Appeal of Wood

• Decision Date: 03 May 1880
• Citation: 92 Pa. 379
• Parties: Wood's Appeal. v. Smith. Wood
• Court: Pennsylvania Supreme Court

92 Pa. 379

Wood's Appeal.

Wood v. Smith.

Supreme Court of Pennsylvania.

May 3, 1880

January 4, 1880

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 purchased it for value from the apparent owner.

2. A certificate of stock accompanied by an irrevocable power of attorney, either filled up or in blank, is in the hands of a third party presumptive evidence of ownership in the holder.

3. One of four executors placed in the hands of his brokers certain certificates of stock which belonged to the estate of his testator. These certificates were pledged as collateral security for the personal indebtedness of this individual executor, and were accompanied by a blank bill of sale and a power of attorney signed by him as acting executor. The brokers in turn pledged the stock to one who advanced money to them in the belief that the brokers were the real owners of the stock. The remaining executors filed a bill in equity to recover the stock. Held, that the same principle which prevails in the case of an absolute owner applies in the case of an executor who invests the holder of certificates of stocks with apparent ownership, and that there could be no recovery of the stock until the advances made thereon were paid.

4. The fact that the legal title to the stock was known to have previously been in the executor, and that the title of the holder appeared on its face to have been derived from him in his representative capacity, does not raise a suspicion or put a purchaser on inquiry, for the reason that it is the executor's primary duty to dispose of the assets and settle the estate.

5. The law casts no duty upon a purchaser to ascertain if the trusted executor of a decedent's will is mismanaging the estate in fraud of creditors or legatees.

Before SHARSWOOD, C. J., MERCUR, GORDON, PAXSON, TRUNKEY and STERRETT, JJ.

GREEN J., absent.

Appeal from the Court of Common Pleas, No. 4, of Philadelphia county : Of January Term 1878, No. 72. In Equity.

Bill in equity filed by R. Francis Wood, Charles Stewart Wurts and John B. Packard, executors of the will of Charles S. Wood deceased, against George R. Wood, James J. McDowell, Joseph R. Wilkins, Jr., The Cambria Iron Company and D. C. Wharton Smith.

The object and purposes of the bill were to compel the restoration and delivery to the plaintiffs, as executors of the will of Charles S. Wood, deceased, of certain certificates of shares of stock in the Cambria Iron Company which, at the time of the filing of the bill, stood in the name of Charles S. Wood, their testator, and were in the possession of D. C. Wharton Smith, one of the defendants.

The case was referred to an examiner to take testimony, and upon the filing of his report was referred to Peter McCall, Esq. as master, who, inter alia, found the following facts:

" Charles S. Wood, of Philadelphia, died on the twenty-seventh day of May 1873, leaving a last will, of which he appointed his sons, George R. and Richard Francis Wood and his sons-in-law, Dr. John H. Packard and Dr. Charles Stewart Wurts, the executors. All the executors proved the will and took letters testamentary.

Mr. Wood, at the time of his death, was the owner of 20,385 shares of the stock of the Cambria Iron Company, of which company he was president, the certificates of which stood in his name.

There was no understanding among the executors that any of the functions of the other executors should be transferred or delegated to George R. Wood, although there was a general understanding that he and R. Francis Wood should pay bills, collect income and keep an account. The estate kept a separate bank account in the Western National Bank, on which George R. Wood drew checks, with the knowledge of his co-executors, as acting executor. Some checks were also drawn by R. Francis Wood, whose signature and that of George R. Wood were given to the bank as of those qualified to draw.

At the time of Mr. Wood's decease and afterwards, the certificates of the Cambria Iron Company stock were kept in a box in the fire-proof of that company. The key of this fire-proof was kept in the office by a clerk of the company, and George R. Wood, who was in the employ of the companies owned by the Cambria Iron Company, and had a desk in one of the suite of rooms in which was the office of that company, had free access to the fire-proof.

The key of the box containing the certificates of stock belonging to his father's estate was kept by him, and he had free access by himself, uncontrolled by the other executors, to the certificates.

