the capital stock of the Standard Oil Company to the extent of seventy-five per cent of the market value thereof, which plaintiff agreed to do. Accordingly on said day Mr. Talcott loaned $7,500 to Nichols & Oo., who delivered to him the usual collateral stock note bearing said date and reading in part as follows: “ On demand, after date, for value received, we hereby promise to pay to James Talcott, or order, at-- seventy-five hundred dollars, with interest at the rate of-per cent per annum until paid, having deposited herewith, as collateral security, for the payment of this note, and also as collateral security, for all other present or future demands of any and all kinds of the holder hereof against the -undersigned due or not due, the following property, viz., 25 Standard Oil, $10,000;” and delivered at the same time a certificate of the Standard Oil Company for twenty-five shares made out in the name of W. S. Blakslee. Finned thereto, accompanying therewith, and delivered at the same time, was an assignment and irrevocable power of attorney in blank. That is, neither the name of the assignee nor the description of the property assigned was entered in the body of the instrument. This was signed as follows: “ In witness whereof, I have hereunto set my hand and seal the 18th day of October, one thousand nine hundred and seven, W. S. Blakslee.
Previous to Mr. Talcott’s loan and on the 18th of October, 1907, the Empire Trust Company of the City of New York had loaned William E. Nichols & Co. the same amount, $7,500, on the same certificate of stock, accompanied by the same assignment and power of attorney, and before delivering the assignment with stock power to the Empire Trust Company, Nichols & Co. on October eighteenth guaranteed the signature of Blakslee. When the Empire Trust Company made its loan on October eighteenth, the certificate and stock power were in exactly the same form as when Talcott made his loan on November eighth. It was because the trust company had called its loan that the transaction with Talcott was had.
During the several years previous to this transaction in which Mr. Talcott had had dealings with Nichols & Co., loaning them sums of money from time to time, he had always received stock certificates as collateral security. At the time this loan was made Nichols & Co. owed him between $30,000 and $40,000. On January 27, 1908, they owed him $30,935 including the loan of $7,500 made November 8,1907, and on that day they gave Talcott a new note for the entire indebtedness, the Standard Oil stock in question continuing as collateral security for said note and Talcott being unaware that Blakslee had any interest in the stock in question.
Nichols & Co. came into possession of this certificate and its accompanying assignment in the following manner: John V. Bitts, who was and had been for twenty years the vice-president of the Butler County National Bank of Butler, Pa., had for some time been dealing in stocks with William E. Nichols & Co. On October 18, 1907, they had bought for his account 3,000 shares of G-reene-Oananea, a mining stock costing about $21,000, and 1,000 shares of Nipissing, costing about $9 or $10 a share.
Mr. Bitts testified that previous to the purchase of these stocks he had had cash settlements with Nichols & Co., who drew on him with the stocks attached to the drafts, but on this transaction he found it inconvenient to take up the stocks as he had done previously. Nichols & Co., having made this pur
He also testified to a conversation with a member of the firm as to obtaining a loan on the Standard Oil' stock which they already had in their possession. “ Q. Was anything said about the amount which was to he borrowed on that stock ? A. There was to be borrowed enough money to take care of the stocks that were coming in and had already come in on my account. ” As a result of this conversation Nichols & Oo. secured the loan of $7,500 first from the Empire Trust Company and then from Talcott, as above stated.
In the summer of 1909 Nichols & Oo. being unable to pay their indebtedness, Talcott sought to have these twenty-five shares of stock transferred to himself, in order to realize on the stock as collateral. The Standard Oil officers examined the transfer and asked that a letter he procured from William E.
To avoid the effect of the delivery of the certificate of stock, the assignment and power to Nichols & Co., and the transactions hereinbefore set forth, and to deprive the plaintiff of all right, title and interest in and to the stock which had been delivered to him as collateral security for a loan of $7,500, the defendant Blakslee presented this remarkable story: That he was the brother-in-law of Bitts, who had married his sister; that they have adjoining houses in Butler, and have always been on the most friendly terms; that while Bitts was the vice-president and the chief executive officer of the Butler County National Bank, Blakslee was the assistant cashier, and that hey were together daily during banking hours in the bank; that he had the highest respect for Mr. Bitts as a man of integrity and honor; that Mr. Bitts was a man of large means, considerably larger than Blakslee’s.
