Bushnell, J.
Plaintiff, National Turners Building & Loan Association, a New Jersey corporation, filed a bill of complaint for cancellation of one of the association’s stock certificates and for the surrender of a passbook, both of which are in the possession of defendants, who are husband and wife and residents of Wayne county, Michigan. Defendants denied plaintiff’s right to equitable relief and, by cross bill, sought a decree validating the certificate and passbook.
Defendant, Irene M. Sehreitmueller (formerly Irene M. Weber), in 1919, while living in the State of New Jersey, purchased, through her brother, Frank Gr. Weber, then secretary of plaintiff corporation, the association’s instalment certificate No. 243, for which she agreed to pay $15 per month. The terms of the purchase provided that, at such time as the monthly payments of $15 and interest, or the accrued profits thereon, aggregated a total of $3,000, Mrs. Sehreitmueller was entitled to receive either a fully prepaid stock certificate for 15 shares of the capital stock of plaintiff association of a value of $200 each, or she could redeem the certificate in cash.
In 1927 instalment certificate No. 243 was assigned by the purchaser to Frank G-. Weber. This assignment was on a separate sheet of paper and defendant received from her brother a receipt, dated February 28, 1927, showing that certificate No. 243, then valued at $1,700, was being loaned to him.’for the express purpose of using it as personal - col
lateral at the Irvington National Bank, of which he was an assistant cashier. After Mrs. Schreitmueller assigned certificate No. 243 to Weber, defendants continued to make payments thereon to the building and loan association until the instalment certificate matured in March of 1931. After its maturity, upon suggestion of Weber, defendants notified him to allow the proceeds of certificate No. 243 to remain with the association and be converted into prepaid stock, instructing him to apply the interest proceeds from such prepaid stock, amounting to $15 per month, towards the purchase of new instalment shares.
Because they needed the certificate in order to use it as additional collateral at one of the Detroit banks, defendants later began to press Weber for its return. .On October 11,1933, Weber sent defendants stock certificate .No. 473 bearing his signature as secretary and that of Charles Braun as vice-president, and a passbook No. 1937, showing receipt of monthly payments from February, 1931, through June of 1933; the certificate, however, was dated March 15, 1931. Braun was not vice-president of the association in 1931 but did occupy that office at the time of delivery of the certificate.
It is plaintiff’s claim that it had not at any time issued certificates with as high a number as 473, although the signatures of Braun and Weber thereon were not disputed. It is this certificate No. 473 and passbook No. 1937 that plaintiff association wants cancelled.
William A. Schilling, a lawyer of Maplewood, N. J., testified that he was one of the organizers of the association and had been its counsel ever since, and that he acted as secretary from .September 1st to December 15, 1934, succeeding Weber,
who was also one of the organizers and secretary of the association since its inception. Schilling stated that Weber was a full time employee of the Irving-ton National Bank, that his work with the association was more or less a side line; that in August of 1934 it was discovered that Weber was a defaulter, and subsequent investigation disclosed a shortage of approximately $20,000 in his building and loan association accounts; he was later indicted by a Federal grand jury for embezzling funds of the Irvington National Bank. His fraudulent dealings with the affairs of his two employers were characterized by Schilling as
“a
most complicated and involved scheme that that bank or anyone around there has ever come on to.” Among some of the dealings of Weber with plaintiff’s stock were the surrender and cancellation by him of the originally assigned certificate No. 243 and the issuance of certificate No. 296, which was in turn pledged by him with the association as collateral for a loan and later cancelled.
The trial judge was of the opinion that the evidence produced before him disclosed a situation controlled by the law laid down in
Moores
v.
Citizens’ National Bank of Piqua,
111 U. S. 156 (4 Sup. Ct. 345). The trial judge did not, however, cite
Muff at
v.
Detroit-Macomb Land Co.,
252 Mich. 692, in which the
Moores Case, supra,
is discussed. In the
Muff at Case
plaintiff filed a bill to compel the transfer of a stock certificate which he had obtained under circumstances related in the reported opinion,
supra.
