Anderson v. Nicholas — 18 N.Y. Super. Ct. 121

Majority

p. 121

Robert D. Anderson and Frederick E. Houghton, Plaintiffs and Respondents, v. Anastasius Nicholas, Defendant and Appellant.

Headnote

1. One who has either tortiously or feloniously, without the knowledge or consent of the owner, obtained the possession of a certificate of stock having a power of attorney in blank annexed thereto, cannot confer title on a third person by selling and delivering the same for a valuable consideration, although the purchaser acts in good faith, believing he is dealing with one who owns or has due authority to sell the stock.

2. One who receives such a certificate and power, and sells the same or causes the same to be sold, by direction of one whom he supposes to be the owner or to have due authority, is liable to the actual owner for a conversion of the stock, notwithstanding he has paid over the proceeds to the person employing him.

3. One who deals with or disposes of the personal property of another (the same not being negotiable paper) must see to it that he acts by the authority of some one who has power sufficient to warrant such dealing or disposition.

(Before Bosworth, Oh. J., and Woodruff and Moncribf, J. J.)

Heard, June 9th;

decided, July 9 th, 1859.

This is an appeal by the defendant from a judgment entered on the report of M. B. Maclay, Esq., as Referee.

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The action was. brought to recover the value of twenty shares of stock of the American Guano Company, which had been wrongfully taken from the plaintiffs’ possession by the son of one of the plaintiffs, and delivered, disposed of, or pretended to be sold to the defendant; a demand of the stock by the plaintiff, and refusal to deliver was alleged, and a conversion thereof by the defendant to his own use.

The defendant’s answer put in issue all the allegations in the complaint.

The Eeferee found, first, “ That the plaintiffs were possessed of and owned, as partners, twenty shares of the capital stock of the American Guano Company; and that on or about the 25th day of October, 1858, one Alexander H. Anderson, a son of the plaintiff, Eobert D, Anderson, and a minor of the age of about sixteen years, without the leave, permission, authority or knowledge of plaintiffs, or either of them, wrongfully took said twenty shares of stock out of the possession of the plaintiffs.

“ Second. That the said twenty shares so taken were in one certificate, and were in all respects, except as to the number of shares and the number of the certificate, like the following:

“ Ho. 782. One Share.

“Americas Guaso .Oompasy.

“ This is to certify that A. G. Benson, President, of New York, is entitled to one share in the capital stock of the American Guano Company, standing in his name, and transferable on the books of said Company only upon surrender of this certificate by the said A. G. Benson, President, or his attorney.

“New York, 7th January, 1856.

“ A. G. Bessom, President.

“ Jos. L. Wyckoff, Treasurer.

“ (Indorsed.)

“ Know all men by these presents, that...................

.................for value received, do hereby constitute and

appoint................................to be.......'. true

and lawful attorney for.............and in

and stead to sell, assign and transfer unto...

name

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.................shares in the capital stock of the American

Guano Company, standing in...........name on the books of

said Company.

“In witness whereof........have hereunto set........hand

and seal this......day of........one thousand eight hundred

and..................

“A. G. Benson President, [l. s.]

“ Witness present, Arthur Benson.

“ Third. That the said stock was not spld and disposed of to the defendant; but that said Alexander, on or about the said 25th of October, 1858, offered to dispose of said twenty shares of stock to the defendant; that the defendant offered said Alexander $3 per share for the same, which amount said Alexander at first refused to take, but almost immediately afterwards agreed to accept, and so stated to the defendant, and that, thereupon, defendant took said stock from said Alexander, went out to inquire about the same; and, upon returning to his office, finding several persons waiting in the back room to do business with him, he stated to his clerk, George M. Bowen, that it was all right, and that he might do as he pleased about buying it, and thereupon handed said certificate of twenty shares to his said clerk, and thereupon the said clerk closed the transaction with the said Alexander, by paying him $3 per share, and retaining the said twenty shares of stock.

“ Fourth. That at no time prior to the commencement of this suit was any intimation made to either of the plaintiffs that said clerk had ever had any interest in said stock; and that no part of said $60, received by said Alexander, was received by or went to the benefit of said plaintiffs, or either of them.

“ Fifth. That shortly thereafter the said Bowen delivered said stock to the defendant to sell for him.

“ Sixth. That the defendant thereupon caused said stock to be sold in his own name, by H. T. Morgan & Co., brokers, at the stock board, on the next day after same was obtained as aforesaid, of said Alexander, for $7 per share; received the proceeds of the sale, and accounted to said Bowen for such proceeds, less his commission for such sale.

