Farrington v. South Boston R. Co.

• Decision Date: 02 January 1890
• Citation: 150 Mass. 406,23 N.E. 109
• Parties: FARRINGTON v. SOUTH BOSTON R. CO.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

150 Mass. 406

23 N.E. 109

FARRINGTON v. SOUTH BOSTON R. CO.

Supreme Judicial Court of Massachusetts, Suffolk.

January 2, 1890

Upon the agreed facts judgment was ordered for plaintiff for $3,375.92, and defendant appeals.

COUNSEL

J.G Abbott, C.T. Gallagher, and J.S. Dean, for appellant.

O.B Mowry, for appellee.

OPINION

FIELD J.

The plaintiff, in December, 1882, lent money to William Reed, and received from him, as security for the payment of the loan, a certificate in the name of the plaintiff, of 32 shares of the capital stock of the defendant corporation, in the usual form, signed by the president and its treasurer, with its seal affixed. This was a fraudulent overissue of stock by Reed, who was the treasurer, and who filled up a blank certificate, which had been signed by the president and left with him. Reed owned no stock, and exhibited no certificate of stock to the plaintiff except that filled up with the plaintiff's name, and he made no transfer of stock on the books of the company, and there was no entry of the transaction in any form upon its books. The stock of the company was transferable by assignment in the books of the company, upon a surrender of the old certificate, and this was stated in the certificate delivered to the plaintiff. The plaintiff, in May, 1886, assigned this certificate to one Wilkins, the cashier of the Howard National Bank, as security for the payment of a loan of money made to the plaintiff by the bank. Wilkins surrendered this certificate, and took a new one in his own name, which was issued to him by Reed who, as treasurer, had the custody of the certificate and transfer books of the company. The plaintiff, in January 1887, paid his debt to the Howard National Bank, and Wilkins assigned the certificate he held to the plaintiff. The plaintiff, in July, 1887, presented this certificate to the defendant, and demanded a new certificate, which the defendant refused to give, having discovered in November, 1886, this and other frauds of Reed. The original loan of the plaintiff to Reed was $2,000, but in October, 1886, the plaintiff lent him $1,000 more, and it was agreed between them that the certificate of stock should stand as security for the payment of both loans. The amount due from Reed to the plaintiff at the date of the writ was $3,175.84. It is manifest that the assignment of this certificate by the plaintiff to Wilkins, as security for the payment of the plaintiff's debt to the bank, and the assignment back to the plaintiff when his debt was paid, did not put the plaintiff in any better position than he would have been in if the certificate had never passed out of his hands. The plaintiff had pledged property which had been pledged to him, and had redeemed it from the pledge he had made, and he held it by his original title as pledgee of Reed. Simm v. Telegraph Co., L.R. 5 Q.B.Div. 188. The present case cannot be distinguished in principle from Moores v. Bank, 111 U.S. 156, 4 S.Ct. 345. In that case Mr. Justice BRADLEY dissented, and the decision has been the subject of some criticism. Low. Tr. Stocks, § 112, note 2. The ground of that decision, as stated in the opinion, is as follows: The plaintiff "having distinct notice that the surrender and transfer of a former certificate were prerequisites to the lawful issue of a new one, and having accepted a certificate that she owned stock without taking any steps to assure herself that the legal prerequisites to the validity of her certificate, which were to be fulfilled by the former owner, and not by the bank, had been complied with, she does not, as against the bank, stand in the position of one who receives a certificate of stock from the proper officers without notice of any facts impairing its validity." Upon a review of the authorities in the opinion it is said: "This review of the cases shows that there is no precedent for holding that the plaintiff, having dealt with the cashier individually, and lent money to him for his private use, and received from him a certificate in her own name, which stated that shares were transferable only on the books of the bank, and on surrender of former certificates, and no certificate having been surrendered by him or by her, and there being no evidence of the bank's having ratified or received any benefit from the transaction, can recover from the bank the value of the...