Edgerly v. First Nat. Bank of Boston
| Decision Date | 23 September 1935 |
| Citation | 197 N.E. 518,292 Mass. 181 |
| Parties | EDGERLY v. FIRST NAT. BANK OF BOSTON et al. |
| Court | United States State Supreme Judicial Court of Massachusetts Supreme Court |
Suit by Arnault B. Edgerly against the First National Bank of Boston and others. From a decree dismissing the bill, the plaintiff appeals.
Affirmed.
Appeal from Superior Court, Suffolk County; Greenhalge, judge.
E. K Arnold, of Boston, for appellant.
F. W Eaton, of Boston, for appellees.
The plaintiff deposited for safe keeping with an investment banker named Crowell, among other stock certificates, an unindorsed certificate in the name of the plaintiff for five thousand three hundred and ninety-seven shares of class A stock of the Moxie Company, a Massachusetts corporation. Some months later, Crowell advised the plaintiff to replace a loan from State Street Trust Company of $20,000, secured by one thousand shares of stock of Massachusetts Investors Trust, by a loan of the same amount which Crowell undertook to obtain from the defendant First National Bank of Boston upon his own note, secured by other stock that was to be bought with the proceeds of the sale of the stock of Massachusetts Investors Trust.‘ Crowell further stated that in order to put the transaction through he would need stock powers and a permission to pledge signed by the plaintiff. He suggested that several stock powers would be advisable in order that the Massachusetts Investors stock might be split for sale.’
Accordingly, the plaintiff signed five or six forms of transfer of stock with power to transfer the stock on the books of the corporation, the name of the transferee, the name of the stock and the number of shares being left blank, and delivered them to Crowell. The plaintiff further signed and delivered to Crowell a ‘ permission to pledge,’ addressed to First National Bank of Boston, authorizing a person whose name was left blank, who was described as ‘ the Borrower’ and who was intended to be Crowell, to pledge ‘ the following securities belonging to me,’ the space for the listing of such securities being left blank, ‘ Also any securities of mine/ours or of which I/we am/are the holder of record, which the Borrower may hereafter deposit with you for the purposes aforesaid,’ as collateral security for whatever the ‘ Borrower’ might borrow.
Armed with these papers, Crowell borrowed on his own note from the defendant First National Bank of Boston, at first $20,000, later increased to $35,000, and as collateral security pledged the certificate for five thousand three hundred and ninety-seven shares of Moxie stock. The officers of the bank filled in the description of the stock in both the forms just described, and the name of Crowell as ‘ Borrower’ in the ‘ permission to pledge.’ At that time, Crowell was of good standing and reputation, and the defendant First National Bank of Boston took the pledge in good faith, without notice of any facts making the transfer wrongful.
In December, 1932, more than a year after the pledge, Crowell was petitioned into bankruptcy and committed suicide. The plaintiff, who had supposed that the replacement of his loan of $20,000 was secured by a pledge of stocks bought with the proceeds of the sale of stock of Massachusetts Investors Trust, discovered that the defendant bank was holding his Moxie stock as collateral security for Crowell's borrowings. The plaintiff brought this bill to restrain any sale of the Moxie stock and to compel the redelivery of the certificate to the plaintiff. The facts were found by a master, whose report was confirmed, and a final decree was entered dismissing the bill with costs. The plaintiff appealed.
