Court Opinion

ID: 6900660
Source: CourtListenerOpinion
Date Created: 2022-07-23 21:54:35.832843+00
Date Added: 2024-06-11T16:06:09.473787
License: Public Domain

Mr. Justice Moore
delivered the opinion of the court.
1. It is contended by plaintiff’s counsel that the mode adopted by Levy to secure possession of the stock constitutes larceny whereby no title passed by his delivery of the certificates to the persons from whom the defendants, answering herein, obtained them, and hence an error was committed in dismissing the suit. In support of the doctrine thus maintained two decisions of this court are cited. In State v. Skinner, 29 Or. 599 (46 Pac. 368), the defendant was indicted for the crime of larceny by bailee. At his trial evidence was introduced tending to show that, as an agent of a building and loan association, the defendant falsely represented to one B. B. Dixon that, in order to secure a loan of money from his principal, the applicant, as a condition and guaranty of good faith, was required to advance 1 per cent of the sum desired, $10 of which was to be paid for procuring and examining an abstract of-the title to the farm land offered as security, if the loan was approved, and the remainder to be credited on the note given as evidence of the indebtedness; but if the application for the loan was rejected, the money so j>aid was to be returned. Dixon thereupon applied for a loan of $10,000, and gave the defendant $100, which the latter converted to his own use. A judgment of conviction having been rendered, the defendant appealed; his counsel maintaining that the evidence was insufficient to establish the existence of any trust relation between the defendant and Dixon, and hence the trial court erred in refusing to direct a verdict of acquittal as requested. In affirming the judgment it was held *547that the evidence was sufficient to show that Dixon parted with the title to the money advanced only in case a loan was made, and for that reason the testimony was sufficient to warrant a conviction. In deciding that case an excerpt from the opinion of Mr. Justice Catón, in Welsh v. People, 17 Ill. 339, is taken in distinguishing between simple larceny and larceny by bailee as follows:
“"Where * * the alleged larceny is perpetrated by obtaining the possession of the goods by the voluntary act of the owner under the influence of false pretenses and fraud, * * there is no real difficulty in deducing the correct rule by which to determine whether the act was a larceny and felonious, or a mere cheat and swindle. The rule is plainly this: If the owner of the goods alleged to have been stolen parts with both the possession and the title to the goods to the alleged thief, then neither the taking nor the conversion is felonious. It can but amount to a fraud. It is obtaining goods under false pretenses. If. however, the owner parts with the possession voluntarily, but does not part with the title, expecting and intending that the same thing shall be returned to him, or that it shall be disposed of on his account, or in a particular way, as directed or agreed upon, for his benefit, then the goods may be feloniously, converted by the bailee, so as to relate back and make the taking and conversion a larceny. The pointed inquiry in such a case must always arise, did the owner part with the title to the thing, and was the legal title vested in the prisoner? If so, he was not guilty of larceny.”
The other case is State v. Ryan, 47 Or. 338 (82 Pac. 703: 1 L. R. A., N. S., 862), in which the defendant was charged with the crime of larceny. At his trial testimony was introduced tending to show that pursuant to his fraudulent representations he induced one John F. Roth to deliver to him $2,000 as evidence of responsibility to hold a sum of money claimed to have been staked on a trial of human speed, which proved to be a fake race. The court thereupon charged the jury inter alia as follows:
“So you are to consider whether or not this whole transaction was a mere scheme or device to steal Rotlfis money.”
*548An exception having been taken to such language, it was contended by defendant’s counsel, on an appeal from a judgment of conviction, that an error was thus committed. In affirming the judgment, a part of the opinion' of Mr. J ustice Catón (Welsh v. People, 17 Ill. 339), is again quoted, and it was ruled that, if the possession of the money was obtained by fraud, trick or device, and ■ the owner intended to part with the title when he surrendered the control, the offense, if any, was obtaining money under false pretenses, hut that, though the possession might have been secured in the manner last indicated, yet, if the owner did not intend to part with the title, the crime was larceny, and hence the instruction was a correct statement of the law applicable to the facts involved.
2. The elementary proposition thus announced is undoubtedly controlling in the case at bar, and the question to be considered is, whether or not the delivery of the certificates to the Garfield Bank of Chicago, manifests an intention on the part of the plaintiff to dispose pf the title to the property, or evinces such conduct, on his part, as to estop him, as is alleged in the answer, from asserting any right to the stock as against the parties who purchased it in good faith, for a valuable consideration, and without any notice or knowledge of the means ado]3ted to effectuate the transfer. A certificate of stock is the written evidence of the right of a party to a pro rata share of the net profits of a corporation when declared, or to a like share of all its property, after the payment of its debts, in case of a dissolution of the artificial being. Such certificates are not negotiable instruments; but the owners thereof have frequently been held to have been estopped to assert any title thereto as against bona fide purchasers thereof for value, without notice of the rights of prior holders. This rule is founded upon the principle that, when the owner of corporate stock voluntarily delivers to another a certificate evidencing a right to participate in the profits or property of a corporation, indorsed in blank, but containing all the indicia of ownership of the property, he is es-topped to assert a title thereto as against a person, who in good faith and for value, purchased the certificate from the apparent *549owner, relying upion the written assignment. The reason advanced for this rule is thus stated by a text-writer:
“In. view of the custom by which certificates indorsed in blank are transferable from hand to hand, like negotiable paper, the owners of such certificates should be required to use the utmost care and diligence in their safe keeping. If a bona fide purchaser should be deceived through any negligence or want of diligence in this respect, justice requires that the owner should suffer the loss”: Morawetz, Priv. Corp. (2 ed.), § 190.
