Mitchell v. Boyer

Scott, J.:

The plaintiff in December, 1910, was the owner of a certificate representing ten shares of the preferred stock of the American Locomotive Company. This certificate stood in the name of Frank W. Thomas, who had signed on the back thereof an assignment to plaintiff with a power of attorney to transfer the stock on the books of the company. At this time one W. W. Sayles was .a customer of defendants, who were a firm of stockbrokers. It does not appear and is not claimed that Sayles occupied any other relation to defendants than that of customer. He was jointly interested with one Scoville in an account kept in the name of the latter. In December, 1910, plaintiff delivered the aforesaid certificate of stock to Sayles and he presented it to defendants to be sold. There is no suggestion that Sayles procured the certificate from plaintiff by fraud or any criminal act. Indeed the irresistible inference from the evidence is that she delivered the certificate to Sayles for the purpose of having it sold, and there is no suggestion or claim to the contrary. When Sayles presented the certificate to defendants for sale he was advised that before it would be salable it would be necessary that it should be surrendered to the company and a new certificate issued in the name of plaintiff. This was accordingly done and the new certificate issued in plaintiff’s name. She then came to defendants’ office and saw Sayles and signed a form of transfer with a power of attorney in the usual form. This was not indorsed on the back of the certificate, but was contained in a separate paper, although there is no question but that it was intended to apply to and to accompany the certificate of stock which had been issued to plaintiff. This certificate and the assignment were then delivered to defendants, who sold it in due course and received the proceeds, which by Sayles’ direction were credited upon his account. It does not appear that Sayles at the time was indebted to defendants. Sayles drew upon the account from time to time and the account was finally closed out on or before the 1st day of April, 1911. On April 13, 1911, plaintiff for the first time made a demand on defendants for the proceeds of the sale of the stock. Up to that time it does not appear that plaintiff had had any personal transaction with any member of defendants’ firm. Her transactions were all with Sayles, who in turn dealt with defendants. Upon this state of facts both sides moved for the direction of a verdict, and the court did so direct in favor of the plaintiff. The correctness of this ruling is challenged by this appeal.

It would serve no good purpose to review at length the long line of decisions in this State which have established the quasi negotiability of stock certificates accompanied by duly executed assignments and the limitations within which such quasi negotiability is confined. It is thoroughly well settled that a blank transfer of a certificate of stock with an irrevocable power of attorney to transfer, signed by the person who appears by the certificate to be the owner, confers upon the holder of the certificate apparent title to the stock and that the bona fide purchaser of such stock from such holder can hold the stock against the real owner who is estopped from asserting his title. (McNeil v. Tenth National Bank, 46 N. Y. 325; Merchants’ Bank v. Livingston, 74 id. 223; Brady v. Mount Morris Bank, 65 App. Div. 212; Talcott v. Standard Oil Co., 149 id. 694.) The exceptions to or limitations of the rule where the certificate and assignment are obtained by. fraud or crime, or where an agent exceeds his authority (Knox v. Eden Musee Co., 148 N. Y. 441; Hall v. Wagner, 111 App. Div. 70; Kilmer v. Hutton, 131 id. 625), are not applicable to the present case because there is no evidence that Sayles obtained the certificate and assignment feloniously or that in selling it he did not carry out plaintiff’s wishes.

The defendants, therefore, were justified, upon fairly established principles, in executing Sayles’ order to sell the stock, and in paying over the proceeds to him by crediting it to his account, whence he could have drawn it' at any moment. This was precisely equivalent to paying him the proceeds in hand, and if that course had ■ been adopted, it would scarcely have been contended by any one that by such payment defendants had not exonerated themselves from all liability. Plaintiff by delivering the certificate to Sayles, with a transfer such as she signed, clothed him with indicia of title which entitled defendants to deal with him as the owner. Whether owner or not, he certainly was thereby created her agent to sell, and in the absence of any instructions from her as to the disposition to be made of the’proceeds, the defendants were justified in paying them to her agent. That the transfer and power of attorney signed by plaintiff was not indorsed on the back of the certificate, but contained in a separate paper, is immaterial (Smith v. Savin, 141 N. Y. 315; Talcott v. Standard Oil Co., supra), and, as has already been said, it is not disputed that the assignment signed by plaintiff was intended to apply to the certificate belonging to her and standing in her name. Upon the undisputed facts a verdict should have been directed in favor of defendants, and the court erred in making a direction in plaintiff’s favor.

The judgment and order appealed from'must, therefore, be reversed and a new trial granted, with costs to the appellants to abide the event.

Ingraham, P. J., and Clarke, J., concurred; McLaughlin and Laughlin, JJ., dissented.