Apart from statute, a certificate of stock is not the embodiment of the shares represented by it. Kennedy v. Hodges, 215 Mass. 112, 102 N.E. 432. See, also, Kling v. McTarnahan, 277 Mass. 386, 178 N.E. 831. Neither the certificate nor the shares can be said to be fully negotiable, in the sense in which money or a negotiable instrument before maturity is negotiable. The owner of a certificate of stock, like the owner of an ordinary chattel, does not lose title when someone steals it and sells it to an innocent purchaser. Pratt v. Higginson, 230 Mass. 256, 119 N.E. 661, 1 A.L.R. 714. That remains true at common law although the certificate when stolen bears an indorsement in blank signed by the owner. Scollans v. E. H. Rollins & Sons, 179 Mass. 346, 352, 354, 60 N.E. 983,88 Am.St.Rep. 386; Russell v. American Bell Telephone Co., 180 Mass. 467, 469, 62 N.E. 751; Barstow v. City Trust Co., 216 Mass. 330, 103 N.E. 911; Casto v. Wrenn, 255 Mass. 72, 75, 150 N.E. 898; National City Bank of Chicago v. Wagner (C. C. A.) 216 F. 473. The only way in which the owner can lose title at common law to an innocent purchaser from a wrongdoer having no title, is by estoppel. An owner, intrusting to another a certificate of stock bearing the owner's indorsement in blank, knows that he is making actual deceit possible. When a business custom exists by which such a certificate is accepted without inquiry into the title of the possessor unless special cause for suspicion exists-and such a custom has been proved in a number of cases-a purchaser or pledgee taking such a certificate without special reason to doubt the title is not put upon inquiry by the existence of a blank for the name of the transferee. Scollans v. E. H. Rollins & Sons, 173 Mass. 275, 279, 280, 53 N.E. 863,73 Am.St.Rep. 284. For this purpose, it is immaterial whether the owner knew of the custom or not. The owner, intrusting the certificate indorsed in blank to one who wrongfully sells or pledges it to another who takes it in reliance upon such a custom, is estopped to deny the title of that other. Scollans v. E. H. Rollins & Sons, 173 Mass. 275, 53 N.E. 863,73 Am.St.Rep. 284; Id., 179 Mass. 346, 60 N.E. 983,88 Am.St.Rep. 386; Russell v. American Bell Telephone Co., 180 Mass. 467, 62 N.E. 751; Clews v. Friedman, 182 Mass. 555, 558, 66 N.E. 201; Baker v. Davie, 211 Mass. 429, 97 N.E. 1094; Loring v. Goodhue, 259 Mass. 495, 156 N.E. 704. In certain reported cases some element of estoppel has been lacking. Barstow v. City Trust Co., 216 Mass. 330, 103 N.E. 911; Marcotte v. Massachusetts Security Corp., 250 Mass. 246, 145 N.E. 464; Casto v. Wrenn, 255 Mass. 72, 150 N.E. 898. There is no finding in this case that any custom existed of accepting documents purporting to be transfers of stock with the name of the stock left blank.
The uniform stock transfer act (G. L. [Ter. Ed.] c. 155, §§ 24-44) now governs the transfer of title in Massachusetts to shares in corporations of Massachusetts and other States having laws consistent with it. Casto v. Wrenn, 255 Mass. 72, 75, 150 N.E. 898; Turnbull v. Longacre Bank, 249 N.Y. 159, 165, 163 N.E. 135. The purpose of that act is to make stock certificates and the shares represented by them more nearly negotiable than they formerly were. Warr v. Collector of Taxes of Taunton, 234 Mass. 279, 281, 282, 125 N.E. 557; Turnbull v. Longacre Bank, 249 N.Y. 159, 164, 165, 163 N.E. 135; Peckinpaugh v. H. W. Noble & Co., 238 Mich. 464, 213 N.W. 859, 52 A.L.R. 941; Jackson v. Peerless Portland Cement Co., 238 Mich. 476, 213 N.W. 863; Connolly v People's State Bank, 260 Mich. 352, 244 N.W. 500. By section 27(b) a certificate and the shares represented thereby may be transferred ‘ by delivery of the certificate and a separate document containing a written assignment of the certificate or a power of attorney to sell, assign or transfer the same or the shares represented thereby, signed by the person appearing by the certificate to be the owner of the shares represented thereby’ ; and this may be made out to a specified person or the name of the person may be left blank. By section 31 ‘ the delivery of a certificate to transfer title in accordance with section...
To continue reading
Request your trial