As supporting the text quoted, the case of Shattuck v. American Cement Co. 205 Pa. St. 197 (54 Atl. 785: 97 Am. St. Rep. 735) affords a good illustration. In that case the plaintiff secured a title to certain certificates of stock, issued by the defendant to another, and delivered to him with an assignment and power of attorney indorsed thereon in blank. Without surrendering the certificates and obtaining others in lieu thereof, or filling the blank spaces in the indorsement, the plaintiff took the certificates to brokers with whom he had been accustomed to deal. The certificates, inclosed in an envelope on which the plaintiff’s name was written, were placed in a pocketbook in a safe in which the brokers were in the habit of keeping securities belonging to their customers. One of the brokers, without authority from or knowledge of the plaintiff, took the certificates from the wrapper and pledged .them to a bank as collateral security for a bona fide loan of money, made to him in the name of his firm, without notice of any interest of the plaintiff therein. Default having been made in the pajnnent of the sum lent, the bank sold the certificates to third parties, whereupon a suit was instituted to enjoin the defendant from transferring on its books such certificates and issuing others in place thereof. The relief sought was granted by the lower court, but on appeal, the decree was reversed, the court holding that the rights of a bona fide holder as against the true owner of the stock to whom the apparent owner had sold or pledged it, do not depend on a negotiable character of the certificates, but rest on the principle that, where one has conferred upon another by a written transfer ail the indicia of ownership of property, he is *550estopped to assert title to it as against a third person, who has in good faith purchased it for value from the apparent owner. So, too, in McNeil v. Tenth National Bank, 46 N. Y. 325 (7 Am. Rep. 341), it was held that, where the owner of hank stock delivers to his brokers, to secure a balance of account, certificate of shares, indorsed with blank assignment, and irrevocable power of transfer, and the brokers without his knowledge pledge the shares with other securities for advances, one who pays the advances at the brokers’ request, and in good faith receives from them the certificates and other securities, is entitled to hold the shares as against the owner for the full amount of the advances remaining unpaid, after the other securities are exhausted. In deciding that case Mr. Justice Sapallo, speakina' for the court, says:
“It must be conceded that, as a general rule, applicable to property other than negotiable securities, the vendor or pledgor can convey no greater right or title than he has. But this is a’ truism, predicable of a simple transfer from one party to another where no other element intervenes. It does not interfere with the well-established principle that, where the true owner holds out another, or allows him to appear, as the owner of or as having full power of disposition over the property, and innocent third parties are thus led into dealing with such apparent owner, they will be protected. Their rights in such cases do not depend upon the actual title or authority of the party with ■whom they deal directly, but are derived from the act of the real owner, which precludes him from disputing as against them the existence of the title or power which, through negligence or mistaken confidence, he caused oí* allowed to appear to be vested in the party making the conveyance.”
To the same effect see, also, 26 Am. & Eng. Enc. Law (2 ed.), 879; 10 Cyc. 631; Brittan v. Oakland Bank, 124 Cal. 282 (57 Pac. 84: 71 Am. St. Rep. 58); Walker v. Detroit Transit Ry. Co. 47 Mich. 338 (11 N. W. 187); Mount Holly, etc., Co. v. Ferree, 17 N. J. Eq. 117; Pennsylvania R. Co.'s Appeal, 86 Pa. St. 80; Wood’s Appeal, 92 Pa. St. 379 (37 Am. Rep. 694); Burton’s Appeal, 93 Pa. St. 214.
3. In the case at bar the Garfield Bank of Chicago was evidently organized to promote the fraudulent practices of Levy *551and his associates, who knew that certificates of stock, assigned in blank, would not in all probability be sent to strangers as intending purchasers. The insertion in a bankers’ directory of such pretended institution would allay suspicion, and give color to Levy’s apparent honesty, when he requested the plaintiff to send the certificates to that bank, properly indorsed, to be held until the consideration agreed upon had be.en paid. The First National Bank of Pendleton, instead of mailing the "certificates to its regular correspondent in Chicago, which would undoubtedly have been done except for the plaintiff’s request, obeyed his direction, and sent the papers, and ultimately caused the postmaster of that city to deliver them to the simulated bank. That the scheme throughout was the rankest kind of fraud will be admitted. The plaintiff, however, voluntarily made such bank his agent, clothed with apparent authority, and surrendered possession of the certificates with the intent that the title to the stock should be transferred to Levy, and the only breach of the agreement consists in his failure to pay the consideration which he had promised for the stock. The facts herein are not the same as in State v. Skinner, 29 Or. 599 (46 Pac. 368), or in State v. Ryan, 47 Or. 338 (82 Pac. 703: 1 L. R. A., N. S., 862), for in such cases the title to the money, the possession of which was delivered to the respective defendants, was never expected to pass to them.
It was the plaintiff’s voluntary act that made it possible for the defendants^ answering herein, to rely upon the apparent ownership of the stock, evidenced by the assignment and irrevocable power of attorney executed in blank, and as a consequence of such belief, to expend 'their money without notice of any adverse right in or title to the stock. The plaintiff’s intention to transfer the title to the stock, and his conduct in relation thereto, estop him, and bring the ease within the rule that, -when one of two innocent persons must necessarily sustain injury by the fraudulent act of a third party, he who first trusted such party, and placed in his hands the means of committing the wrong, must bear the loss. „
The decree is therefore affirmed. Affirmed.