Shattuck v. American Cement Co.

54 A. 785, 205 Pa. 197, 1903 Pa. LEXIS 547

• Court: Supreme Court of Pennsylvania
• Decided: March 23, 1903
• Docket: Appeal, No. 243
• Status: Published

Opinion

Opinion by

Mb. Justice Bbown,

It seems to be useless for us to call the attention of some of the lower courts to the propriety of an opinion containing the reasons for entering a judgment where reasons manifestly ought to be given. In the present case reasons for the judgment entered certainly ought to have been given, and it is to be regretted that the learned court withheld them.

When the appellee purchased the stock from Jamison Brothers & Company, they handed to him proper certificates, with an assignment and power of attorney on the back of each, signed by them in blank. They parted with all their interest in the stock, and, when they delivered the certificates to their vendee Avith their signatures to the blank assignments and powers of attorney, they gave authority to him to insert his own or any other name as the transferee of the stock and to designate any one as the attorney to make the formal transfers on the books of the American Cement Company. That the stock was transferable only on the books of the company by Jamison Brothers & Company, to whom the certificates had been originally issued, was a condition inserted in the certificates only for the convenience and protection of the corporation itself: Commonwealth v. Watmough, 6 Wh. 116; and in no manner affected the title of Shattuck, Avhich was absolute upon the delivery of the certificates to him. There was nothing either on the face or back of any one of them to indicate that they belonged to him. The evidence of the ownership of the stock, as gathered from each certificate, was that it had been originally issued to Jamison Brothers & Company; that, for a valuable consideration, they had sold it to an unnamed vendee, and that whoever might have possession of the certificates as the purchaser directly from the firm, or through some one to whom they had sold and delivered them in the first instance, should be regarded and dealt with as their owner. The evidence of Shattuck’s title Avas not a transfer to him, but was his possession of the certificates, which it is to be fairly presumed were handed to him by the brokers from whom he had purchased, with the transfers in blank, because he had so requested for his own convenience, if he should wish to dispose of them to others, without going through the formality of transfers upon the books of the company.. Instead of having himself named as transferee, he saw fit to take the certificates in the shape in which they are usually handed over to purchasers from brokers, knoAving that his possession of them would be regarded as tbe evidence of his title and his authority to insert proper names in the blank transfers and blank powers of° attorney. Upon presentation of them to the company by himself or others acquiring title through him, he or they, at any time, could have demanded and would have received new certificates in their own names. If he had sold his stock to another, nothing more would have been required of him than a mere delivery of the certificates' to the vendee, and so they could have passed from hand to hand, each succeeding vendee having implied authority from Jamison Brothers & Company, the original holders, to fill up the blanks, though there was no necessity either in law or according to the usages of trade to do so, until some purchaser wished to keep them as a permanent investment or feared to allow them to remain in a condition which might cause serious consequences if they should get into hands for which they were not intended. With the certificates in this shape, Shattuek entrusted them to the safekeeping of his brokers, and the question is whether he shall suffer the consequences of their bad faith to him, or the same shall fall upon another who acted in good faith with the brokers as the holders of the certificates, possessing, according to the 'usages of trade, the indicia of ownership of the stock.

The appellee could have absolutely protected himself from the loss which has befallen him through the perfidy of Stahl by having had his name inserted as the transferee of the stock; but he did not do so. He followed one of the well settled usages of the financial world by taking a blank transfer of the stock, which, with the delivery of the certificates to him, was all he needed for the purpose of acquiring the absolute title to the securities. As a rule, stocks are so sold and bought in this busy age, and pass from seller to buyer, quasi negotiable. Occasionally real owners of certificates of stock so transferred to them in blank may be, as in this case, the victims of those to whom they are entrusted in confidence that there will be no abuse of the indicia of ownership; but, notwithstanding such abuse, those who sell and buy stocks in financial communities will continue to sell and buy them as they were sold and bought here. The convenience and necessities of commercial centers will always require such a usage.

With full faith in the integrity of Stahl & Straub, bankers and brokers, with whom the. plaintiff below had been in the habit of transacting business, he left his certificates of stock with them for safe-keeping. He had been not only their customer, but had acted as their attorney, and there was nothing to lead him to think that the certificates would not be returned to him whenever he should call for them. Instead of keeping them safely, Stahl took them from the envelope in which they had been placed and pledged them to the Com Exchange National Bank, which, in good faith, made a loan to him in the name of Stahl & Straub, and the only question is whether this bank, which has indemnified the American Cement Company, or the appellee, shall bear the loss caused by the bad faith of Stahl. Upon principle and authority, the question can hardly be regarded as an open one.

As applicable to the facts in this case, we adopt the language of our Brother Mitchell in his dissenting opinion in Ryman v. Gerlach, 153 Pa. 197, which is in harmony with the view entertained by the majority of the court: “ A certificate of stock with a power of attorney to transfer, duly executed but in blank as to date and name of transferee, is in the position of merchandise prepared for market. That is the way sales and transfers of stock are usually made, and the presumable intent of executing the power to transfer, is to put the holder in position to complete a sale by delivery of the certificate and transfer of the stock. Such transfer carries prima facie a good title. The business of a stockbroker is to buy and sell stock, and when a certificate and power to transfer are put into a broker’s hands, the situation is exactly analogous to that of goods or merchandise of any kind, prepared for market, and put into the hands of a dealer in that particular article. The presumption which would arise in the case of an ordinary agent or holder is reinforced by the nature of this particular agent’s business.”

