Court Opinion

ID: 7192582
Source: CourtListenerOpinion
Date Created: 2022-07-24 16:58:58.74349+00
Date Added: 2024-06-11T16:15:12.924815
License: Public Domain

On Rehearing.
The opinion of the Court was delivered by
Fenner, J.
Under stress of well established principles and authorities we feel constrained to reconsider our original opinion and decree herein.
The statement of facts presented in the original opinion is substantially correct, and we refer to the same.
The plaintiff sues the defendant for the value of thirty shares of stock owned by her, which she alleges the Company unlawfully transferred to a third person without her authority.
The Company affirms the transfer and defends the action on the ground that the transfer was lawful and authorized.
I.
The objection made in argument to the remedy invoked by plaintiff is not well founded. She was not bound to sue to annul the transfer and demand the restoration of the stock. The corporation is the custodian and trustee of the corporate funds and property and stock for the stockholders. It is bound to employ competetent and faithful transfer agents, and is responsible to the stockholders for any negligence or fraud by such agents to their injury. When stock has, by the fraud or negligence of the corporation or its agents, been permitted to be unlawfully transferred to a third person, without authority of the owner, the latter may, indeed, contradictorily with both the corporation and the transferree, contest the title to the stock and demand its restoration. But he is not bound to take this course. He may sue the corporation alone for the value of his stock illegally transferred. *242This last remedy has been frequently recoguized and affirmed. Factors’ & Traders’ Ins. Co. vs. Marine, 31 An. 149; Sewall vs. Boston, 4 Allen, (Mass.) 277; Pollock vs. National Bank, 3 Seld. (N. Y.) 274; Albert vs. Savings, 1 Md. Ch. 407; Loring vs. Salisbury, 125 Mass. 138; Gray vs. Portland, 3 Mass. 385.
II.
Under Art. 2997 Rev. C. C., the mandate to sell must be “ express and special.” This Article has been frequently interpreted by this Court to mean “ express and special,” as distinguished from implied and general. Cuny vs. Roberts, 16 La. 180; Nalle vs. Higginbotham, 27 An. 477; Nugent vs. Hickey, 2 An. 358; Ducongé vs. Forgay, 15 An. 37; Robertson vs. Levy, 19 An. 327; Gribble vs. Haynes, 22 An. 141.
It is not pretended that Allen had any express and special authority from plaintiff to sell this stock, nor that she ever ratified his action in selling. On the contrary, as soon as she was notified thereof, she repudiated it.
The attempt to imply authority to sell, from the fact that Allen had done various other acts for plaintiff without special authority and yet approved by her, is in the very teeth of the requirement of the Code.
III.
No principle of estoppel applies in this case. Unless by some act in connection with this very sale, she could not be estopped from her legal right to dispute his authority to make it, when his legal iiower to do so was entirely wanting, nor could her ratification of other unauthorized acts of a different character bind her to ratify this. Young vs. Grote, 4 Bing. 253; Bank of Ireland vs. Evans, 32 Eng. L. & E. 28.
But, aside from this, it does not appear that the Company was aware of, or misled by many of the various acts of Allen now set up in defense. Its own books show that it dealt with Allen, in the matter of this transfer, simply on the faith of a written procuration exhibited by him at the time, and which did not include the power to. sell. The element of misleader, essential to estoppel, is entirely wanting,
IV.
There was no fault or negligence whatever on the part of plaintiff iu leaving the stock certificate in tiie possession of Allen. The certificate was in her individual name, not endorsed or assigned by her, and informed the Company and all persons that the stock belonged to her and could not be sold or disposed of without her authority.
In one case already quoted, where the certificate was in the name of a trustee for the benefit of a cestui que trust known to the corporation, a transfer by the trustee without the cestui's authority was held no bar *243to tlie latter’s action for the value of the stock. Loring vs. Salisbury, 125 Mass. 138.
Y.
It appears that in 1875, several years prior to these transactions, plaintiff had given Allen a special notarial procuration to borrow money and make notes for and to secure the same by mortgage on certain designated property. The special purpose of the act is sufficiently apparent on its face; yet it contains general expressions relative to tlie power to borrow aud to make notes, and had never been revoked. Allen, long afterwards, borrowed money from the Union Bank, made a note therefor as agent for Mrs. Woodhouse, and pledged the stock for payment thereof.
So far as the pledge is concerned, he wras utterly without authority to make it, and it was without any effect as against Mrs. Woodhouse or her stock.
As for the note, the evidence shows that Allen borrowed the money for his own purposes, at a time when he had money of plaintiff in his hands and when the loan was not required for any purpose of hers ; though Allen claims that some undefined part of it was used for her benefit; but the evidence is vague and uncertain, and no such defense is made in the pleadings.
It is not shown that the defendant corporation had any knowledge of this note or pledge at the time of the transfer, but it is contended that, as Allen used the proceeds of the sale of the stock, in taking up this note, they enured to her benefit and, therefore, bar her action.
It is possible that these facts might have furnished an equitable basis for a demand in reconvention against the plaintiff, and even yet for a separate action; but they offer no justification for the illegal transfer of her stock and no defense to her action for its value.
The pledge being null for want of authority, the holder of the note had no lien or claim on plaintiff’s stock. Whatever right he might have against her personally could not have been satisfied by the unauthorized and extra-judicial sale of her stock and appropriation of the proceeds, but must have been urged judicially and subject to all legal defenses. If the defendant Company be equitably or legally subrogated to such right, it must be enforced in the same manner.
We cannot adjudge plaintiff to be liable on such note, without de-‘ mand to that effect and without opportunity of defense, which, as sufficiently indicated, may be serious. The sole question at issue here is the liability of the defendant for the illegal and unauthorized trans- . fer of her stock; and, as we have shown, that question must be solved in favor of plaintiff.
We perceive no conflict of equities in the case. The plaintiff has *244suffered enough at the hands of this unfaithful agent. She has been guilty of no fault or negligence excusing, in any manner, the action of defendant; while the latter has been guilty of the grossest negligence, for the consequences of which it must justly respond.
As a matter of course, the demand against Miss Coleman is without foundation.
We shall take.as the value of the stock at the date of the sale, which is the value claimed with interest, the price at which it was then sold, viz : 81$ dollars per share, aggregating $2445.
It is, therefore, ordered, that our former decree herein be annulled and set aside.
It is now ordered, adjudged and decreed, that the judgment appealed from be anhulled, avoided and reversed; and that there be judgment in favor of plaintiff and against the Crescent Mutual Insurance Company for the sum of two thousand four hundred and forty-five dollars, with legal interest from June 29th, 1879, and costs in both Courts; and that the demand against Miss Coleman be rejected.