Court Opinion

ID: 5624779
Source: CourtListenerOpinion
Date Created: 2022-01-11 04:49:09.684359+00
Date Added: 2024-06-11T08:37:33.988544
License: Public Domain

MacIntyre, J.,
dissenting. I am in agreement with the majority, that generally, “where the owner of propertj', such as stock certificates, has lost it by the criminal or fraudulent act of another, the owner not voluntarily or negligently conferring upon such other the indicia of ownership or apparent title,” he can not be deprived of his property by the attempted transfer of title to a third person for value, no matter how innocent the purchaser may be of knowledge of the crime or fraud by which the property was acquired. However, I can not concur in their construction and application of this principle to the case at bar. The article in dispute is a stock *188certificate. While certificates of stock are not negotiable instruments in any proper sense, the courts, in view of the extensive dealings in such securities, and the interest, both of the public and of the corporations issuing them, in making them readily transferable and convertible, have largely, by application of the equitable doctrine of estoppel, clothed them with some of the characteristics of negotiable paper. 12 Fletcher’s Enc. Cor. § 5477. This doctrine of equitable estoppel is stated in the Code of 1910, § 4537, as follows: “When one of two innocent persons must suffer by the act of a third person, he who put it in the power of the third to inflict the injury must bear the loss.” Also § 4119: “Where an owner has given to another such evidence of the right of selling his goods as, according io the custom of the trade or the common understanding of the world, usually accompanies the authority of disposal, or has given the external indicia of the right of disposing of his property, a sale to an innocent purchaser divests the true owner’s title.” The principle cited from Fletcher, supra, and many other cases such as are cited in the majority opinion, recognize, in reference to the disposal and transfer of stock certificates, “the custom of the trade or the common understanding of the world,” and have clothed them with a “quasi-negotiable” character, and apply strictly the doctrine of equitable estoppel. Stock certificates not being negotiable in the strict sense of the word, we must, in applying the doctrine of equitable estoppel, look to the phrase “according to the custom of trade and the common understanding of the world,” with reference to the right of disposal, to determine what acts it was necessary for Moody to do in order to estop himself from claiming title to the stock in the hands of the Fulton National Bank. Accordingly, I think two things were necessary on the part of Moody: (1) the entrusting of the possession of the power of attorney to Shropshire, and (2) the entrusting of the possession of the stock certificate to Shropshire, in order to estop him from claiming title to the stock in the hands of the Fulton National Bank. The first-mentioned act is.admitted by both sides, so I may pass to the question: Did Moody entrust the possession of the certificate of stock to Shropshire? In determining this it is to be kept in mind that this could have been done (1) voluntarily or (2) negligently. Did he entrust the possession of the certificate to Shropshire voluntarily ? The agency of Mrs. Moody, *189mother of the plaintiff, is admitted, so I will consider her acts as his. The evidence, including the agreed statement of facts, would possibly authorize two inferences of fact: (1) that Shropshire came into possession of the certificate by stealing it while having mere access to the safety-deposit box, and (2) that he came into possession of it when the envelope containing this certificate and the Lowry National Bank stock was handed to him by Moody, for the purpose of affecting a transfer of the Lowry National Bank stock. If the first inference is sustained, there can be no doubt, under the weight of authority, that Moody is entitled to the recovery of his stock. However, if the second inference is sustained, I can not agree that he is so entitled. It is true that it has been held that the delivery of a sealed envelope does not constitute a delivery of the articles enclosed therein (Scollans v. Rollins, 179 Mass. 346), and I can not say that I fully agree with this principle, in a case of the present character, yet the delivery of the envelope here was made ivith authority to open ii} for it was necessary to open it in order to effectuate the purpose of its delivery, to wit: the removal of the Lowry National Bank stock. Certainly this therefore constituted a purposeful and voluntary entrusting of the contents of the envelope to Shropshire; and if he thereafter fraudulently converted the same, Moody, because he was at the time of the delivery of the stock charged with notice of the blank powers of attorney already entrusted to Shropshire, and because, “ according to the custom of trade and the common understanding of the world,” he was putting in Shropshire’s hands the apparent power of disposal of the stock, can not now claim or assert that his acts were not such as to estop him. Certainly the law should not sanction a rule that would allow one to put it into the power of another to commit a fraud, and then turn a willing ear to a plea that he thought the party was honest and that his intention was not to so entrust the article to him. Under Moody’s acts, I conceive it to be the law, that he as a matter of law entrusted the article to Shropshire, and is now estopped from claiming title thereto if the possession of the stock came about under the second inference stated.
Furthermore, in a case of this character, a delivery of possession, should certainly be a sufficient entrusting to Shropshire for one purpose, and he used it for another. Shropshire brought the *190certificates to the Fulton National Bank apparently clothed with the full ownership thereof by all of the tests usually applied by business men to gain knowledge upon the subject before making the purchase of such property. Moody’s trusted agent, in gross breach of his duty, whether with technical criminality or not, took such certificate with the power of attorney attached, and thus authenticated with the evidence of title, to the Fulton National Bank, and in the course of ordinary business transferred it to the bank, an innocent party. One of two innocent parties must here suffer, and the question is who shall suffer the loss? Adopting the language of the Supreme Court of the United States in the case of National Safe Deposit Saving & Trust Co. v. Hibbs, 229 U. S. 391, “In such a case we think the principles which underlie equitable estoppel place the loss upon him whose misplaced confidence has made the wrong possible.”
However, I may go further and assume that Moody’s acts did not amount to a voluntary entrusting of the certificate of Coca-Cola stock, yet certainly, if he came into possession of it under the second inference stated above, he was negligently entrusted with its possession. What more startling example could be thought of, of negligence, than in the present case? Moody first sends to Shropshire two blank powers of attorney executed by him, and then, without investigating what was in the envelope which he was turning over to him with power to open, he turned it over to him. True he may'have trusted Shropshire; true he may have not intended to give him possession of any certificates other than the bank stock, but did not the duty evolve upon him to ascertain what stock he was putting into the possession of Shropshire, knowing that Shropshire with his (Moody’s) consent already had a power of attorney which if attached to any of his stock would apparently clothe Shropshire with the full ownership thereof according to all the tests usually applied by business men under such circumstances ? Will he be heard to say that his intention was not what it seemed to be, where his acts, intentional or otherwise, were sufficient under the law, “according to the custom of trade and the common knowledge of the world,” to place in Shropshire’s hands the power of defrauding another. I can see but one answer.
This case is distinguishable from those cases in which a servant is entrusted with a man’s property with no power, expressed or *191implied, of disposition. I also recognize the principle that if Shropshire had stolen the certificates endorsed in blank before it had been transferred, the owner of the stolen certificate could recover even from an innocent purchaser. This principle that when the property is stolen the owner can not be deprived of his property by an innocent purchaser “is not based on the name of the agent’s crime but upon the fact that in the ordinary and typical case of theft the owner has not entrusted the agent with the document and therefore is not considered to have done enough to be estopped as against a purchaser in good faith.” National Deposit Savings and Trust Co. v. Hibbs, 229 U. S. 391.
One of two innocent persons, Moody or the Fulton National Bank, must suffer a loss in this case. I can not escape the conclusion that Moody, whose misplaced confidence caused him to put it into the power of Shropshire to inflict the injury, must bear the loss. I, therefore, think the court below erred in directing a verdict for the plaintiff.