Case Name: Mrs. C. Honold vs. Victor Meyer et als.
Court: Louisiana Supreme Court
Jurisdiction: Louisiana
Decision Date: 1884-05
Citations: 36 La. Ann. 585
Docket Number: No. 8870
Parties: Mrs. C. Honold vs. Victor Meyer et als.
Judges: Bermudez, C. J. concurs in this opinion.
Reporter: Louisiana Annual Reports
Volume: 36
Pages: 585–598

Head Matter:
No. 8870.
Mrs. C. Honold vs. Victor Meyer et als.
Plaintiff owned certain corporation stock, which stood on the books of the oorporation-in hername and for which she held a certificate also in her own name. She gave a power of-attorney to an agent to sell and transfer the stock. The agent fraudulently pledged the stock in favor of defendants, to secure the debt of a commercial firm of which he was a member. The pledge was effected by means of a transfer to defendants on the books of the company, made by virtue of the power of attorney, and a certificate was issued in the name of defendants. Defendants had no knowledge of the fact that the stock belonged to plaintiff. They accepted the transfer on the faith of the certificate issued in their own name. Keld] that they were not bouud to enquire into plaintiff’s title, and that the latter cannot recove r.
APPEAL from tbe Civil District Court for the Parish of Orleans. Tissot, J.
T. J. Semmes & JPayrie and Henry Denis for Plaintiff and Appellant.
1. An agent authorized to sell cannot pledge his principal’s property, to secure his own debt. Story, Agency, §§ 78, 225, 228; Kent, 2 vol. p. 626, etseq.; Wharton, Agency, pp. 193, 745, et seq.¡ C. C. 3145; 25 A. 31319 A. 368; 19 A. 300; 10 A. 70, and cases cited.
2. The maxim: JSn fait de meiibles la possession vaut titre, is no part of the law of Louisiana. It was unknown to the Homan law. Troplong, Prescription, vol. 2, pp. 556 and 560; Duranton, vol. 15, § 385. It was introduced in the Napoleon Code, as the heading of Article 2279. In adopting Article 2279 of N. C., we rejected in Lousiana its heading. See Code of 1808, p. 488, Articles 75 and 76; Code of 1825, Arts. 3506-7. In Louisiana the right of revindication of movables from a bona fide purchaser, is well established. 9 Hob, 525; 10 Hob. 55; 11 Hob. 16; C. C. 2452; Stern Bros. vs. Bank, 34 A 1119, and cases cited.
3. An exception to the rule is when the true owner has put on.his agent the indicia of ownership. 6 A. 7, 313, 516; 5 A. 73, and oases cited. The owner of stock of a corporation does not put on his agent the inditeia of ownership, if he does [not transferthe stock to him or assign his certificate to said agent, or in blank. Such owner does not exhibit his agent to the world as the apparent owner, by simply giving him a power of attorney to sell. 74 N. Y. 226; 46 N. Y. 325; 49 N. Y. 289; Moores vs. Citizens’Bank of Piqua, just decided by United States Supreme Court.
4. A pledgee cannot prescribe. C. C. 3175. Prescription of movables, only applies to cor poreal movables and obligations to hearer. Marcadé, Prescription, p. 254; Laurent, vol, 33, p. 580; Troplong, Prescription, vol. 2, p. 583, Prescription suspended in favor of the wife when action prejudicial to husband. C. C. 3525; 2 A. 756, 834,- 34 A. 822.
Julius Aroni, £. F. Jonas and Hrecmx & Hall, for Defendants and Ap-pellees.
1. One who has conferred upon another, by a written transfer, all the indicia of ownership of property, is estopped to assert title to it, as against a third person who has in good faith acquired for value, from the apparent owner. Dos Pasaos, p. 601, and note; McNeil vs. Tenth Nat. Bank, 46 N. Y. 325; Moore vs. Metropolitan National Bank, 55 N. Y. 46; Berwick vs. Marye, 9 Ney. 312.
2. Stock assigned as security of a negotiable note, transferred before maturity, is taken by the assignee free from all equities, on the ground that the security partakes of the nature of the debt. Dos Passos, Stock Exchanges, p. 578: Kemiicot vs. The Supervisors, 16 Wallace, 464; Carpenter vs. Logan, 16 Wallace, 275; Bateville Institute vs, Kaufman, 18 Wallace, 153 ; 9 Wisconsin, 504-511.
3. The power to sell includes the power to pledge. Clark & Brisbin vs Bouvain, 20 A. 71.; Davidson & Hill vs. Bodley, 27 A. 150.
