Pennsylvania Railroad Company's Appeal

86 Pa. 80, 1878 Pa. LEXIS 12

• Court: Supreme Court of Pennsylvania
• Decided: January 21, 1878
• Status: Published

Opinion

Mr. Justice Sharswood

delivered the opinion of the court,

There is no doubt that a corporation is a trustee of its stockholders, and is bound to proper vigilance and care that they may not be injured by unauthorized transfers of their stock: Bayard v. Bank, 2 P. F. Smith 232 ; and there is no doubt, we think also, that, had the certificates of stock, which are the subject of the controversy, been lost or stolen from the possession of the appellees, the appellants would have been responsible. Though the signature of Samuel P. Fearon to the powers to transfer was genuine, yet they had actually been revoked by his death, and, in fact, before; and the circumstance that at,the time the transfer was permitted they were thirteen years old, was enough to arouse suspicion and inquiry; and it is necessarily to be presumed that if proper inquiry had been made the truth would have been elicited. The clerk by whom the transfer was permitted, unfortunately, is dead, and we are without evidence on the subject. The onus, however, of showing due diligence was on the corporation appellants, and they must suffer from the want of the evidence.

But there certainly was negligence on the part of the appellee. As executrix she placed the certificates in the hands of Creeley, as her attorney, with the blank powers endorsed uncancelled. 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 w’ell as 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 Parsons’s Eq. Rep. 248: “The true doctrine on this subject is that, where one of two innocent persons is to suffer from the tortious act of 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. . He 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 learned master and 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.

Decree reversed, and now the bill of the appellee, Mary Eearon, is dismissed as to the Pennsylvania Railroad Company, with costs, and the costs of this appeal.