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“ Seventh. That at the time of such sale by defendant, the said stock was of the value of $10 per share, amounting in the aggregate to the sum of $200.

“ Eighth. That a day or two after such sale, and before the commencement of this suit, the plaintiffs demanded of defendant the return of said stock, or the value thereof, stating to defendant that the plaintiffs owned the stock, and that the said Alexander had taken it without the leave or knowledge of plaintiffs, or either of them, and offering, if defendant would pay the difference between the $60 given for the stock and the $140 received by defendant on its sale, to take that in full satisfaction. Defendant admitted, at this time, in the presence of his said clerk, that he, the defendant, had purchased the said shares of said Alexander, for $3 a share, and had sold the same for $7 a share, and received the avails thereof; but that the said defendant refused to return or deliver the same, or to pay the value thereof, or any part thereof.

“ Ninth. That thereupon, as matter of law, I do find and report that the defendant wrongfully converted said stock to his, said defendant’s, use, and that plaintiffs are entitled to judgment in their favor against the said defendant for the sum of $200, being the value of said s'tock, with interest from the 10th day of November, 1858, to the date of this, my report, amounting to $205.83, and costs.

“ Dated, New York, April 11th, 1859.”

Judgment for the plaintiffs was accordingly entered, and the defendant appealed.

The only exceptions taken on the trial were to the final decision.

F. H. Upton, for the defendant, (appellant.)

I. The conclusion of law is wholly unsupported by, and at variance with, the Referee’s several findings of the issues of fact.

1. The Referee having found that the defendant did not purchase the stock in question, and that he did not sell the same as his own, but as the agent of another, 'with whom he accounted, and to whom he paid over the proceeds, before any demand upon, or notice to him, that the stock had been wrongfully taken from

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the plaintiffs, has found against the plaintiffs the very facts upon which alone they rest their claim for a recovery.

2. Having thus found these facts upon which alone the plaintiffs allege a wrongful conversion by the defendant, such conversion is completely and necessarily excluded by the findings.

8. A wrongful conversion, as matter of law, can only be predicated upon the findings of the issues of fact as made by the pleadings.

4. A wrongful conversion, as matter of law, cannot be predicated upon the admissions of the defendant at the time of the demand and refusal, if the issues of fact are from the other evidence found against such admissions. The Referee might have been justified in finding, as matter of fact, from those admissions, that the defendant was the principal in the transaction, and not the agent; but having found otherwise, a conclusion of law cannot be based upon the truth of admissions which he has found to be untrue.

In the cases where the admissions of the defendant have been held sufficient evidence of conversion, those admissions have stood alone, uncontroverted by other evidence, and a portion of the conceded facts of the cases. (Laplace v. Aupoix, 1 Johns. Ca., 406; Everett v. Coffin, 6 Wend., 603 ; Dezell v. Odell, 3 Hill, 215 .)

II. If any wrongful conversion of the stock in question has been made by any one, the. findings of fact by the Referee clearly point to Bowen, and not to the defendant, as the party who has made, and who in law is alone liable for such conversion.

The facts found are:

1. That the defendant did not purchase the stock from the plaintiff’s son.

2. That in selling the stock he merely acted as Bowen’s agent.

3. That he accounted with Bowen for its proceeds.

4. That he did this before any demand upon or notice to him of the plaintiff’s claim.

Upon these facts, the action, if at all maintainable, can only be maintained against Bowen.

If, while the stock was in the hands of the defendant, as Bowen's agent, the plaintiffs had given him the notice, and made the demand, then his exercise of dominion, or his assertion of claim,

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whether as principal or agent, might have been sufficient to render him liable in trover. But all the authorities agree in this, that the claim, or interference or exercise of authority, as the basis of an alleged conversion, must be in opposition to the real owner at the time of the demand, and while the person so claiming has the property in his actual control or power. (Connah v. Hale, 23 Wend., 462 ; Farrar v. Chauffete, 5 Denio. 527 ; Cobb v. Dows, 9 Barb. S. C. R., 230; Frye v. Lockwood, 4 Cow., 454 ; LaFarge v. Kneeland, 7 Cow., 456 ; Mowatt v. McClelan, 1 Wend., 173 .)

HI. The complaint of the plaintiff does not state those facts, nor does the Referee find those facts which are, in law, essential to be averred and proved, in order to justify the conclusion of a conversion of the property in question, either by the defendant or by Bowen. Those essential facts, neither averred nor found, are these:

1. That the son of. the plaintiff acquired his possession feloniously.

2. That the defendant obtained it from him in bad faith and with notice of the felony—or,

3. With notice or knowledge of facts or circumstances which ought to have put him, as a man of ordinary prudence, on his guard.