Mr. Bitts testified in regard to the delivery to him of the certificate of stock as follows: “ Some time during August, I think it was, 1907, when the panic was on and stocks were tumbling, Mr. Blakslee, who was talking about buying an automobile, said, ‘ if I could make a little turn, I believe that I would buy an automobile.’ I says: ‘I am going to buy some Greene-Cananea; I feel that if you buy a thousand shares of Greene-Cananea that inside of a year’s time you will have made enough money to buy an automobile.’ ‘Well,’ he says, ‘I am very glad to make some money, but,’ he says, ‘I have done pretty well on — naming some other stock then, naming Standard Steel Car stock — and I have a notion to put that up and borrow some money out of the bank; I have not got enough money to pay for an automobile,’ something to that effect; and
After delivering the certificate to Hr. Ritts, Hr. Blakslee testified he never inquired about the certificate and knew nothing about it for the period of two years, or until August, 1909, and although it was delivered to cover the purchase of 1,000 shares of Greene-Oananea, out of the profits of which he expected to be able to purchase an automobile, he testified: “ I never asked him for the thousand shares of Greene-Oananea; never asked him at all during this whole time.”
' In regard to the assignment and power, Blakslee testified that it was given by him to Ritts in the year 1904 to transfer
Ritts testified that when he gave the transfer to William E. Nichols & Oo. he did not mean it to be a trap for the hank, but that he meant it to be a genuine, sufficient stock power to get a loan. Mr. Ritts testified that he himself was a man held in the highest esteem in Butler by all his acquaintances, and that for a few thousand dollars he would not sacrifice that reputation and his sense of honor. When he sent the stock on to William E. Nichols & Oo. he did not stop to think whether he was doing a thing he had a right to do. “Q. And you have not any sense of wrongdoing in connection with that transaction whatever, have you ? A. It was wrong, there is no question about that. It was a wrong thing, my having put up this stock as collateral. Q. But you have no sense of moral obliquity in reference to the matter, your conscience does not hurt you ? A. Well, only that I realize if I had done a wrong thing I would have simply to go into the market and buy the stock and return it to him. * * * Q. Even assuming that you did improperly take this stock, you can make good to him to-day, can’t you ? A. I would expect to make good to Mr. Blakslee his stock if I did not return it. Q. If he has any claim against you ? A. Well, he has a claim for 25 shares of Standard Oil stock. Q. Ton are abundantly able to make good to him ? A. Well, I hope so.”
To sum it up, the defense is that while Blakslee, the assistant cashier of the Butler County National Bank, delivered the certificate of Standard Oil stock to his brother-in-law, the vice-president of the bank, as security to him for the purchase by him of 1,000 shares of Greene-Cananea stock for Blakslee’s
If the assignment and power had been indorsed upon the back of the certificate, although in blank except as to signature and witness, I apprehend there would be no doubt, although a certificate of stock is not a negotiable instrument, that it would have presented such indicia of title that an innocent holder would have obtained good title. (McNeil v. Tenth National Bank, 46 N. Y. 325.) And if the assignment and power, though upon a separate paper, had identified by description the property intended to be assigned, the same rule would have applied. (Smith v. Savin, 141 N. Y. 315.) But, it is claimed, that although duly executed, the signature properly guaranteed, pinned to the certificate of stock and delivered and received in the regular course of business, the assignment and power being upon a separate paper and blank as to the property intended to be assigned, conferred no title upon Talcott, but on the contrary put him upon his inquiry and destroyed his claim of being an innocent holder for value.
I cannot accept at its face value the testimony of Blakslee and Ritts, deeply interested in the event as they are, Blakslee, an inferior officer of the bank, and Ritts the vice-president and chief executive thereof, and a man of substance and power, the attempt being to relieve Ritts of a clear obligation to Blakslee,
In the cases which have dealt with the fundamental question here involved, the reasons given for the decision of the court seem to me applicable to the situation here presented. Thus in McNeil v. Tenth, National Bank (46 N. Y. 325) Judge Bapallo said: “ Where the true owner holds out another, or allows him to appear, as the owner of, or as having full power of disposition over the property, and innocent third parties are thus led into dealing with such apparent owner, they will be protected. Their rights in such cases do not depend upon the actual title or authority of the party with whom they deal directly, but are derived from the act of the real owner, which precludes him from disputing, as against them, the existence of the title or power which, through negligence or mistaken confidence he caused or allowed to appear to be vested in the party making the conveyance.”