When the certificates of stock, with the transfers in blank indorsed upon them, were placed in the hands of Stahl & Straub by Shattuck, he acted innocently and in good faith; but another, equally innocent, dealt with one of the men to whom he had entrusted his stock with all the indicia of ownership; and if one of these two innocent persons is to suffer, the rule, as everywhere recognized, is that, where one by his own act arms another with power to act for him, he who so armed the wrongdoer must suffer for the consequences of the wrongdoing: Bank of Kentucky v. Schuylkill Bank, 1 Parsons’s Eq. 248; Burton’s Appeal, 98 Pa. 214; Ryman v. Gerlach, supra; Goodwin v. Robarts, L. R. 1 App. Cas. 476. There was nothing to indicate to the Corn Exchange National Bank that Stahl & Straub were not the owners of the certificates. They presented them in the regular course of business to the bank, for the purpose of procuring money upon them, and there was nothing to put the bank on inquiry as to the right, title or interest of the plaintiff below, or anyone else, in the shares of stock. The bank took them in good faith, and its title to them cannot now be impeached by the unfortunate appellee. “ The rights of a bona fide holder, as against the true owner of the stock, to whom the apparent owner has either sold or pledged, do not depend on a negotiable character in the certificates, but rest on another principle: ‘ namely, that one who has conferred upon another by a written transfer all the indicia of ownership of property, is estopped to assert title to it as against a third person, who has in good faith purchased it for value from the apparent owner.’, As a general rule, the vendor or pledgor can convey no greater right of title then he has. Simply intrusting the possession of a chattel to another as a depositary, pledgee or other bailee, is insufficient to prevent the real owner reclaiming his property in case of an unauthorized disposition of it by the person so intrusted. The mere possession of chattels, without evidence of property or authority to sell from the owner, will not enable the possessor to give good title. But if the owner intrusts to another the possession of property, and also written evidence of title and power of disposition over it, as respects innocent third persons, he is deemed as intending it shall be disposed of at the pleasure of the depositary. If there be conditions on which this apparent right of control is to be exercised, not expressed on the face of the instrument, the case, in principle, is like that of an agent who receives secret instructions qualifying or restricting an apparent absolute power. If the owner of the stock voluntarily gives certificates with blank assignment and power to make transfers, to his brokers, who betray the confidence reposed in them, such owner must suffer the loss, rather than innocent strangers whose money the brokers were thereby enabled to obtain. The principle ap-. plies to pledges of stock, and one who purchases from the pledgee may hold against the pledgor. And if the pledgee pledge it to secure payment of his own debt, the second pledgee may hold, it as security till his debt be paid. ‘ A person loaning money on such certificate and power, has a right to believe that the borrower from whom he receives them has an absolute right to pledge the stock.’ By commercial usage, a certificate of stock accompanied by an irrevocable power of attorney, either filled up or in blank, is, in the hands of a third party, presumptive evidence of ownership in the holder. And where the party in whose hands the certificate is found is a holder for value, without notice of any intervening equity, his title cannot be impeached: Moore v. Metropolitan National Bank, 55 N. Y. 41; McNeil v. Tenth National Bank, 46 N. Y. 325; Pratt et al. v. Tilt et al., 28 N. J. Eq. 479; Bridgeport Bank v. New York & New Hampshire Railroad Co., 30 Conn. 275; Mount Holly, etc., Turnpike Co. v. Ferree, 2 C. E. Green, 117; ” Wood’s Appeal, 92 Pa. 379.

We need not pursue this discussion further than to say that Pennsylvania Railroad Company’s Appeal, 86 Pa. 80, is conclusive that the judgment below should have been in favor of the defendant. In that case, Samuel P. Fearon, in 1860, pledged certain shares of stock as collateral security for a loan, transferring the certificates in blank. At the maturity of the loan he paid the debt, and the shares were returned to him, but the blank transfers and powers of attorney as executed were never canceled. Five or six years after his death his executrix took the certificates of stock and deposited them for safe-keeping with her lawyer, a member of the bar in good standing. Creeley, the lawyer to whom they had been entrusted, used them to secure a personal loan, and Shultz, to whom he delivered the certificates of stock, had the same transferred to himself on the books of the company. On a bill to require the Pennsylvania Railroad Company to issue to the executrix of Samuel P. Fearon duplicate originals of the certificates of stock so transferred to Shultz, the court below directed a decree in favor of the plaintiff. In reversing that decree, while attention was called to the negligence of the railroad company, we said: “ 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 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 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 Parson’s Eq. 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.”

In the present case there was no negligence on the part of the Corn Exchange National Bank. It is conceded that it took the stock from Stahl & Straub in good faith in the regular course of business, without any notice of the right, title or interest of the plaintiff in the certificates. Indeed, there was nothing that the Corn Exchange National Bank could or ought to have done that it did not do. If, in the exercise of extraordinary caution, which was not required of it, it had gone and made inquiry of the only persons who could have informed it as to whom the stock had been sold, it would have been informed by Jamison Bros. & Company that they had parted with all interest in the securities and had sold them to Mr. Shattuck, with authority in him to pass them by delivery to any one who might have purchased them from him. As stated, the question raised on this appeal is no longer debatable. The judgment of the court below is reversed and the record remitted, with direction to enter judgment in favor of the defendant.