(a.) The fact averred and found, that the plaintiff’s son, “without the permission or knowledge of the plaintiffs,” wrongfully took the stock from their possession, is not an averment inconsistent with an averment of a simple breach of trust, or fraudulent conversion on the part of the young man. And it being in evidence that he was or had been in the employment of the plaintiffs; that he was entrusted with the key of the safe, where their securities were deposited; and that he took the certificate in question from the safe in mid-day—are facts which negative the idea of a felony, and tend to show a violation of the confidence reposed in him, by allowing him to have access to and the control of the plaintiffs’ securities.

If the complaint not only does not aver, and the Referee does not find the possession of young Anderson to have been a felonious one; but, on the contrary, the facts tend to show that such possession was the result of the position which he qccupied, and

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the confidence had in him by the plaintiffs, then the authorities are uniform, that a purchaser for value, without actual notice, is protected against the claims of the rightful owner. (Parker v. Patrick, 5 D. & E., 175; Mowrey v. Walsh, 8 Cow., 238 ; Saltus v. Everett, 20 Wend., 275 ; Lloyd v. Brewster, 4 Paige, 540; Andrew v. Dieterich, 14 Wend., 31 ; Hoffman v. Carow, 22 id., 285.)

(5.) There is neither averment nor proof, nor any pretense of any bad faith on the part of the defendant, assuming him to have been the purchaser from the plaintiff’s son.

(c.) Bad faith in the defendant not being averred, it was essential, to entitle the plaintiffs to a recovery, that the Referee should expressly find, as a matter of fact, that the defendant had notice or knowledge of facts or circumstances which ought to have put him, as a man of ordinary prudence, on his guard. This the Referee does not find, and there is therefore no basis for his legal conclusion. (Pringle v. Phillips, 5 Sand., 161, and cases cited.)

IY. This notice or knowledge on the part of the defendant, of such facts or circumstances as shall put a man of ordinary prudence on his guard, is essential, as the basis of his liability, because the character of" the property alleged to have been, converted was such as to bring it clearly within the exceptions to the rule—that he who has himself no title to a personal chattel can pass no title to another.

1. The exceptions to this' rule, as important as the rule itself, are established in favor of trade and commerce, and apply to all instruments and securities which are negotiable, and pass from hand to hand by mere delivery. (Miller v. Race, 1 Burr., 452; Grant v. Vaughan, 3 id., 1516; Gill v. Cubit, 3 B. & C., 466; Snow v. Peacock, 3 Bing., 406; Baynes v. Foster, 4 Tyrw., 65; Beckwith v. Corral, 3 Bing., 444; Snow v. Saddler, 3 id., 610; Strange v. Wigney, 6 id., 677; Easly v. Crockford, 10 id., 243.)

All these cases (cited with approbation in Pringle v. Phillips, before cited,) establish the doctrine, that the actual good faith of the purchaser or bailee for value of such a character of property, is not questioned, there must be proof in order to deprive him of his protection in the purchase, of a want of reasonable caution or prudence on his part in omitting to make any inquiry when just grounds of suspicion exist, of which he has knowledge.

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2. Property of the character of that claimed to have been converted in this case has been included within the exception to the rule, ever since the great leading case of Lickbarrow v. Mason, (2 T. R., 63,) in which it was decided that the consignor, who had indorsed in blank the bill of lading, lost his right to stop the goods in transitu, when the consignee holding it had fraudulently delivered it to a third party, who had advanced his money upon it in good faith.

3. The doctrine has been expressly applied to certificates of stock, in The Commercial Bank v. Kortright, ( 22 Wend., 348 ;) Sargent v. Franklin Insurance Company, ( 8 Pick., 90 ,) and in this Court, in the case of Fatman v. Lobach. ( 1 Duer, 354 .)

In this last case it was expressly held that a certificate of stock, with a power of attorney executed thereon, in blank, (exactly as was the case here,) was a negotiable instrument, the property in which passed by delivery and protected the purchaser or him who advanced his money upon it.

6. But inquiry was made, and that, too, as the testimony shows, from the best sources within reach, for the purpose of ascertaining if the young man might safely be dealt with.

V. The facts found by the Referee are wholly insufficient to sustain his conclusion of law, that the property in question was wrongfully converted by the defendant; and neither the facts averred, proved nor found by the Referee, are sufficient in law to sustain a claim on behalf of the plaintiffs for an unlawful conversion of the property against any one other than the son of the plaintiff.

Charles W. Prentiss, for the plaintiffs, (respondents.)

