By the Court,
Hawley, J.:
This is an action of claim and delivery for certain mining stocks. The material facts are as follows: On or about the twelfth of August, 1879, Gass deposited with the Bank of Yirginia, a corporation engaged in the business of buying and selling mining stocks on commission, certain certificates of stock, of which he was the owner, for safe keeping. [188]*188These certificates of stock were in the usual form, and were issued in the name of different parties, and indorsed by them as “ trustees.” Within a short time after the deposit was made, Gass became indebted to the bank for money loaned and advanced, and for interest and expenses in the purchase and sale of mining stocks, and requested the bank to hold the certificates as collateral security for the payment of any indebtedness that then existed, or might thereafter accrue to the .bank, by reason of any purchase or sale of stock that he might desire to make.
On the fourteenth of August, 1879, the firm of J. 0. Hampton and Co., of which defendant is a member, advanced and loaned to the Bank of Virginia, in addition to other money then due from it, the sum of two thousand dollars, and in consideration of said loan the bank, without the knowledge or authority of Gass, within a day or two thereafter, delivered the stock, which belonged to Gass, to J. C. Hampton & Co., as collateral security for the payment of said loan and the other indebtedness then due, or by reason of their business transactions of like character thereafter to become due.
At the time of these transactions it was the custom in Nevada and in California to deal in mining stocks and transfer certificates by indorsement in the manner in which the certificates in question were indorsed.
Neither Hampton nor the firm of which he is a member had any notice or knowledge of the .ownership or claim of Gass to said certificates of stock until some time after the failure of the bank, when Gass tendered to Hampton the amount he owed the bank, and demanded the stock, and upon the refusal of Hampton to deliver it this suit was brought for its recovery. At the time the demand was made the certificates were held by J. C. Hampton & Go. as security for the indebtedness of the bank to said firm, which exceeded the value of all stocks held by them, and exceeded the amount that could be realized by a sale of the stocks.
Upon the facts, as found by the court, and sustained by the evidence, we are unable to distinguish this case from [189]*189that of Stone v. Marye, 14 Nev. 362, in so far as the application of the legal principles therein announced are concerned.
Hampton was a stranger to the business operations of the bank. He made no inquiry, and the law did not, upon the facts presented, require him to make any inquiry, whether it was depositing its customers’ stocks or its own. The bank had the right t'o pledge its own stocks for its individual debt, and a transaction of this kind is not putside of the usual course of business. There was nothing in the mere , fact of depositing this stock as collateral security with j Hampton & Co. to put them upon inquiry as to the owner- ' ship of the stocks. There was nothing upon the face of the j - certificates to raise a suspicion that they were not the prop-j{ erty of the bank. There is nothing in the record to show that Hampton & Co., or Hampton, knew, or ought to have / known, that the bank did not own the stock, or that Gass, J or any person other than the -bank, did own it. The record does, affirmatively, show that Hampton & Co. received the certificates in good faith, without any notice or knowledge ' of the claim or' ownership of Gass.
When Gass deposited his stock he knew, or ought to have known, that it was the custom of brokers to transfer certificates of stock that were indorsed in the manner his were by delivery.
• By his own voluntary act he left his certificates of stock with the bank in such a condition as to pass by delivery, with nothing on their face to indicate that he had any interest in them, or that they were not tlie property of the bank, and thereby enabled it to treat the certificates as its own, and to wrongfully obtain the loan of money thereon from parties innocent of the true state of the title. He clothed the bank with such an apparent ownership as to enable it to mislead the public and to hold itself out to the world as the true owner, and .thereby to defraud innocent persons dealing with it in good'faith.
Under these circumstances the case comes clearly within the principle, announced in Toland v. Thompson, 48 Cal. 112, that “the party who places another in a position to [190]*190enable him to practice tbe fraud should suffer the loss rather than an innocent person who deals with him on the faith of the usual indicia of ownership with which the true owner has invested him.”
If Gass had desired to protect his rights against the use which the bank might make of his stock, he should — as he readily could — in some proper method, have placed it out of the bank’s power to deal with the stoek'as its own. It is to be presumed, from his acts, that he selected the bank because he had confidence in its managers, and did not believe they would wrongfully use his property. He reposed his confidence in the bank. To it he must look for redress. He can not now, upon any principle of equity, be allowed to hold an innocent party responsible for the loss which resulted to him from the improper and wrongful act of the party in whom he confided.