When Muffat presented the certificate for transfer, he learned for the first time that it represented 103 shares of stock which Willmarth, the secretary and a large stockholder of defendant company, had owned at one time, but, having sold 84 shares to
one Whittaker, the certificate for 103 shares was surrendered to the corporation for cancellation and new certificates were issued. The trial judge found against Moffat on the theory— “that when an officer, who has the power to issue certificates of stock, hypothecates stock represented by a certificate standing in his name for his personal debts, the pledgee is put upon inquiry. Had due inquiry been made, Willmarth’s remissness would probably have been discovered.” This court did not agree with the trial judge’s conclusion and, after a discussion of the authorities cited in the opinion,
supra,
particularly the
Moores Case
and the uniform stock transfer act, 2 Comp. Laws 1929, § 9520
et seq.
(Stat. Ann. § 19.331
et seq.),
concluded that the defendant corporation was liable.
On its facts the
Moores Case
differs so widely from the instant case that it is hardly applicable even by analogy. In that case the principal transaction was á loan between individuals wholly independent of the defendant banking corporation, but for which its corporate stock was pledged as security. The bank was not a party to the agreement. In the instant case the principal transaction was a purchase of stock from plaintiff association. The contract provided for the delivery of a prepaid stock certificate to defendants on completion of their payments to plaintiff. The payments were made to the corporation and the contract was completed by the delivery of a prepaid stock certificate in the manner agreed to by the association. A corporation is not to be relieved from its contractual obligations by the fraud of its own agent. The doctrine of the
Moores Case
was qualified by this court in the
Moff at Case,
and it seems inconsistent to give blanket application of the
Moores Case
to this case.
As to the effect of the assignment, the trial judge said:
“Defendant cannot be heard to complain of irregularities surrounding the issuance of certificate No.
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Bushnell, J.
Plaintiff, National Turners Building & Loan Association, a New Jersey corporation, filed a bill of complaint for cancellation of one of the association’s stock certificates and for the surrender of a passbook, both of which are in the possession of defendants, who are husband and wife and residents of Wayne county, Michigan. Defendants denied plaintiff’s right to equitable relief and, by cross bill, sought a decree validating the certificate and passbook.
Defendant, Irene M. Sehreitmueller (formerly Irene M. Weber), in 1919, while living in the State of New Jersey, purchased, through her brother, Frank Gr. Weber, then secretary of plaintiff corporation, the association’s instalment certificate No. 243, for which she agreed to pay $15 per month. The terms of the purchase provided that, at such time as the monthly payments of $15 and interest, or the accrued profits thereon, aggregated a total of $3,000, Mrs. Sehreitmueller was entitled to receive either a fully prepaid stock certificate for 15 shares of the capital stock of plaintiff association of a value of $200 each, or she could redeem the certificate in cash.
In 1927 instalment certificate No. 243 was assigned by the purchaser to Frank G-. Weber. This assignment was on a separate sheet of paper and defendant received from her brother a receipt, dated February 28, 1927, showing that certificate No. 243, then valued at $1,700, was being loaned to him.’for the express purpose of using it as personal - col
lateral at the Irvington National Bank, of which he was an assistant cashier. After Mrs. Schreitmueller assigned certificate No. 243 to Weber, defendants continued to make payments thereon to the building and loan association until the instalment certificate matured in March of 1931. After its maturity, upon suggestion of Weber, defendants notified him to allow the proceeds of certificate No. 243 to remain with the association and be converted into prepaid stock, instructing him to apply the interest proceeds from such prepaid stock, amounting to $15 per month, towards the purchase of new instalment shares.
Because they needed the certificate in order to use it as additional collateral at one of the Detroit banks, defendants later began to press Weber for its return. .On October 11,1933, Weber sent defendants stock certificate .No. 473 bearing his signature as secretary and that of Charles Braun as vice-president, and a passbook No. 1937, showing receipt of monthly payments from February, 1931, through June of 1933; the certificate, however, was dated March 15, 1931. Braun was not vice-president of the association in 1931 but did occupy that office at the time of delivery of the certificate.