I. Any exercise of dominion over property, in opposition to the rights of the owner, is a conversion, and even a mere claiming may be. (Connah v. Hale, 23 Wend., 462 ; Farrur v. Chauffetete, 5 Denio, 527 ; Cobb v. Dows, 9 Barb. S. C. R., 230; 2 Greenl. Ev., § 642; Harris v. Saunders, 2 Strob. Eq. R., 370; Parker v. Goddard, 39 Maine R., 144; Freeman v. Scurlock, 27 Ala. R., 407.)

II. Stock is not negotiable like bills or promissory notes. (Covill v. Hill, 4 Denio, 323 , aff’d, 2 Seld., 374; Brower v. Peabody, 11 How. Pr. R., 492; Mechanics’ Bank v. N. Y. & N. H.

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R. R. Co., 3 Kern., 599; Biddle v. Bayard, 13 Penn. S. R., 150; McCready v. Rumsey, 6 Duer, 574 .)

III. Therefore, the stock having been stolen, the defendant, whether he acted as principal or agent, acquired no better title to the stock than the boy had; and having sold it, is liable to the owners. (Williams v. Merle, 11 Wend., 80 ; Andrew v. Dieterich, 14 Wend., 31 ; Hoffman v. Carow, 20 Wend., 21 , aff’d, 22 Wend., 285 ; Covill v. Hill, 4 Denio, 323 , aff’d, 2 Seld., 374.)

IY. The Referee’s report shows that the defendant admitted to the plaintiffs, before this action was commenced, that he had bought and sold the stock. This is of itself sufficient evidence of conversion. (La Place v. Aupoix, 1 Johns. Cas., 406 ; Everett v. Coffin, 6 Wend., 603 ; Dezell v. Odell, 3 Hill, 215 .)

Y. Even admitting that the defendant in this transaction acted only as the agent or broker of Bowen, he is still- liable for the conversion; and equitably so, as he knew all the circumstances of the' pretended sale, and received part of the proceeds of the stock. (Bristol v. Burt, 7 Johns. R., 254; Thorp v. Burling, 11 id., 285 ; Murray v. Burling, 10 id., 175; Reynolds v. Shuler, 5 Cow., 323 ; Hoffman v. Carew, 20 Wend., 21 , aff’d, 22 id., 285; Farrar v. Chauffetete, 5 Denio, 527 ; Pringle v. Phillips, 5 Sandf. S. C. R., 157; Calkins v. Allerton, 3 Barb. S. C. R., 171; 2 Greenl. Ev., § 645; Perminter v. Kelly, 18 Ala. R., 716; Dunlap’s Paley’s Agency, 4th Am. ed., 399, and n. b.)

The defendant in this case is liable for the value of the stock. The lad, Anderson, had no title to the stock, and no authority to dispose of it. He had not been intrusted with the certificate by the plaintiffs, the true owners, but had taken it wrongfully without their consent. He could, therefore, by no act of his, confer title upon the defendant or upon Bowen; nor could he give to either of them a right to dispose of the stock.

Bowen having neither title to the stock nor authority to sell it, (assuming, for the purposes of the question, that the defendant had nothing to do with the purchase from the boy, and is in that respect in the same situation as if he had never seen the boy at all,) could not authorize the defendant to dispose of the stock, nor could he confer upon him any authority which the

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defendant can interpose as a protection against the plaintiffs’ claim.

The defendant has in fact received the certificate of the plaintiffs’ stock; he has employed third persons to sell it for him ; it has been sold in obedience to his instructions; he received the proceeds of sale; and he is not protected by any legal authority to do the acts so performed. This makes him liable to the owners of the stock. He has dealt with their property without their consent, and received its proceeds on a sale made by his direction.

Assuming that he acted in good faith in the belief that the stock, when he caused it to be sold, belonged to Bowen, is not sufficient to protect him. One who deals with or disposes of the .property of another, (the same not being negotiable paper,) must see to it that he acts by authority of one who has title, or who has an authority to confer, sufficient to warrant such dealing or disposition. (Everett v. Coffin, 6 Wend., 603 ; Williams v. Merle, 11 id., 80; Saltus v. Everett, 20 id., 267; Hoffman v. Carow, 20 id., 21; 22 id., 285; Connah v. Hale, 23 id., 462; Covill v. Hill, 4 Denio, 323 ; 2 Seld., 374; Cobb v. Dows, 9 Barb., 230 .)

The judgment should be affirmed with costs.

Ordered accordingly.

Cases cited

Farrar v. Chauffetete 5 Denio. 527 N.Y. Sup. Ct. p. 126