Counsel for appellant have cited numerous authorities to show that certificates of mining stock are personal property, and non-negotiable; that no person can transfer any other interest in personal property than he, or his principal for whom he acts, is possessed of; that no person can be divested of his property without his own consent, and that an honest purchaser', under a defective title, can not hold the property against the true owner. As a general proposition these “fundamental principles”are unquestionably correct. The bank had no right to hypothecate the stock without the consent of Gass, and it must be conceded that as a general rule, applicable to personal property other than negotiable securities, the vendor or pledgor can convey no greater right or title than he has. This principle applies to transfers from one party to another where no other element intervenes. But this rule does not, as was said by the court of appeals in McNeil v. The Tenth National Bank, 46 N. Y. 329, “interfere with the well-established principle that where the true owner holds out another, or allows him to appear, as the owner thereof, 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 [191]
Free access — add to your briefcase to read the full text and ask questions with AI
By the Court,
Hawley, J.:
This is an action of claim and delivery for certain mining stocks. The material facts are as follows: On or about the twelfth of August, 1879, Gass deposited with the Bank of Yirginia, a corporation engaged in the business of buying and selling mining stocks on commission, certain certificates of stock, of which he was the owner, for safe keeping. [188]*188These certificates of stock were in the usual form, and were issued in the name of different parties, and indorsed by them as “ trustees.” Within a short time after the deposit was made, Gass became indebted to the bank for money loaned and advanced, and for interest and expenses in the purchase and sale of mining stocks, and requested the bank to hold the certificates as collateral security for the payment of any indebtedness that then existed, or might thereafter accrue to the .bank, by reason of any purchase or sale of stock that he might desire to make.
On the fourteenth of August, 1879, the firm of J. 0. Hampton and Co., of which defendant is a member, advanced and loaned to the Bank of Virginia, in addition to other money then due from it, the sum of two thousand dollars, and in consideration of said loan the bank, without the knowledge or authority of Gass, within a day or two thereafter, delivered the stock, which belonged to Gass, to J. C. Hampton & Co., as collateral security for the payment of said loan and the other indebtedness then due, or by reason of their business transactions of like character thereafter to become due.
At the time of these transactions it was the custom in Nevada and in California to deal in mining stocks and transfer certificates by indorsement in the manner in which the certificates in question were indorsed.
Neither Hampton nor the firm of which he is a member had any notice or knowledge of the .ownership or claim of Gass to said certificates of stock until some time after the failure of the bank, when Gass tendered to Hampton the amount he owed the bank, and demanded the stock, and upon the refusal of Hampton to deliver it this suit was brought for its recovery. At the time the demand was made the certificates were held by J. C. Hampton & Go. as security for the indebtedness of the bank to said firm, which exceeded the value of all stocks held by them, and exceeded the amount that could be realized by a sale of the stocks.
Upon the facts, as found by the court, and sustained by the evidence, we are unable to distinguish this case from [189]*189that of Stone v. Marye, 14 Nev. 362, in so far as the application of the legal principles therein announced are concerned.
Hampton was a stranger to the business operations of the bank. He made no inquiry, and the law did not, upon the facts presented, require him to make any inquiry, whether it was depositing its customers’ stocks or its own. The bank had the right t'o pledge its own stocks for its individual debt, and a transaction of this kind is not putside of the usual course of business. There was nothing in the mere , fact of depositing this stock as collateral security with j Hampton & Co. to put them upon inquiry as to the owner- ' ship of the stocks. There was nothing upon the face of the j - certificates to raise a suspicion that they were not the prop-j{ erty of the bank. There is nothing in the record to show that Hampton & Co., or Hampton, knew, or ought to have / known, that the bank did not own the stock, or that Gass, J or any person other than the -bank, did own it. The record does, affirmatively, show that Hampton & Co. received the certificates in good faith, without any notice or knowledge ' of the claim or' ownership of Gass.
When Gass deposited his stock he knew, or ought to have known, that it was the custom of brokers to transfer certificates of stock that were indorsed in the manner his were by delivery.
• By his own voluntary act he left his certificates of stock with the bank in such a condition as to pass by delivery, with nothing on their face to indicate that he had any interest in them, or that they were not tlie property of the bank, and thereby enabled it to treat the certificates as its own, and to wrongfully obtain the loan of money thereon from parties innocent of the true state of the title. He clothed the bank with such an apparent ownership as to enable it to mislead the public and to hold itself out to the world as the true owner, and .thereby to defraud innocent persons dealing with it in good'faith.
Under these circumstances the case comes clearly within the principle, announced in Toland v. Thompson, 48 Cal. 112, that “the party who places another in a position to [190]*190enable him to practice tbe fraud should suffer the loss rather than an innocent person who deals with him on the faith of the usual indicia of ownership with which the true owner has invested him.”
If Gass had desired to protect his rights against the use which the bank might make of his stock, he should — as he readily could — in some proper method, have placed it out of the bank’s power to deal with the stoek'as its own. It is to be presumed, from his acts, that he selected the bank because he had confidence in its managers, and did not believe they would wrongfully use his property. He reposed his confidence in the bank. To it he must look for redress. He can not now, upon any principle of equity, be allowed to hold an innocent party responsible for the loss which resulted to him from the improper and wrongful act of the party in whom he confided.