It is plaintiff’s claim that it had not at any time issued certificates with as high a number as 473, although the signatures of Braun and Weber thereon were not disputed. It is this certificate No. 473 and passbook No. 1937 that plaintiff association wants cancelled.
William A. Schilling, a lawyer of Maplewood, N. J., testified that he was one of the organizers of the association and had been its counsel ever since, and that he acted as secretary from .September 1st to December 15, 1934, succeeding Weber,
who was also one of the organizers and secretary of the association since its inception. Schilling stated that Weber was a full time employee of the Irving-ton National Bank, that his work with the association was more or less a side line; that in August of 1934 it was discovered that Weber was a defaulter, and subsequent investigation disclosed a shortage of approximately $20,000 in his building and loan association accounts; he was later indicted by a Federal grand jury for embezzling funds of the Irvington National Bank. His fraudulent dealings with the affairs of his two employers were characterized by Schilling as
“a
most complicated and involved scheme that that bank or anyone around there has ever come on to.” Among some of the dealings of Weber with plaintiff’s stock were the surrender and cancellation by him of the originally assigned certificate No. 243 and the issuance of certificate No. 296, which was in turn pledged by him with the association as collateral for a loan and later cancelled.
The trial judge was of the opinion that the evidence produced before him disclosed a situation controlled by the law laid down in
Moores
v.
Citizens’ National Bank of Piqua,
111 U. S. 156 (4 Sup. Ct. 345). The trial judge did not, however, cite
Muff at
v.
Detroit-Macomb Land Co.,
252 Mich. 692, in which the
Moores Case, supra,
is discussed. In the
Muff at Case
plaintiff filed a bill to compel the transfer of a stock certificate which he had obtained under circumstances related in the reported opinion,
supra.
When Muffat presented the certificate for transfer, he learned for the first time that it represented 103 shares of stock which Willmarth, the secretary and a large stockholder of defendant company, had owned at one time, but, having sold 84 shares to
one Whittaker, the certificate for 103 shares was surrendered to the corporation for cancellation and new certificates were issued. The trial judge found against Moffat on the theory— “that when an officer, who has the power to issue certificates of stock, hypothecates stock represented by a certificate standing in his name for his personal debts, the pledgee is put upon inquiry. Had due inquiry been made, Willmarth’s remissness would probably have been discovered.” This court did not agree with the trial judge’s conclusion and, after a discussion of the authorities cited in the opinion,
supra,
particularly the
Moores Case
and the uniform stock transfer act, 2 Comp. Laws 1929, § 9520
et seq.
(Stat. Ann. § 19.331
et seq.),
concluded that the defendant corporation was liable.
On its facts the
Moores Case
differs so widely from the instant case that it is hardly applicable even by analogy. In that case the principal transaction was á loan between individuals wholly independent of the defendant banking corporation, but for which its corporate stock was pledged as security. The bank was not a party to the agreement. In the instant case the principal transaction was a purchase of stock from plaintiff association. The contract provided for the delivery of a prepaid stock certificate to defendants on completion of their payments to plaintiff. The payments were made to the corporation and the contract was completed by the delivery of a prepaid stock certificate in the manner agreed to by the association. A corporation is not to be relieved from its contractual obligations by the fraud of its own agent. The doctrine of the
Moores Case
was qualified by this court in the
Moff at Case,
and it seems inconsistent to give blanket application of the
Moores Case
to this case.
As to the effect of the assignment, the trial judge said:
“Defendant cannot be heard to complain of irregularities surrounding the issuance of certificate No. 296 after her unqualified assignment of certificate No. 243. Plaintiff may have been careless in its dealings with Weber but was under no obligations to protect defendant who had disposed of her interest in the certificate. She trusted Weber to protect her and live up to his secret agreement and gave plaintiff no notice of any infirmity in his title to the certificate. ’ ’
The court cited, in support of this statement,
Peckinpaugh
v.