4. Pledge may be made legally under form of sale. Wolf vs; Wolf, 12 A. 531. and author ties cited.

Opinion:
The opinion of the Court was delivered by
Todd, J.
This is an action on the part of the plaintiff to recover of the defendants one hundred shares of stock of the St. Charles Bail-road Company, or its value, and dividends on the same.
The defense made to the action is substantially, that the shares in question were transferred on the books of the company, for a valuable consideration, to Meyer, Weis & Co., the defendants, then composing-said firm, who received the certificate of stock therefor, in the regular course of business, without knowledge that plaintiff had any interest therein, and it was not incumbent upon them to find out, touching such interest.
They further say that the said certificate of stock was issued to them for the protection of Baring Brothers & Co., of England, and was, immediately upon its receipt, turned over to the agents of said firm in New Orleans, who accounted for the same; that the stock had long since been sold to other parties, and defendants were unable to say who were now the owners of it. They further allege that the transfer of the stock to them was made by a party fully authorized by plaintiff to make it, and that the certificate having been issued and received in the usual and regular way, their title thereto was perfect. The de-maná was resisted on other grounds unnecessary here to mention.
From a judgment in favor of the defendants the plaintiff has appealed.
The facts hearing on the controversy are briefly these:
There was a commercial partnership engaged in business in the city of New Orleans during the years 1877 and 1878, under the style of Ho-nold & Co., composed of the husband and the son of the plaintiff. The son 'held a power of attorney from the plaintiff to sell the stock of the St. Charles "Railroad Company, which plaintiff owned at the time and which stood in her name on the books of the company, being the stock which forms the matter in dispute in this case, and said power of attorney contained full authority to transfer the stock.
This agent did make a transfer on the hooks of the company of the stock in question to Meyer, Weis & Co., the defendants' firm at the time, and a certificate for said stock was thereupon issued by the company to said firm.
The validity of this transfer is denied by the plaintiff, on the grounds, substantially, that the transfer in question was really a pledge of the stock for the debts of Honold & Co., and the agent had no power to pledge the same for his own or his firm's debt, and that this property of the plaintiff could not be used to pay her husband's debts or that of the firm of which he was a member.
It is undoubtedly true that this transfer was made to secure a contingent liability of Honold & Co., which it is unnecessary to explain; and there is no evidence to show that it was with the knowledge and consent of the plaintiff.
It is just as true, however, that Meyer, Weis & Co. liad no knowledge at the time of the transfer of plaintiff's interest in the stock; that the first and only information they had of their title to the stock was furnished by the certificate issued to them by the company after the transfer had been made to them on its books, conveyed in a letter to them from Honold & Co., stating the purposes of the transfer; that Meyer, Weis & Co. accepted the transfer and gave a valuable consideration for the stock, and that it went into the hands of other parties immediately thereafter and was subsequently sold, in furtherance of the purposes for which the transfer was made.
Under this state of facts, the important question arises whether the plaintiff is entitled to recover of the defendant this stock, or its value.
A mature consideration of the question in all its bearings, and an exhaustive examination of the authorities bearing on it, lead us to the conclusion that she is not entitled to recover.
It is true that plaintiff was the undisputed owner of the stock, and the same stood in her name on the books of the company. It is also true that she had given to her agent no authority either to sell or pledge it for his own debts or those of his firm, and there can be no doubt that if Meyer, Weis & Co. had received this stock directly from the hands of the agent, after being made acquainted with plaintiff's ownership of the same, and after an inspection of the agent's authority or power of attorney in the premises, and of the actual consideration for which it was received, they could have acquired no right to the stock that could prevail against plaintiff's claim thereto.
For in such case defendants would have been apprised of plaintiff's ownership of the stock and the want of authority in the agent to dispose of it for the purposes proposed. Just as little would they have been protected if they had acquired it from the agent directly, in the absence of any authority to sell, relying on his possession of the stock.
Such, however, was not the case. Meyer, Weis & Co. did not acquire the stock, and the evidence of their title thereto, solely and directly by the act.of this agent, and immediately from him. There was another agent or intermediary in the affair, forming- an important factor therein and whose participation in the matter exercises a con-troling influence upon the legal result and the conclusion to which we have arrived.
We refer to the company itself. It was the depositary, custodian and guardian of the plaintiff's stock, and as such an agent of the plaintiff, without whose consent and co-operation the transfer in question could not have been effected.
