The opinion of the court was delivered, May 15th 1866, by
Strong, J.
Passing by the question whether the defendants, being mere agents of the Commonwealth, are liable to damages at the suit of the plaintiff, even for a wrongful refusal to permit him to transfer the stock, we come immediately to the inquiry whether their refusal was wrongful. Certainly they were under no obligation to permit a transfer if their permission would have exposed them or their principals to a successful claim by any one for the replacement of the stock, or for its value. In a certain [235] sense, they were custodians of the rights of stockowners. With them was the registry, and transfers could be made only with their consent, by the surrender of the certificates and the issue of new ones to the transferee.
A purchaser of stock does not receive the certificate of his vendor, but a new one, made out in his own name, and reciting nothing contained in the former. He is therefore protected in the enjoyment of his purchase, even though there was no right to make the transfer to him. For this reason, an unauthorized transfer is a wrong done to the owner of stock, for which not only the person who makes it, but any one knowingly assisting in the wrong, is responsible. That a bank or other corporation, and also these defendants, are trustees to a certain extent for stockholders — that is, for the protection of individual interests — cannot be denied. They are alike trustees of the property and of the title of each owner. They have in their keeping the primary evidence of title, and they are justly held to proper diligence and care in its preservation. From this it results that they may rightfully demand evidence of authority to make a transfer before they permit it to be made. Their own safety requires that they be satisfied of the right of the person proposing to make a transfer to do what he proposes. Generally, sufficient evidence of such right is found in the possession of legal title to the stock. Yet it is well settled that it is not in all cases sufficient, notwithstanding that the true equitable ownership may be in some other than the holder of the legal right, and a transfer may be a gross wrong to such an equitable owner. To that wrong the corporation or keepers of the register make themselves parties, if, with knowledge that there is no equitable right to transfer, they permit it to be done. And in equity, whatever puts a party upon inquiry, is notice of what inquiry must reveal. The real difficulty* is in determining how far it is the duty of the transfer agent to inquire. The law casts the legal ownership of personal property of a deceased intestate upon his administrators. They are sometimes said to be trustees, but they are such for administration. Their primary duty always is to dispose of the personal property, and therewith pay the debts of the intestate and make distribution amongst his next of kin. A sale and transfer of stocks by them is therefore in the line of their duty. There is no cestui que trust having a right to interfere and prevent such a transfer. Hence, letters of administration are always sufficient evidence of authority.
A trustee of an insolvent debtor would seem to stand on the same footing. And so,' generally, does an executor. His primary duty is administration. He is to pay debts and legacies out of the personal estate, and use even specific legacies to pay debts if necessary. His letters testamentary, therefore, [236] show an apparent right to dispose of the stocks of the testator. Even if the stock has been bequeathed specifically, a transfer agent has no means of ascertaining whether it is needed to pay debts. líe can inquire only of the executor, the very person who proposes to make the transfer. If he inquire of the specific legatee, he can learn nothing, for the legatee may be ignorant, and to require evidence of authority beyond the letters testamentary, might greatly delay and embarrass the executor in the discharge of his duties. It has therefore generally been held that transfer agents may safely permit a transfer of stock by an executor without looking for his authority beyond his letters. Such was the ruling in Hartga v. The Bank of England, 3 Vesey 55: Bank of England v. Parsons, 5 Id. 665; Same v. Same, 15 Id. 569; Franklin v. The Bank, 9 B. & C. 156; Fowler v. Churchill, and Churchill v. The Bank, 11 M. & W. 323; and Bank v. Franklin, 1 Russell Ch. 515. Similar decisions' have been made in this country, and so far the law is undoubted.
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The opinion of the court was delivered, May 15th 1866, by
Strong, J.
Passing by the question whether the defendants, being mere agents of the Commonwealth, are liable to damages at the suit of the plaintiff, even for a wrongful refusal to permit him to transfer the stock, we come immediately to the inquiry whether their refusal was wrongful. Certainly they were under no obligation to permit a transfer if their permission would have exposed them or their principals to a successful claim by any one for the replacement of the stock, or for its value. In a certain [235] sense, they were custodians of the rights of stockowners. With them was the registry, and transfers could be made only with their consent, by the surrender of the certificates and the issue of new ones to the transferee.
