[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 239
[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 240 The referee placed his decision against the plaintiff's recovery on the ground that the general power given to the treasurer of the defendant to sign certificates of stock did not authorize him to sign those in his own name or favor, and that as such defect appeared on the face of the certificates, upon the credit of which the plaintiff advanced his money, he had notice of it when he took them, and therefore he could not recover. This the General Term held to be erroneous, and I think properly. The defendant was incorporated by an act of the legislature of this State (chapter 30), passed 15th March, 1799. By reference to its provisions it appears that its business was to be managed by thirteen directors to be *Page 242 chosen by and from its stockholders, and that such directors were to elect one of their own number as its president. Seven of them were necessary to constitute a quorum, of which the president, except in case of necessary absence, was required to be one. They were authorized to make by-laws, rules, orders and regulations, not inconsistent with the laws of this State or of the United States, as they might deem necessary for the well-ordering and management of the affairs of the corporation. The shares of its stock were declared to be personal estate, transferable on its books. In pursuance of the authority thus given, the directors, as found by the referee, passed certain by-laws, by which they prescribed the form of certificates to be given for the stock of the defendant to the owners thereof, which, under a general resolution of the directors, were to be signed by its president and treasurer. It appears, by the case, that the form of the certificate was prescribed as early as September, 1806, and that it required the signature of the president and treasurer thereto, and that the seal of the corporation should also be affixed to it. It is found by the referee that there was no by-law of the defendant making any exception as to the form of the certificate, or as to the officers who were to sign it when issued to its treasurer or president. It will thus be seen that the directors of the defendant, with knowledge that the act of the legislature incorporating it required its president to be a stockholder, nevertheless authorized and required him to sign every certificate of stock that was to be issued. Such certificate is the only evidence which a stockholder receives of the ownership and title to the stock held by him, and if the decision of the referee was right it would follow that there was no authority conferred on any person to give to the president any certificate showing that he was the holder of the stock standing in his name on the books of the company, and consequently that he could not hold any evidence of his title thereto. There is nothing disclosed by the report of the referee that there was any intention of the directors to prohibit the issue of a certificate to him in the form prescribed *Page 243 by them; nor was there any reason or necessity why such an exception should have been made, or why it should be implied. The president must be presumed to have been chosen with a conviction and belief that he would honestly and properly discharge the specific duties imposed on him by the by-laws, rules and regulations made by the directors, as well as those which would properly devolve on the principal officer of a turnpike corporation. The regulation prescribed for the issue of certificates did not give the right or authority to him or the treasurer alone to do it, but it required, as above stated, the signature of both of them, and in addition thereto the seal of the defendant, which is the highest evidence of a corporate act. It may, therefore, be properly assumed that, as no spurious or false certificate could be issued except by the act of its president (its confidential officer), it was not deemed necessary to make any exception as to his power or that of the treasurer in giving the usual evidence of the ownership of stock held by either of them, and that it was intended that their certificate should be in the same form and signed by the same officers as that issued to any other stockholder.
There is nothing in the decision in the case of Claflin v.Farmers and Citizens' Bank (25 N.Y., 293), which decides or declares a principle that the certificates issued in conformity with the by-law or regulation of the defendant, herein above referred to, were invalid because they were signed by the treasurer. In that case the president of a bank, having a general authority to certify checks upon it as good, certified, in his character of president, checks drawn by himself, individually, to be good, and it was held that the certificate was virtually an acceptance of the check by the bank, and that the general authority to certify the checks of its dealers did not authorize him to declare his own to be good, and thereby charge the bank with the amount thereof. It was well said by PARKER, J., in giving the opinion of the General Term on the reversal of the referee's decision in the present case (reported in 5 Lansing, 250), that "presumptively, the intention of the *Page 244 bank in giving the general authority did not include such a case, one out of the ordinary course of business and contrary to business and legal rules, and one entirely unnecessary to the ordinary course and management of the business of the company, * * * but in regard to certificates of stock, they are the necessary parts of the machinery by which the business of every corporation is carried on. * * * In the case at bar the resolution does not, as in that case, authorize the making ofcontracts for the company, but it directs the performance of a mere ministerial act, necessary to the orderly conduct of its business in regard as well to the officer's stock as to that of other stockholders," and he presents other reasons and considerations, showing that a fair and reasonable construction of the authority conferred on the president and treasurer allows them to give certificates of their own stock as they did of the other stockholders.
There is another and a very material distinction between that case and this. The power there conferred was given to the president alone, and was exercised, if intended to be exercised, without the seal of the bank; but here the signature of the treasurer alone was not sufficient. That of the president, and, in addition to both, the corporate seal of the defendant was required to be affixed. The certificates presented to the plaintiff, on the faith and credit of which he parted with his money, conformed to all those requisitions. The ownership of the stock by the treasurer was therefore not certified by the party in interest alone; whereas the certificate by the president of the bank, in his official capacity, that his individual check drawn on it was good, was made by the same person who was to receive the benefit of it, and was signed by no other officer of the institution. That difference clearly distinguishes the case of Claflin (supra), from the present, not only in the character of its material facts but in principle. It follows from what has been said that the first conclusion of law by the referee, that the general power given to the treasurer did not authorize him to sign certificates in his own name and favor was erroneous, and consequently the *Page 245 second based thereon, that this defect appearing on the face of those taken by the plaintiff charged him with notice of their invalidity was without foundation and therefore also erroneous.
It is not questioned by the defendant that it is liable to the plaintiff for the acts of its officers in issuing the certificates for spurious stock, as established in the present case, if they were authorized to issue certificates for valid stock held by themselves. Its liability for such acts is settled by the decision of the Court of Appeals in the cases of the NewYork and New Haven Railroad Company v. Schuyler (34 N.Y., 30,64), and Bruff v. Mali (36 id., 200), and the General Term, on the authority of those decisions, holding the defendant liable, properly reversed the judgment entered on the report of the referee.
Their order granting a new trial on such reversal must, therefore, be affirmed, and judgment absolute must, under the defendant's stipulation, be rendered against it, with costs.
All concur.
Order affirmed and judgment accordingly.