The other executors were not in the habit of going to the box in which the securities were kept. No precautions were taken by them to prevent George R. Wood from disposing of any of the securities. But there was a distinct understanding among all the executors before leaving town for the summer of 1873, that there should be no sales until the autumn.

In that summer, without the knowledge of his co-executors, George R. Wood speculated in Lehigh Navigation and Pennsylvania Railroad stocks, through the medium of MacDowell & Wilkins, stock brokers on Third street, who carried for him large amounts of these stocks, being protected by margins of stocks deposited with them as collateral security by George R. Wood.

Among these securities were certificates of seven thousand two hundred and seventy-six shares of stock of the Cambria Iron Company, belonging to the estate of Charles S. Wood, which were abstracted by George R. Wood from the fire-proof without the knowledge of his co-executors. Each of these certificates stood in the name of Charles S. Wood, and was accompanied by a blank bill of sale and power of attorney to sell and transfer, signed ‘ George R. Wood, acting executor.’

Two of these certificates, for one thousand and thousand one one hundred and seventy-two shares respectively, were used by MacDowell & Wilkins in certain transactions with the defendant, D. C. Wharton Smith, carrying on the business of broker and banker which have given rise to the present controversy. Those transactions were as follows.

On the 20th September 1873, the defendant sold to MacDowell & Wilkins, two hundred shares of Lehigh Navigation stock at $30 per share, deliverable in sixty days. On the 2d October following, he sold to them six hundred shares of the same stock at $27 per share, deliverable in thirty days; and on the sixth of the same month, he sold to them two hundred more shares of that stock at $29.50 per share, deliverable in thirty days. The defendant called upon them for a margin, as the market declined during the Jay Cooke panic, and received from them certificate No. 110, of one thousand shares of stock of the Cambria Iron Company, belonging to the estate of Charles S. Wood. MacDowell & Wilkins failing to take the stock when their contracts fell due, the stocks were sold out on their account.

Besides these stock transactions, MacDowell & Wilkins, on the 29th September 1873, borrowed from the defendant $12,000 on call, giving him their due-bill for that amount and certificate No. 638, for one thousand one hundred and seventy-two shares of stock of the Cambria Iron Company, belonging to the estate of Charles S. Wood, as collateral.

Attached to each of these certificates was a blank bill of sale and power of attorney, under seal, signed ‘ George R. Wood, acting executor,’ in the words following:

KNOW ALL MEN BY THESE PRESENTS, that for value received, have bargained, sold, assigned and transferred, and by these presents do bargain, sell, assign and transfer unto shares of the capital stock of the standing in name on the books of the and do hereby constitute and appoint true and lawful attorney, irrevocable for and in name and stead; but to use, to sell, assign and transfer, and set over, all or any part of the said stock, and for that purpose to make and execute all necessary acts of assignment and transfer, and one or more persons to substitute with like full power, hereby and confirming all that said attorney or substitute or substitutes shall lawfully do by virtue hereof.

In witness whereof, have hereunto set hand and seal, the day of 1873.

GEORGE R. WOOD, [SEAL.]

Acting Executor.

Sealed and delivered in the presence of

The bill of sale and power attached to the certificate No. 110, of one thousand shares, as surrendered to the plaintiffs, has the number of shares of Cambria Iron stock, and number of the certificate and date (16th September) filled in the blanks, in the handwriting of Mr. MacDowell, and is witnessed by him. The other has the name Charles S. Wood, the number of shares (1172), the name of the company, the number of the certificate 638, and the date 22d September filled in the blanks, in whose handwriting did not appear, and is witnessed by Mr. Wilkins, the other member of the firm.

The defendant in his answer declares, that in dealing with MacDowell & Wilkins in these transactions, he believed the stock to have been sold to them, and that he received the certificates in perfect good faith. In his examination he testified, that he dealt with them as principals, not as agents; and that he had no doubt, or reason to doubt, that the certificates were their property when he received them. He received them from Wilkins, but made no inquiry as to how they became possessed of the stock.

No money has come into Charles S. Wood's estate by reason of these transactions, nor has it derived any benefit therefrom.

The plaintiffs' bill was filed October 16th 1873, and an injunction was granted by the court, restraining the defendant from selling, & c., the certificates. From this decree an...