Foster v. Ambler

• Decision Date: 14 December 1888
• Citation: 5 So. 263,24 Fla. 519
• Parties: FOSTER et al. v. AMBLER.
• Court: Florida Supreme Court

5 So. 263

24 Fla. 519

FOSTER et al. v. AMBLER.

Florida Supreme Court

December 14, 1888

Appeal from circuit court, Duval county; ELEAZER K. FOSTER, Judge.

Action by George R. Foster and others against D. G. Ambler for an accounting for the proceeds of certain stock. Judgment was rendered for plaintiff, and a master appointed to take an account. Plaintiff, being dissatisfied with certain directions given the master, appeals.

Syllabus by the Court

SYLLABUS

In a case where the bill seeks an account on alleged liability of the defendant, and the court gives a decree for the plaintiffs, with directions to the master appointed to take the account, which are unsatisfactory to the plaintiffs, and from which they take an appeal, this court will consider the whole case, and reverse the decree against the defendant, if found to be erroneous in charging him with any liability.

Where the sworn answer to a bill denies the allegations essential to sustain the case of the plaintiffs, the plaintiffs will fail if they do not overcome the answer by the evidence of two witnesses, or of one witness and sufficient corroborating circumstances. This case for the plaintiffs is founded on an alleged trust accepted by the defendant on a transfer of their stock in the Jacksonville & St. Augustine Railroad Company to him, which trust he denies in his sworn answer claiming that the transfer was under an absolute sale of the stock to him; and the denial of the answer not being overcome, in the opinion of this court, by the evidence required, held, that the decree charging the defendant with liability under the alleged trust is erroneous.

Authority to third parties to transfer stock, expressing that it was given on receipt of full consideration, if coupled with a secret trust, does not carry the trust to the party to whom they sell and transfer the stock, unless knowledge of such trust is brought home to him. The breach of trust, if any, is in such case chargeable to the parties having authority to transfer.

When stock is offered for sale to an officer of a company, by one holding written authority of the character above indicated there is no rule of law which requires him to inquire the purpose of the sale. He would only be put upon inquiry when he has knowledge of such facts as would lead an honest man using ordinary caution, to make further inquiries, and be taken to have notice of facts about which inquiry should be made when with such knowledge he does not make the inquiry but avoids making it.

If one gives to another such evidence of right to sell his property as, according to common understanding, accompanies authority of disposal, he loses the right of reclaiming the property if disposed of under that authority to an honest purchaser for a valuable consideration without notice of any adverse claim. If a trust goes with the authority, such purchaser would not be held as taking the property subject to the trust.

The rule that a purchaser of property from a third party incumbered with a trust cannot hold against the true owner if the consideration of the purchase is only an antecedent debt, does not apply where there is further consideration in the surrender of a valuable security for the debt.

COUNSEL

H. Bisbee, for appellants.

Fleming & Daniel, for appellee.

OPINION

MAXWELL C.J.

Appellants filed their bill against appellee in the court below on the 24th day of December, 1879, praying an account for the proceeds of certain stock in the Jacksonville & St. Augustine Railroad Company, sold by him, which stock at one time belonged to them, and for payment of said proceeds to them, with interest. The substance of the bill is that on or about February 28, 1874, the complainants were stockholders in said company, which was incorporated in 1870 for the purpose of building and operating a railroad between the two cities named, and that, of the 5,000 shares of stock of $100 each, they owned and controlled among them 3,076 shares, being a majority of said stock, while the defendant, who was one of the directors and vicepresident of the company, owned and controlled 1,153 shares. That complainants had contributed much time, labor, and money to secure the building of the road, but without success. That thereupon defendant, a banker, and having, or pretending to have, ample facilities for raising money, and for securing the co-operation of capitalists in the work, represented to complainants that certain capitalists were ready to unite with him in furnishing money and building the road if he and they could own and control a majority of the stock; and he proposed the assignment of the several shares of stock of complainants to him in order to secure the building of the road. He further agreed to cancel and surrender a promissory note for $500, signed by the president, and indorsed by complainants Durkee and Driggs, which note was then held by him, and had been given on behalf of the company for moneys he had before that advanced towards its preliminary operations. That complainants being anxious to secure the building of the road, and willing to surrender their stock to that end, and relying upon the good faith of defendant, and his ability to perform his agreement, accepted his proposition, and caused to be assigned to one Maxey, as agent of defendant, their several shares of stock; it being understood that said Maxey should hold the stock for the use of defendant, or assign the same to him as he should direct, (said arrangement being at his instance and request,) in pursuance of the agreement, except that the shares of complainants Reed and Foster were assigned directly to defendant. He thereby got absolute control of the company; said assignments, however, being for the sole purpose of securing the building of the road, and upon the express condition that he would secure that. Thus defendant was made a trustee to hold and use said shares of stock for the purpose aforesaid, the same to be his property if he accomplished the purpose, but to be reassigned to complainants if he did not. It is then alleged that defendant sometimes pretends that said stock was sold and assigned to him for a valuable consideration, but complainants say that the only consideration intended and understood in any written assignment was the building of the road. The defendant also pretends that he purchased and paid for said stock, the consideration being the cancellation and surrender of the promissory note aforesaid; but complainants deny this, and say that such cancellation and surrender was part and parcel of the agreement before recited, it being understood that upon getting the assignment defendant should also assume and discharge all liabilities of the company; and, in alleging that the only consideration for the assignment was the building of the road, it is further said that defendant acquired no other right, title, or interest in the stock than as trustee for the purpose mentioned. Nevertheless, complainants say, after the assignment aforesaid, the defendant, regardless of the trust, continued to hold the stock for a long time, but did not secure the co-operation of capitalists or the building of the road; and afterwards, about 18th of March, 1875, in violation of his trust, and without the knowledge or consent of complainants, and for the purpose of defrauding them and preventing the construction of the road, and for his own personal benefit, sold and assigned a majority of said stock, including that of complainants, to the St. Johns Railway Company, a corporation running a line of railroad from St. Augustine to Tocoi, on the St. Johns river,--said sale being for the sum of $4,000, which was received and appropriated by defendant to his own use. The St. Johns Railway Company was interested in preventing the construction of the Jacksonville & St. Augustine Railroad, because it was a competing line; and the defendant at the time of the sale aforesaid was largely interested in the St. Johns Company, was a stock holder and an officer or agent of said company, and he sold the stock to enable it to control the Jacksonville & St. Augusting Railroad Company, and thereby prevent the construction of its railroad. All which actings of defendant were not known to complainants until recently, and upon discovery thereof they demanded return of said stock, or an accounting and settlement for the proceeds thereof, which defendant refused. Complainants, believing that the sale of said stock was made without notice to the St. Johns Railway Company, elect to waive the violation of the trust, and demand of defendants the proceeds of the sale.

The answer of defendant, denying that complainants Jenkins and Driggs ever were stockholders of the Jacksonville & St Augustine Railroad Company, also denies that the remaining complainants ever owned or controlled a majority of the stock of said company, and further denies that they had severally contributed a great deal of time, labor, and money in the preliminary work of the company. Admitting that he is a banker, as alleged, he denies that he had, or pretended to have, ample facilities for securing co-operation of capitalists, who would invest money in the construction of the road, or that he represented to complainants that any capitalists were ready to unite with him in furnishing the necessary money to build the road, if he and his associates could control a majority of the stock of the company. He denies the alleged proposition to complainants that if they would assign their stock to him he would secure the building of the road, or that he made any promises, pretenses, or representations to them, or either of them, at all similar to those alleged in their bill. Says that Bridge, one of the stockholders, and a director...