So in this case, Blakslee did deliver the certificate of stock to Bitts for security when about to engage in a joint stock purchasing enterprise; Blakslee did execute and deliver to Bitts a blank assignment and power of attorney and with the intent
As further said in the McNeil case: “The true point of inquiry in this case is, whether the plaintiff did confer upon his brokers such an apparent title to, or power of disposition over the shares in question, as will thus estop him from asserting his own title, as against parties.who took bona fide through the brokers.” Again: “The common practice of passing the title to stock by delivery of the certificate with blank assignment and power has been repeatedly shown and sanctioned in cases which have come before .our courts. * * * The holder of such a certificate and power possesses all the external indicia of title to the stock, and an apparently unlimited power of disposition over it. * * * Such, then, being the nature and effect of the documents with which the plaintiff intrusted his brokers, what position does he occupy toward persons who, in reliance upon those documents, have in good faith advanced money to the brokers or their assigns on a pledge of the shares % When he asserts his title, and claims, as against them, that he could not be deprived of his property without his consent, cannot he be truly answered that, by leaving the certificate in the hands of his brokers, accompanied by an instrument bearing his own signature, which purported to be executed for a consideration, and to convey the title away from him, and to empower the bearer of it irrevocably to dispose of the stock, he in fact csubstituted his trust in the honesty of his brokers, for the control which the law gave him over his own property,’
In Moore v. Metropolitan Nat. Bank (55 N. Y. 46) Grover, J., said: “One reason why an owner of corporate shares or of goods and chattels, who has conferred upon another the apparent ownership, without transferring to him a valid title, was held precluded from asserting his title, against a bona fide purchaser from such apparent owner, is that such purchase was made upon the faith of the title which he had apparently given, and that it would be contrary to justice and good conscience to permit him to assert his real title against an innocent purchaser from one clothed by him with all the indicia of ownership and power of disposition. * * * Another reason is that it presents a proper case for the application of the legal maxim that where one of two innocent parties must sustain a loss from the fraud of a third, such loss shall fal upon the one, if either, whose act has enabled such fraud to be committed.”
It seems to me that nothing could be more contrary to justice and good conscience than to permit these brothers-in-law, fellow bank officers and participators in a stock purchase, to throw upon the banker the loss of the money loaned and required in that stock transaction, by a denial of agency, and the assertion of fraud and conversion as between themselves.
I think the claim that both the certificate and the power were delivered to Ritts for a limited purpose is met by the language of the court in Knox v. Eden Musee Co. (148 N. Y. 441), where Andrews, Oh. J., said of the McNeil Case (supra): “ That case holds that an agent to whom the owner has delivered a certificate of stock duly indorsed for transfer, with a limited power of disposition for a special purpose, may bind the title thereto as against the true owner by transferring it to a bona fide transferee who has no notice of the limitations of the agent’s authority, although the transfer was made for an unauthorized purpose and with the intention on the part of the agent to commit a fraud upon his principal.”
The judgment appealed from should be reversed and a new trial ordered, with costs and disbursements to the appellant to abide the event.
Ingraham, P. J., and McLaughlin, J., concurred; Laughlin and Miller, JJ., dissented.
Dissenting Opinion
The mere delivery of the certificate of stock by Blakslee to Eitts did not confer even apparent authority upon the latter to transfer it to á third party. The undisputed testimony of Blakslee and Eitts supports the finding of the trial court to the effect that the power of attorney in blank, signed by Blakslee, had been given to Eitts years before the delivery of the certificate in question for the specific purpose of enabling Eitts to transfer certain stock of the Butler County National Bank standing in the name of Blakslee, that no occasion to use it arose and that its existence had been forgotten. It seems to me that the case is precisely the same as though Eitts had abstracted the blank power of attorney from papers in Blakslee’s possession, though it may be that, if it had been filled up with a description of the certificate in question, the plaintiff would have been entitled to rely upon it. Upon the back of the certificate was an unsigned blank assignment and power of attorney which was enough of itself to suggest to the plaintiff the possibility that the blank power of attorney pinned to the certificate had been given for a different purpose. The two
Judgment reversed, new trial ordered, costs to appellant to abide event.
Dissenting Opinion
I vote for affirmance on the opinion of Mr. Justice O’G-orman at Special Term.