A purchaser of stock does not receive the certificate of his vendor, but a new one, made out in his own name, and reciting nothing contained in the former. He is therefore protected in the enjoyment of his purchase, even though there was no right to make the transfer to him. For this reason, an unauthorized transfer is a wrong done to the owner of stock, for which not only the person who makes it, but any one knowingly assisting in the wrong, is responsible. That a bank or other corporation, and also these defendants, are trustees to a certain extent for stockholders — that is, for the protection of individual interests — cannot be denied. They are alike trustees of the property and of the title of each owner. They have in their keeping the primary evidence of title, and they are justly held to proper diligence and care in its preservation. From this it results that they may rightfully demand evidence of authority to make a transfer before they permit it to be made. Their own safety requires that they be satisfied of the right of the person proposing to make a transfer to do what he proposes. Generally, sufficient evidence of such right is found in the possession of legal title to the stock. Yet it is well settled that it is not in all cases sufficient, notwithstanding that the true equitable ownership may be in some other than the holder of the legal right, and a transfer may be a gross wrong to such an equitable owner. To that wrong the corporation or keepers of the register make themselves parties, if, with knowledge that there is no equitable right to transfer, they permit it to be done. And in equity, whatever puts a party upon inquiry, is notice of what inquiry must reveal. The real difficulty* is in determining how far it is the duty of the transfer agent to inquire. The law casts the legal ownership of personal property of a deceased intestate upon his administrators. They are sometimes said to be trustees, but they are such for administration. Their primary duty always is to dispose of the personal property, and therewith pay the debts of the intestate and make distribution amongst his next of kin. A sale and transfer of stocks by them is therefore in the line of their duty. There is no cestui que trust having a right to interfere and prevent such a transfer. Hence, letters of administration are always sufficient evidence of authority.
A trustee of an insolvent debtor would seem to stand on the same footing. And so,' generally, does an executor. His primary duty is administration. He is to pay debts and legacies out of the personal estate, and use even specific legacies to pay debts if necessary. His letters testamentary, therefore, [236] show an apparent right to dispose of the stocks of the testator. Even if the stock has been bequeathed specifically, a transfer agent has no means of ascertaining whether it is needed to pay debts. líe can inquire only of the executor, the very person who proposes to make the transfer. If he inquire of the specific legatee, he can learn nothing, for the legatee may be ignorant, and to require evidence of authority beyond the letters testamentary, might greatly delay and embarrass the executor in the discharge of his duties. It has therefore generally been held that transfer agents may safely permit a transfer of stock by an executor without looking for his authority beyond his letters. Such was the ruling in Hartga v. The Bank of England, 3 Vesey 55: Bank of England v. Parsons, 5 Id. 665; Same v. Same, 15 Id. 569; Franklin v. The Bank, 9 B. & C. 156; Fowler v. Churchill, and Churchill v. The Bank, 11 M. & W. 323; and Bank v. Franklin, 1 Russell Ch. 515. Similar decisions' have been made in this country, and so far the law is undoubted.
