DeBoer v. Anthony

• Decision Date: 26 May 1938
• Citation: DeBoer v. Anthony, 300 Mass. 403, 15 N.E.2d 260 (Mass. 1938)
• Court: Supreme Judicial Court of Massachusetts
• Parties: RALPH F. DEBOER v. H. HENRY ANTHONY & others.

300 Mass. 403

15 N.E.2d 260

RALPH F. DEBOER v. H. HENRY ANTHONY & others.

Supreme Judicial Court of Massachusetts, Suffolk.

May 26, 1938

April 7, 1938.

Present: RUGG, C.

J., LUMMUS, QUADOLAN, & COX, JJ.

Corporation Transfer of shares.Uniform Stock Transfer Act.Notice.

The mere facts that, when an attempted delivery of a certificate of stock with a separate document of assignment and power of attorney in incomplete form was made by a broker to an agent of a purchaser, the agent refused to accept delivery and returned the documents to the broker, that the broker then complied with required formalities and redelivered the documents to the agent, who accepted delivery and paid the purchase price and that the certificate was of shares of a Michigan corporation and was signed by the owner as president, did not put the agent or the purchaser on notice as to possible lack of authority in the broker to sell; and findings that in the circumstances, although the broker had no authority to sell the agent and the purchaser acted in good faith and that the sale was valid under G.L. (Ter. Ed.)c. 155,

Sections 24-44, were warranted.

BILL IN EQUITY, filed in the Superior Court on July 19, 1937.From a final decree entered by order of Greenhalge, J., the plaintiff appealed.

R. M. Sullivan, (A.

R. Kingston & B.

B.Priest with him,) for the plaintiff.

M. Jenckes, for the defendants.

COX, J.This is a bill in equity in which the plaintiff seeks to recover three stock certificates registered in his name and allegedly sold without his consent; or, in the alternative, to have his damages assessed because of the alleged unlawful transfer of the certificates.The defendants, a partnership, doing business as Whitney & Elwell and Elizabeth F. Tobey, in their answers, set up a counterclaim against the plaintiff, Rule 32 of the Superior Court(1932), each alleging to be entitled to a dividend on twenty-five hundred shares of the stock represented by the three certificates, which was paid to the plaintiff after the certificates had been delivered to Whitney & Elwell "so that they had legal title to the same."The suit was referred to a master whose report was confirmed by interlocutory decree, and a decree was entered dismissing the bill as to all defendants except Anthony and Forgrave, copartners, doing business as Brown, Anthony & Company; ordering the plaintiff to pay Whitney & Elwell all dividends received by him on twenty-five hundred shares of the stock "while the same stand in the plaintiff's name"; ordering Whitney & Elwell to assign and transfer to the plaintiff five hundred of the shares; establishing that Anthony and Forgrave each is indebted to the plaintiff' in the amount of $10,000; with costs to the plaintiff as against Anthony and Forgrave and costs to the defendants Whitney & Elwell, Tobey and Kinsman, as against the plaintiff.

The master found that the plaintiff is the president, treasurer and general manager of a Michigan corporation, the Applied Arts Corporation.Anthony and Forgrave, as copartners, doing business as Brown, Anthony & Company, were in the stock brokerage business, in Boston, and made an assignment for the benefit of creditors on June 29, 1937.For some time prior to June 1, 1937, the firm had been dealing in the unlisted stock of Applied Arts Corporation, and was the eastern correspondent of a brokerage firm in Detroit, Michigan, with which the plaintiff had made arrangements for the distribution of the stock.Through this connection, Forgrave and the plaintiff became known to each other.About May 28, 1937, Brown, Anthony & Company needed money and Forgrave conceived the idea of getting some by obtaining Applied Arts Corporation stock from the plaintiff.On that day he telephoned the plaintiff and asked for a temporary loan of some of the stock.On June 1, 1937, Forgrave telephoned the plaintiff, who was in Michigan, that he had "taken a position" in the stock which required that he should temporarily have stock on hand and that he needed three thousand shares.The plaintiff said that he had three thousand shares that were part of an issue of ten thousand shares, which, however, could not be sold because that issue had not been approved for sale by the securities commission of Michigan.Forgrave told the plaintiff that he would not sell the stock and would return it within a few weeks, that the matter was urgent and that in the afternoon he would have his auditor speak to the plaintiff on the telephone; and asked him to tell the auditor that three thousand shares were being sent.The plaintiff said that he would send the stock.The plaintiff understood, and was given to understand by Forgrave, that the stock certificates were wanted so that it might appear for purposes of an audit that Brown, Anthony & Company had the stock on hand, and that when the certificates had served their purpose Forgrave would return them.