H. W. Noble & Co.,
238 Mich. 464 (52 A. L. R. 941);
Connolly
v.
Peoples State Bank,
260 Mich. 352, and annotations in 73 A. L. R. 1405.
Unless defendant Irene Schreitmueller has assigned away her right to complain, she is entitled to her certificate. As between her and Weber, no question can arise as to her rights. Unless these rights or equities were cut off by those of a
bona fide
purchaser, they remain intact.
A.bona fide
purchaser must buy without notice of any defect in the seller’s title. 2 Comp. Laws 1929, § 9526, subd. (1) (Stat. Ann. § 19.337, subd. 1). The problem thus narrows itself to a determination of whether Weber’s knowledge of defendant’s interest in the pledged certificate is chargeable to plaintiff association. The general rule which imputes an agent’s knowledge to his principal is subject to an exception where the agent acts in his own interest, adversely to his principal.
State Savings Bank of Ionia
v.
Montgomery,
126 Mich. 327;
People’s Savings Bank of West Bay City
v.
Hine,
131 Mich. 181; 2 Am. Jur. p. 298. See, also, annotation in 104 A. L. R. 1246. But this exception is qualified where the agent is the sole representative or “sole actor” for the principal in the transac
tion.
Munroe
v.
Harriman
(C. C. A.), 85 Fed. (2d) 493 (111 A. L. R. 657, and annotation, p. 665). See, also,
Shaw
v.
Clark,
49 Midi. 384, 386 (43 Am. Rep. 474); 2 Am. Jur. p. 300; 13 Am. Jur. p. 1039, and 86 A. L. R. 537.
The record contains no evidence questioning* the fact that defendants dealt solely with Weber and that Weber had access to the stock books at any time he wished.
State Savings Bank of Ionia
v.
Mont
gomery, supra, is distinguishable. Its cashier was not authorized to discount paper generally, whereas Weber apparently could handle stock at will. In the
State Savings Bank Case
the discount committee had passed on the loan and exercised its own discretion, but in the case at bar no one else passed on the transaction for the building and loan association except Weber. If a corporation is so lax as to trust the whole of a transaction to one officer, it should suffer the consequences of his misfeasance as an officer. The same distinction may be made in
Peoples Savings Bank of West Bay City
v.
Hine, supra.
When defendant Irene Schreitmueller loaned Weber the instalment stock certificate No. 243, it had a value of approximately $1,700, but she continued to make subsequent payments thereon to the association through its officer, her brother, and in due time received from it, through him, certificate No. 473, which on its face purported to be a
tona fide
prepaid stock certificate representing* $3,000 of payments. It is possible that defendant Irene Schreitmueller, by her assignment of the instalment stock certificate, unwittingly assisted Weber to defraud the building* and loan .association, but a reading* of the record forces the conclusion that Weber apparently had no difficulty in perpetrating almost any kind of a fraud upon the association and that its
directors and other officers, by their laxity, permitted a situation to arise whereby Weber eventually succeeded in consummating his scheme of embezzlement of large sums of money from the association.
Defendants must accept the consequences of the loan made by Mrs. Sehreitmueller and suffer the loss occasioned by Weber’s misuse of this certificate while he was acting other than as a representative of the association. Plaintiff should not be held liable for the value of the certificate at the time it was loaned to Weber.
Defendants’ subsequent payments on the certificate, and the earnings, if any, on the entire amount of the investment, were not connected with the loan agreement between the sister and her brother, and for these plaintiff is liable.
The record does not contain sufficient testimony to permit the entry of a decree here. An accounting must be had between the parties in order to determine the actual amount for which plaintiff is liable. For this purpose, testimony must be taken.
The decree entered below will be vacated and the cause remanded for an accounting in conformity with this opinion and the entry of a final decree in the circuit court. Neither party having’ prevailed in this appeal, no costs will be awarded here.,/ Costs below may be taxed as the trial court may direct. It is so ordered.
Sharpe, Potter, Chandler, North, and McAllister, JJ., concurred with Bushnell, J.