Union Trust Co. v. Oliver

[ 1 ] The defendant Oberg delivered to one Clarke, the wrongdoer, his certificate of stock without writing his own name in the blank assignment and power to transfer the stock, indorsed thereon, and executed by the man who, on the face of the certificate, appeared to be the owner thereof. The certificate was delivered to Clarke to be surrendered and reissued to Oberg. Although Clarke was the secretary of the company, he was not the agent of the voting trustees for transferring the stock upon the books of the trustees. They had an agent of their own for that purpose. Clarke pledged the certificate to the plaintiff bank, to secure the payment of a loan of $2,000, made to him on the faith of the pledge. The question is: Who shall bear the loss of that transaction, the owner of the stock or the bank, the plaintiff Trust Company?

While the actual authority of Clarke was limited to having the stock transferred upon the books, as provided by the certificate, and reissued, Oberg, by delivering the certificate, with the blank assignment and power, clothed Clarke with the indicia of ownership and apparent authority to sell and dispose of the stock. While Clarke may have been guilty of larceny in pledging the stock, as the learned trial judge holds, it was not a larceny of taking, but of misappropriating, the stock. If there had been a felonious taking, I think .the bank could not hold the stock against the owner; but where, as in this case, the owner voluntarily delivers to another his stock, indorsed in blank as this was, although for a special purpose, and the person whom the owner so in

There has been much controversy in the courts over this and kindred questions. I shall not stop to analyze the decisions. It is possible that the views of thé judges, as expressed in their opinions,' may not be in entire accord; but the principle applicable to this case is well established, and I can do no better than to quote from the opinion of Judge Rapallo in the case of McNeil v. Tenth National Bank, 46 N. Y. 325 , 329, 330 ( 7 Am. Rep. 341 ), as follows:

“It must be conceded that, as a general rule, applicable to property other than negotiable securities, the vendor or pledgor can convey no greater right or title than he has. But this is a truism, predicable of a simple transfer from one party to another where no other element intervenes. It does not interfere with the well-established principle that where the true owner holds out another, or allows him to appear, as the owner' of, 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 or authority of the 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. Pickering v. Busk, 15 East. 38; Gregg v. Wells, 10 Adol. & El. 90; Saltus v. Everett, 20 Wend. 268 , 284 [ 32 Am. Dec. 541 ]; Mowrey v. Walsh, 8 Cow. 238 ; Boot v. French, 13 Wend. 570 [ 28 Am. Dec. 482 .]”

“The true point of inquiry in this case is whether the plaintiff did confer upon his brokers such an apparent title to, or power of disposition over the shares in question, as will thus estop him from asserting his own title, as against parties who took bona fide through the brokers.

“Simply intrusting the possession of a chattel to another as depository, pledgee, or other bailee, or even under a conditional executory contract of sale, is clearly insufficient to preclude the real owner from reclaiming his property, in Case of an unauthorized disposition of it by the person so intrusted. Ballard v. Burgett, 40 N. Y. 314 . ‘The mere possession of chattels, by whatever means acquired, if there be no other evidence of property or authority to sell from the true owner, will not enable the possessor to give a good title.’ Per Denio, J., in Covill v. Hill, 4 Denio, 323 .

“But if an owner intrusts to another, not merely the possession of the property, but also written evidence, over his own signature, of the title thereto, and of an unconditional power of disposition over it, the case is vastly different.' There can be no occasion for the delivery of such documents, unless it is intended that they shall be used, either at the pleasure of the depository, or under contingencies to arise. If the conditions upon which, this apparent right of control is to be exercised are not expressed on the face of the instrument, but remain in confidence between the owner and the depository, the case cannot be distinguished in principle from that of an'agent who receives secret instructions qualifying or restricting an apparently absolute power.” ... -

[2] That is the only question remaining to be considered, viz., whether the plaintiff is a bona fide holder of the stock. The trial court found that the plaintiff was negligent in failing to make sufficient inquiry concerning the ownership of the stock. It is true that Clarke was not asked the specific question whether he was the owner of the stock, but that would hardly seem to have been necessary. Clarke was in possession of the certificate, and the apparent owner, and asked to borrow money on it. While he stated that he had sold it, that did not imply that he had parted with the title, in view of his statement made in that connection that he expected to receive his pay therefor within a few days. Clearly, what was meant by that statement was that he had agreed to sell it and was holding it until he got his pay. If Zoller, who represented the Trust Company in the transaction, had made inquiry of Lyon, to whom Clarke said he had sold the stock, he would not have received any information as to the claim of Oberg. At. least, there is nothing in the record to so indicate, and I think no such presumption can be indulged. If he had gone to the books, where the stock was registered, he would have found the stock registered in the name of Adams, just as it appeared on the face of the certificate. If he had gone to Adams himself, he would have learned that Adams had sold the certificate to Clarke, because it appears that Clarke bought of Adams and sold to Oberg. It is difficult to see how any reasonable inquiry which Zeller might have prosecuted would have led to the discovery that Oberg was the owner of the stock. His name did not .appear upon the certificate, and there was nothing disclosed to Zoller to indicate that Oberg was the owner of the stock. In fact, it was not until some time after that, that Oberg discovered that the stock had been pledged, or that Zoller or any one on behalf of the plaintiff became aware that Oberg made any claim to the stock.

I am of the opinion that the plaintiff’s claim on the stock should be protected to the extent of the loan made on the faith of the pledge. There should be a reversal of the judgment upon the law and the facts, and, in view of the recent amendment to the Code of Civil Procedure (section 1338), the order should designate, as the particular question or questions of fact upon which the reversal is made, the seventh and eighth findings contained in the decision, and the statement in the ninth finding, so far as it finds that there was a wrongful appropriation to the use of the plaintiff, and so far as it connects the plaintiff with the unlawful and felonious appropriation, lying at the foundation of the fight to maintain the action and deprive Oberg of his right and title to the certificate, as therein stated. Each of these findings ¿should be held contrary to the evidence and contrary to law.

The judgment should therefore be reversed upon the grounds stated; and final judgment directed in favor of the plaintiff for the relief demanded in the complaint, with costs. All concur, except McLENNAN, P. J., who dissents and votes for affirmance upon the opinion of Clarke, J., delivered at Special Term.