Between May 28 and June 1, Forgrave took up with the defendant Kinsman the question of raising money on Applied Arts Corporation stock.Prior to April 1, 1937, Kinsman, who was connected with a company, the Financial Independence Founders, had talked with Forgrave about having Brown, Anthony & Company sell Financial Independence Founders units, with the result that on April 1 Kinsman was placed in charge of a branch office of Brown, Anthony & Company for the purpose of organizing and developing the sale of these units.Brown, Anthony & Company paid him a salary and expenses and he was to have a share in any profits of the branch office, the expenses of which were to be borne by the company.This was the only relation that Kinsman had with Brown, Anthony & Company.

The defendant Tobey, who was a friend of Mr. and Mrs. Kinsman, had an account with Whitney & Elwell, a brokerage firm in Boston, and on September 8, 1936, in anticipation of her absence from the country, she had given Kinsman a printed form of Whitney & Elwell, authorizing him to buy and sell securities for her account and risk with that firm.On May 30, Kinsman told Mrs. Tobey that he had an opportunity to buy from Brown, Anthony & Company twenty-five hundred shares of Applied Arts Corporation stock at $3 a share; that it was selling for around $4 a share and that he felt confident that she could sell it within a month at a profit of one point.She returned to her home in New York on the following day, ascertained the price at which the stock was selling, telephoned Elwell, a partner in Whitney & Elwell, for his advice, and notified Elwell and Kinsman that she would purchase the stock.She directed Whitney & Elwell to pay for twenty-five hundred shares to be delivered to it for her account.The master finds specifically that in this transaction Kinsman did not purport to act under the power which Mrs. Tobey had given to him, and that she herself, and not through an agent, authorized Whitney & Elwell to make the purchase for her account.

On June 1, Forgrave, one Whittaker "of Brown Anthony," and Kinsman signed a memorandum agreement to the effect that Kinsman was to purchase twenty-five hundred shares of Applied Arts Corporation stock at $3 a share which he"may sell at any time he chooses.Before selling he must offer to B. A. & Co at $4 per share net -- this not to apply 30 days after purchase.After 30 days and up to 60 days after purchase should he decide to sell if Brown Anthony & Co purchase they must do so at 4 1/2 dollars per share net."Kinsman did not tell Forgrave that he expected Mrs. Tobey to take the stock but Forgrave understood that someone other than Kinsman "was going to put up the money."In the afternoon of June I Forgrave telephoned again to the plaintiff and asked Kinsman to speak to him, which he did.The plaintiff told Kinsman that he was sending three thousand shares of Applied Arts Corporation stock.Kinsman did not know the plaintiff and knew of no reason why he should speak to him.The plaintiff thought he was talking with some auditor.

On June 3 the stock arrived by registered mail at the office in Boston of Brown Anthony & Company.There were three certificates, each for "$1,000"(1,000 shares?) in the plaintiff's name, together with three printed forms of assignment, which were not filled in except for the signature of the plaintiff and the date, June 1, 1937.These assignment forms were as follows: "Form488 ASSIGNMENT SEPARATE FROM CERTIFICATE FOR VALUE RECEIVED .............hereby sell, assign and transfer unto.................. shares of the........... standing in ........... name on the books of said........ represented by Certificate No...........herewith and do hereby irrevocably constitute and appoint.............. attorney to transfer the said stock on the books of the thin named Company with full power of substitution in letter was contained in the envelope: "APPLIED ARTS CORPORATION Manufacturers 365 Lane Ave., S.W. Phone 93474 Grand Rapids, Michigan June 1, 1937 Brown, Anthony & Company 24 Federal Square Boston, Mass. Attention: Mr. W. Forgraves.Gentlemen: As agreed I am forwarding you 3,000 shares of Applied Arts Corporation Stock, representing: CertificateNo. 3804 -- 1,000 shares CertificateNo. 3805 -- 1,000 shares CertificateNo. 3806 -- 1,000 shares Accompanying I have included three signed `Power of Attorneys.'Due to no consideration of any value received, this stock is being forwarded you on the condition that under no circumstances is it to be sold except with my written permission.As advised you, this stock has been issued by the Board of Directors but has not been approved for sale through the Michigan Securities Commission.As soon as this is passed for sale I will notify you to this effect as steps are now being taken to approve this and other stock within a...