To the company the agent and son of the plaintiff submitted a power of attorney from his principal, giving him full authority to sell and make a transfer of the stocK. On the faith of that authority the transfer was permitted and recognized as valid by the company, and on the faith of the transfer thus made by due authority the company, as in duty bound, issued a certificate for the stock to the transferees, Meyer, Weis & Co., thereby and therein declaring them to be the owners of the stock. No possible blame could attach to the company for its acts in the premises. The plaintiff's counsel admit this, when, in their brief, they say (quoting):
"Upon the simple inspection of his power of attorney, the company was bound to permit the transfer on its books, and as a consequence thereof to issue a certificate to the transferee."
How then can we impute any fault or negligence to the defendants for acting on the faith of a transfer made by due authority, and of a certificate issued in compliance with a legal requirement, recognizing the transfer as made by competent authority and as conveying the ownership of the stock to the transferees'? We do not think they were in fault, and they were justified in believing they were the lawful holders of the stock and acting on that belief. The fault is to be found for the loss incurred by plaintiff not in the company, nor in Meyer, Weis & Co., but in the agent selected by her and charged with the responsible trust of disposing of the property. In truth, the whole question would seem to resolve itself into this: whether the loss should fall on Meyer, Weis & Co., innocent parties in the transaction, as we have shown, and who gave their money or credit for the stock, rather than on tile plaintiff, when it is evident that the loss was caused by the act of an unfaithful agent, chosen by her, and who used the power with which lie was entrusted for his own personal gain. We think there could be but one answer to this, an answer supported by the highest legal authority and elementary in principle. Thus we read in Smith's Mercantile Law, p. 158:
"He wlio accredits another' by employing him, must abide by effects of that credit, and will be bound by contracts made with innocent third persons in the seeming course of that employment, and on the faith of that credit, whether the employer intended to authorize him or not, since where one of two innocent persons must suffer by the fraud of a third, he who enabled that third person to commit the fraud should he the sufferer."
xVnd -we are further supported in the conclusion we have reached touching'the rights of the defendants under the transfer and the certificate for the stock issued by the company after such transfer, by several adjudications in cases bearing a striking' analogy to the instant one.
Thus, Chief Justice Taney, in deciding the case of Lowery vs. Bank of Baltimore, says :
" The party to whom it is transferred rarely, if ever, sees the entry, and relies altogether upon the certificate of the proper officer of the hank, stating that he is entitled to so many shares, that is to say, so many shares have been transferred to him by one who had a lawful right to make the transfer."
He then refers to the ease of Davis vs. Bank of England, above cited, and goes on to say: "And as it (the transferee bank of the stock) paid a valuable consideration, and had no notice, actual or constructive, of any violation of trust, upon which the transfer could be imperiled in equity, it had a right to sell the stock for the payment of the note for which it was pledged and to make the purchasers a valid title. A different rule would render the right of every purchaser of stock in a bank insecure or liable to doubt, and greatly impair its value, and would, moreover, seriously disturb the usages of trade and the established order of business in relation to this subject, in á manner highly injurious to the community; for purchasers always rely on the certificate of the bank in which it is held as conclusive evidence of the ownership. Most commonly, the purchase is made through a broker, and the buyer does not know who is the,seller and who makes the transfer; the certificate of the bank tells him that lie is entitled to so many shares, and he pays his money upon receiving the certificate, without further iuquiry. It would be unjust and inequitable to charge the stock in his hands with any equitable encumbrance or trust, however created, which was not known to him at the time he paid his money."
(See, also: Davis vs. Bank of England, 2 Bingham, 393; 9th Eug. Com. Law R. 451; Hulbrook vs. Zinc Co. 57 N. Y. 616; Salisbury Mills vs. Townsend, 109 Mass. 111; National Bank vs. Watsontown Bank, 105 U. S. (15 Otto) 217.)
We have examined the autbei'ities cited by the plaintiff's counsel, and the examination has satisfied us that they are not opposed to the doctrine above announced. They refer mainly to cases when the purchases of the stock or other like property were made from persons not the owners and having no authority to sell, and when the buyers acted on the faith of the possession alone of the sellers. This Court has held in the case of Stern Bros. vs. Germania Bank, 34 A. 1119 — a case also cited by the plaintiff's counsel as supporting her pretensions — that under such circumstances the purchaser would not be protected as against the true owner; but the principle announced in that and other similar eases has no direct bearing on the instant one.
For these reasons the judgment of the lower court is affirmed, with costs.