Counsel for appellant have cited numerous authorities to show that certificates of mining stock are personal property, and non-negotiable; that no person can transfer any other interest in personal property than he, or his principal for whom he acts, is possessed of; that no person can be divested of his property without his own consent, and that an honest purchaser', under a defective title, can not hold the property against the true owner. As a general proposition these “fundamental principles”are unquestionably correct. The bank had no right to hypothecate the stock without the consent of Gass, and it must be conceded that as a general rule, applicable to personal property other than negotiable securities, the vendor or pledgor can convey no greater right or title than he has. This principle applies to transfers from one party to another where no other element intervenes. But this rule does not, as was said by the court of appeals in McNeil v. The Tenth National Bank, 46 N. Y. 329, “interfere with the well-established principle that where the true owner holds out another, or allows him to appear, as the owner thereof, 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 [191]*191or authority of tbs 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.” The fact, apparently relied upon by appellant’s counsel, that the stock “ did not stand on the books of the company iii the name of the bank of Yirginia, nor had the bank of "Virginia title by assignment from Gass, the owner,” “nor did the bank have any power of attornej' from plaintiff, the owner, to have the same transferred or to dispose of it in any way,” or that “Gass did not deposit this stock with the bank of Virginia, to secure an account he owed it, with a blank assignment and power of attorney signed by him,” do not distinguish this case in principle, from those cited in Stone v. Marye.
The bank had the same absolute power to hypothecate the certificates, indorsed by the respective trustees to whom the same Avere issued, as it would have had if the stock had been issued in its OAvn name, or to Gass, and by him assigned to the bank. In the condition in which the certificates were left Avitli the bank, it could, at any time, have caused the certificates to be transferred on the books of the respective corporations in its own name, and any purchaser or pledgor could have done the same. By the act of Gass the bank Avas clothed Avith the usual indicia of the OAvnership of mining stock, and the real point of inquiry here, as it Avas in Stone v. Marye, is Avhether the plaintiff did confer upon his brokers such an apparent title to, or poAver of disposition over, the certificates of stock as to estop him from asserting his own title as against parties who took bona fide through the brokers.
The cases of Brewster v. Sime, 42 Cal. 139; Thompson v. Toland, supra, and McNeil v. The Tenth National Bank, supra, upon the authority of Avhicli Stone v. Marye avus decided, Avere cases concerning stock transactions that can not, in the application of legal principles, be distinguished from.the case at bar.
The same principle Avas applied in the Pennsylvania Rail[192]*192road Company’s appeal by the supreme court of Pennsylvania. The executrix of an estate took certain certificates of stock, with blank power of attorney signed on the back, in the railroad company, and deposited them for safe-keeping with one Creeley, who, at that time, was a lawyer in good standing, and was-acting as the legal adviser of the executrix, and had been for several years collecting the dividends of the estate.
Creeley secured a loan for himself from an innocent party, and pledged the certificates of stock as collateral security therefor, without the knowledge or consent of the executrix. The loan was not paid, and the party wffio held the certificates of stock as collateral security took them to the office of the railroad company and had the stock transferred to himself, and he subsequently disposed of the same. The executrix sought to hold the railroad company liable upon the ground that it was negligent in not making inquiries as to the true ownership of the stock. The court, in deciding the questions raised upon this branch of the case, said:
“But there certainly was negligence on the part of the ap-pellee. As executrix she placed the certificates in the hands of Creeley, as her attorney, with the blank powers indorsed uncanceled. Thus by her act he was enabled to commit this fraud. The equities of the respective parties are not equal. Where one of two parties, who are equally innocent of actual fraud, must lose, it is the suggestion of common sense, as well as of equity, that the one whose misplaced confidence in an agent or attorney has been the cause of the loss shall not throw it on the other. As Judge King has well expressed this principle in The Bank of Kentucky v. Schuylkill Bank (1 Pars. Eq. 248): ‘ The true doctrine on this subject is that, where one of two innocent Iversons is to suffer from the tortious act óf a third, he who gave the aggressor the means of doing the wrong must alone bear the consequences of the act.’ The appellee in this case selected the attorney. She had entire confidence in him. She placed these certificates, with the blank powers, in his hands. He proved unworthy of the trust reposed in him. [193]*193He perpetrated a gross fraud, by which he converted this property to his own use. That he was an attorney-at-law in good standing does not help her case. He added to the crime of which he was guilty that of moral perjury by the violation of his official oath. On what principle of equity can she be allowed to throw off from herself on to the appellants the loss which has resulted from the dishonesty of her own agent ? This important element in the case was entirely overlooked by * * * the court below; and we think, applying it to the undisputed facts of the case, the appellee’s bill as to the appellants ought to have been dismissed.” (86 Penn. St. 83.)
The facts do not show, as appellant claims, that the certificates in controversy were delivered to Hampton & Co. as security for the payment of an antecedent debt due from the bank to them, and the authorities cited upon this point have no application to this case.
The judgment of the district court is affirmed.
Belknap, J.,
having been of counsel at the trial of this cause in the lower court, did not participate in the foregoing decision.