Yet even in cases in which executors have attempted to make transfers of stock, or a public loan, transfer agents (meaning thereby the corporations in which the stock is held) have sometimes been required to make inquiry into the right of the executor beyond the letters testamentary, and even beyond the will itself. In Lowry v. The Commercial and Farmers’ Bank of Baltimore, decided by Chief Justice Taney, in the Circuit Court of the United States for the Maryland District, and reported in American Law Journal, N. S., vol. 3, page 111, it was ruled that where bank stock had been bequeathed to an executor in trust to pay the dividends to certain persons, and -the executor had transferred it to one who' made allowances, thereon for the use of the executor, the bank which had issued the certificate, having notice that the stock belonged originally to the testator, was bound to look at the title of the executor under the will before it permitted the transfer. In that case the transfer was made by the executor as such, and there was no proof of any actual notice to the bank that the stock had been specifically bequeathed, and that the executor was violating his trust by making the transfer. Yet the chief justice held that the bank was bound to take notice of the will when the transfer was proposed by one of the executors; that it was negligence in the bank not to examine it, and that if it was ignorant of its contents, and of the specific bequest of the stock, it was its own fault; that it' must be dealt with as if it had possessed actual knowledge that the stock in question was specifically bequeathed- by the testator, and was not by the will to be transferred. He then proceeded to show that while it might have been sold if necessary for the payr ment of debts, there was enough to indicate to the bank that it was not needed for such an use. The bank was therefore held [237] liable as a party to the fraud of the executor. It was held responsible for not preventing the executor, who had the legal right, from making the transfer. But were it conceded that in no case is an executor offering to make a transfer of stock issued to his testator, under obligation to exhibit any other authority than his letters testamentary, it would by no means follow that this plaintiff had a right to demand of the defendants an allowance of his proposed transfer without furnishing for them inspection more than his certificate. He was not an executor, but a trustee. The certificates held by him had been issued in the name of “ Thomas E. Bayard, trustee of Mary Gilpin.” Upon their face it appeared that though the legal right was in him, he was not the owner. The person to be affected by the transfer was not himself, but Mary Gilpin. There is a marked difference between the powers of an administrator or executor and those of an ordinary trustee. The common duty of the latter is not administration or sale, hut custody and management. No purchaser either of land or personalty would be safe in buying from a known trustee- without looking at the nature and extent of his trust. It is true, a trustee may have power to sell, but the power is not a necessary incident to his trust as it is to the office of an executor. He may have the legal title, and yet have no authority to sell. His sale may he entirely unauthorized by the instrument that created the trust; it may have been forbidden. Why, then, does not a bank or a transfer agent act at its peril when permitting him to make a transfer ? If in truth he has no such power, the bank, by accepting his certificates and issuing others in lieu thereof to his transferree, is assisting him to destroy the rights of the cestui que trust. It has even been held that a corporation is- liable, if it permit a transfer by a lunatic holding a legal right, though it had no knowledge of the lunacy, and was guilty of no actual fault: Chew & Goldsborough v. The Bank of Baltimore, 14 Maryland 299. The reason given was that it might have provided against the transfer by precaution. If thus liable when only the innocent cause of a loss, much more is the liability certain when the transfer is permitted with full knowledge that the stock does not belong to the person" who offers to transmit it to another; if the transfer is in fact unauthorized, such knowledge was given in this case by the form of the certificates. It is true that it was ruled in Albert & Wife v. The City of Baltimore et al., 2 Maryland 159, that the mere designation of the stockholder as trustee without a specification of the trust, or naming the cestui que trust, was not such notice to the transfer agents as to make it their duty to look beyond the legal title, for it did not point to any source of information. The fiduciary character of the person in whose name the stock stood did not appear, and in Stockdale v. The South Sea Company, Barnardiston 363, the Lord Chancellor said, [238] “ It is certain these great companies are only to consider the person in whose name the stock stands, unless the trust of the stock is declared on their books.” But naming the person for whose use the stock is held is certainly a declaration of the trust. In remarking upon the case of Harrison v. Harrison, 2 Atk. 121, Davis v. The Bank of England, 2 Bright 393, and other cases in which the legal authority of a trustee to transfer has been conceded, Chancellor Johnson said, in Albert v. The Savings Bank, 1 Maryland Chancery Decisions 407, “they must be understood as applying to cases where the fiduciary character appears, but there is nothing to indicate the nature of the trust, or the beneficiaries.” And there is no case in which it has been ruled that a trustee of stock, whose certificate shows a declared trust for another named, has a right to transfer it without showing a power beyond his certificate. It never has been decided that a corporation may disregard the rights of a known equitable stockholder. It would be an anomaly were there any such decisions. An obligor in a bond must take notice of the rights of an equitable assignee of the obligee. A stakeholder cannot very safely pay over to him who has the legal right when he knows another to be the beneficial owner. "With equal reason, at least, ought it to be held illegal for a corporation to aid in destroying the title of a cestui que trust to its stock without being satisfied that the trustee had authority to part with and destroy it. We hold, therefore, that the plaintiff had no right to insist upon being allowed to make a transfer of stock which he held ostensibly in trust, for Mary Gil-pin, without exhibiting to the defendants an authority to transfer beyond the certificate.
The judgment is affirmed.