Webb v. Graniteville Manufacturing Co.

11 S.C. 396

• Court: Supreme Court of South Carolina
• Decided: April 14, 1879
• Docket: CASE No. 705
• Status: Published

Opinion

The opinion of the court was delivered by

Willard, C. J.

Paul, the guardian of the infant plaintiffs, took from the defendant corporation a certificate of shares of the capital stock of that corporation belonging to his wards in his own name as guardian. He placed it with a blank endorsement in the hands of Davant, his counsel, for purposes connected with his administration as guardian. Davant hypothecated the certificate to the Savings Bank of Augusta for money loaned for his personal use. Hickman, who was president of the bank, and also president of the Graniteville Manufacturing Company, purchased, with Giles, the stock from the bank, and had the stock transferred by the defendant corporation to such purchasers. To show authority on the part of Paul as guardian to sell the stock, an order of the Circuit judge of the second circuit was produced, claimed as authorizing the guardian to sell the stock for the purpose of changing the form of instrument. Objections were made to this order that need not be considered, for no sale of the nature authorized was made under it. As the title of the stock stood in the name of Paul and the beneficial interest in the plaintiffs, his wards, Paul was a trustee for plaintiffs’ use. These relations were sufficiently declared by facts appearing on the face of the certificate and the books of the corporation. The stock previous to the transfer to Paul as guardian stood in the name of Fielding and Hill, as executors of Burwell McBride. The plaintiffs are the children of Burwell McBride. The transfer to Paul as guardian was made with full knowledge on the part of the corporation of the source from which information might have been derived as to the persons represented by Paul, and it must be assumed that the defendant corporation either had full knowledge of the persons entitled as beneficiaries under the trust, or improperly neglected to inform themselves on such subject. The company were, therefore, apprised of the rights of the parties and occupy tlie same position as that' of the defendants in Magwood v. Bank, 5 S. C. 379. Hickman could only derive title through the order of the Circuit judge, as he was chargeable with notice of the guardianship from the certificate itself, and, as we have just held, the guardian had no authority to sell the plaintiffs’ beneficial interest in stock constituting an investment, independently of an order of the court for that purpose. McDuffie v. McIntyre.

* The order discloses all that was essential to charge Hickman .with full notice of the rights of the plaintiffs, both as wards of Paul and under the trusts with which he was charged. As Hickman’s alleged title flows through that order, he is chargeable with notice of its contents. The order did not authorize the guardian to hypothecate the stock for the purpose of borrowing money. Such á transaction is neither within the terms or intention of the order, and cannot be justified under it. It must be assumed that Hickman saw the order and the proceedings upon which it was made, and from that he would be informed that Davant was the solicitor of Paul. In the absence of evidence showing that Hickman had reason to believe and did believe that Davant was a purchaser from Paul of the stock for a fair consideration, it must be assumed that Hickman dealt with Davant as the solicitor or agent of Paul. To hypothecate the stock was a breach of trust. If Hickman supposed that Davant had authority from Paul to hypothecate the stock, which is the assumption most favorable to Hickman, then his action must be regarded as assisting Paul to commit a breach of trust. As Hickman was president of the defendant corporation, that defendant is chargeable with notice of such breach of trust. It is in that case an instance of knowledge brought home to the agent of a corporation possessing full authority to act and actually acting as such in the máfcter to which the notice relates — the strongest case for charging a corporation wiih notice of matter known to its agent. It is unnecessary to consider the questions discussed by the Circuit judge, as they have no real application to the facts of the present case. The plaintiffs have lost their estate through a series of wrongful acts that would have been ineffectual for that purpose but for the transfer of the stock on the books of the defendant corporation, and by the exercise of reasonable prudence and care on their part the loss might have been prevented.

The judgment dismissing the complaint as to the Granite-ville Manufacturing Company must be reversed and the cause remaneced to the Circuit Court for judgment for the plaintiffs against both defendants.

Decree reversed.

McIver and Haskell, A. JVs, concurred.

Post. Case No. 720.