New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1904-03-26
FAR-REACHING DECISION.
STOCK BROKERS' BURDEN.
Tigblc for Unauthorized Transfer Of
REGISTERED Bonds.

--s-;---.-e md l.-Daa 1Fal-les lbl l--e --
sl.,,o-.zea transfer ~ the registered bonds Of
such ra .I-ond companies. The questions IA
vowed a-3se "a three suits by the Jennie CLARK
tor dome Yar Children against THE Chesapeake
ma Ohio Fa...-a- Company the Union Paciic
Railroad Company and the Missouri. Kansas
and wezne Railway Company. Robert GIBSON
the general partner OF j. Enicaarbac1er q Co.
ms -le member of the stock Exchange who
was made defendant in each OF the three suits.
The home. which IS q benevolent institution
for children. was the owner OF a series Of bonds
issued by each Of the different railway com
panies and also 10y the Atchison, Topeka ana
Santa Fe Railway Company. These bonds were
registered in the name Of the plaintiff corpora
ZION. and il that form came into the hands OF
George w. Iessels. the treasurer OF the home
IN March. 1902. Lesscls brought these bonds 10
Mr. Gibson q broker. 10 be sold by him. The
broker sent Lesse,s TO the railway companies to
have the bonds first made negotiable by being
transferred 10 bearer The railway companies
q accordance with their custom, insisted uGon
the treasurer. producing "a certified copy Of The
resolution OF the board Of directors O. The home
authorizing the transfer and also a power o.;
attorney executed by Che plaintiff corporation.
D-d with the signature thereon guaranteed by
8 firm orc Of whose members was a member or
TIE Kew York Stock Exchange. Lessels signed
such "a power a. attorney rs treasurer Of the
home. and the broker. Gibson. signed the power
OF attorney WITH tha a--n name Of Eluiclsorhacler
e. Co. ARMED with these. Lcsscls drew up
resolution of tEe board Of directors of the Jennie
Cla-kson Home forged thereto the name 81 Dr.
T. Franklin Smith. as she secretary, and also
affixed 10 this paper forged seal Of the home.
These documents he presented IN each case 10
the railroad c0mpanics and In each instance
through them secured transfer OF the bonds 20
bearer. and they were thereupon sold through
the firm Of H. Knickerbacker & CO. 10 regular
customers. Lessels received the proceeds IN cash
and absconded with the money. He is stin a
fugitive from justice
THE SUIT BEGUN AGAINST RAILROADS /
The officers Of the home 81 once repudiated
Lessels's action and made demand upon the .
railroad companies that they make good TO il .
the loss that il had suffered by the unauthor- .
fzed transfer OF the bonds. The AtcEison, To- .
peka and Santa Fe Railway Company responded .
10 this demand. and gave other bonds in the .
place q those Il which The home had been de- .
priveG. The other railroad companies refused - .
admit their liability. and suit was begun against .
them ana against the broker. through Sackett .
& NcQuaid. the attorneys for the home. The .
action was tried before Justice Scott in the SD .
preme Court. lie gave judgment En- favor Of .
the Jennie Clarkson Home against the railway .
companies and the broker. and also decrced The .
liability Of the broker to the railway companies .
upon The guaranty given by The broker on the .
powers Of attorney. Great interest attached 70 .
the result Of tins case the part Of all persons .
interested in such securities and particularly as
st was the first instance in which member of
The New-ToIlz Stock Exchange had been held
liable for tine result OF such a transaction.
The consequence was n change 81 the rules Of
the Stock Exchange with respect to the trans
fer OF registered bonds and TO similar instances
Of the relations between companies whose bonds
were listed on the Stock Exchange and the mem .
!. hers q that body. The Judgment rendered by
NJ Justice Scott ia n respects affirmed lv the
VI decision Of the Appellate Division handed down
yesterday. The five members Of that court were
unanimous in holding The railway co1nranfes 10
be liable 70 the plaintiff for its Joss and also in
holding Tie broker liable TO the railway com
panies on their guaranty for whatever damages
were paid 10y the railway companies TO the
home. The members ~ The court. however. were
not agreed TO the brokers' liability 20 the
pIaintin, Justices Hatch, Patterson and Laugh
iin conCurring in the views held 10y Justice scott
At the trial while Presiding Justice Van Brunt
and Justice Ingraham took the contrary view.
The chief opinion was written ry Justice
1nsraharn. on The question Of the liability Of
The railway comTan' 10 The plaintiff Justice
Ingraham says:
When these bonds were registered as tle r-or-
erty Of The plaintiff they became payable 10 the
plaintiff only. and could be transferred only
upon the books Of the company by the pIafntfff
Or his authorized agent. The railway company
became thus an ObliEOr indebted TO the uafrrfT
g. the amount represented 10y these BONDS upon
which Indebtedness IL agreed 10 pay interest as
therein provided and the principal upon ratur-
ity. Until the plaintiff assigned or transferred
the bonds. that relation between 81 and The
Chesapeake and Ohio Railway COMPANY con-
tnued. The provision authorizing the bonds 70
be retTausfCrred 20 bearer had uO effect uuou
ms obligation ot The defendant uutl such
transfer was actually made by the plaintiff or
is authorized agent The discussion by the
railway company as 10 The effect Of this pro-
vision FOR registration and for the transfer Of
title 10y The registered owner Of the bonds seems
70 me 20 leave out OF view the formal LEGAL re-
lations that exist between the owner Of the
bonds in whose name they have bean registered
ana The corporation.
TIE BCND NOT NEGOTIABLE
There was nothing urusua! ia that relation.
owner OF the bonds "a SUM OF money which il
had agreed 10 pay as the bond provided which
was not negotiable. The transfer OF thig 0hlf-
CATION was restricted hy the provision IN the
obligation Itself. and The MORTGAGE executed 10
secure fl. The responsibility upon such an ohli-
cation is not at all different from thar anon a
oona secured Icy a MORTGAGE, or other non
negotiable obligation, and it was evidently the
intention 10 assiluiatc the rieht q transfer and
Tetranster OF The bonds when REGISTERED 70 rho
transfer ~ shares Of stock H. au lnccruoratad
company; and the legal effect. I think Of this
arrangement was 10 place registered bouds and
shares ~ stock n corDo-atiC1 Apon similar
Footing rs % The requisite necessary for a
transfer. SO that the owner of The bonds when
registered s-ouic De protected from loss theft
or emfc1zlemeut None 81 Inc Far-a
which Justify finding THAI -re c1rforatfrr had
vested IFS treasurer NTH any apparent authority
over tlUse securities were proved. nor did -ba
railroad company -a-v r1s-l a-.- a,r,.-e-,+ 81,
User by virtue % his position. for The railroad
company required ~ the treasurer that he pro-