Gooch v. Natural Gas Supply Co.

Decision Date12 November 1935
Docket NumberCase Number: 25742
Citation51 P.2d 932,175 Okla. 153,1935 OK 1107
CourtOklahoma Supreme Court

¶0 1. CORPORATIONS -- Nonliability of Corporation Upon Bogus Stock Certificate.

A corporation is not liable upon a bogus stock certificate where it has in no way profited by the transaction and the officer who issued the same was not authorized to issue the genuine stock of the corporation, and was not even trusted with the blank certificates of stock of the corporation, or with its stock book or seal and was not held out as having authority to issue stock or to receive subscriptions to its stock or to receive money in its name or for its account.

2. SAME -- Liability of Corporation on Ground of Negligence.

It is only when a party holds a certificate of stock in a corporation to which is attached the genuine signatures of the officers who must sign it to make it valid, that the question arises as to whether or not the corporation is liable to the holder because of negligence when the certificate is in fact false by reason of having been improperly or fraudulently issued.

3. SAME--Corporation Held not Liable on Forged and Bogus Stock Certificate.

Where a forged and bogus stock certificate is signed by the vice president of a corporation and bears the forged signature of a person as secretary, who never had occupied such office, and bears the impression of a spurious corporate seal, and the vice president was never authorized to issue certificates, and the transaction was handled by another person in no way connected with the corporation and the purchaser relied exclusively upon the statements and representations of this person, and did not know the vice president nor come, in contact with him, and had never heard of him until after she had parted with her money and received the false certificate, and did not rely in any way upon any apparent authority of the vice president to issue the certificates, and the corporation had never bestowed any such apparent authority upon him, and received none of the benefits of this transaction, it is not liable on the certificate, as the same is a forgery and null and void.

4. SAME--Rule That Where One of Two Innocent Persons Must Suffer From Fault of Third the Loss Must Be Borne by One Whose Negligence Enabled Third Party to Commit Fault, Held not Applicable.

The rule that where one of two innocent persons must suffer from the fault of a third the loss must be borne by the one whose negligence enabled the third to commit the fault, is not applicable when plaintiff fails in a duty of care which he eaves to himself fully as imperative as any owed to him by defendant, and by this alone brings himself within the scope of the effects of defendant's negligence.

Appeal from District Court, Grady County; Will Linn, Judge.

Action by Sarah Gooch against the Natural Gas Supply Company for alleged failure to recognize her as a stockholder thereof. Judgment for defendant, and plaintiff appeals. Affirmed.

William Pfeiffer, for plaintiff in error.

Bailey & Hammerly, for defendant in error.


¶1 This is an action by Sarah Gooch, of Schell City, Mo., against the Natural Gas Supply Company, an Oklahoma corporation, with its principal and only place of business in Chickasha, Okla., for damages in the sum of $ 1,000 for the refusal of the corporation to recognize her as the holder of 100 shares of its capital stock of $ 10 par value, for which she alleges she paid the $ 1,000. The case was tried to the court without a jury and resulted in a judgment for the defendant, from which she has appealed to this court. We shall refer to her as plaintiff and the company as defendant.

¶2 In her petition plaintiff alleged that she purchased the stock certificate, which she exhibited, because it bore the signature of one V. A. Reardon, vice president of the company, and who she alleged was acting within the apparent scope of his authority in the issuance of the stock "as affecting her right for the relief prayed for" and that prior to the issuance and delivery of the certificate she had had no contractual relation with the defendant and that she acted in good faith and relied upon the issuance of the certificate by Reardon as vice president. She alleged she paid or caused to be paid the $ 1000 direct to Reardon "in his official capacity as vice president", but the defendant had refused to recognize her as a stockholder and that she had been damaged to the extent of her investment and prayed for judgment in that amount and tendered the certificate into court for the benefit of the defendant.

¶3 Defendant answered that the stock certificate was a forgery and not issued by or under the authority of the defendant or by any one authorized by it to do so and denied that Reardon was acting within the apparent scope of his authority in issuing the certificate, if, in fact, he ever issued it, and alleged that, under the laws of Oklahoma and the by-laws of the defendant corporation no person could become a stockholder except by proper entry on ils books, and that plaintiff had never been entered as a stockholder on the books of the company and had never been a stockholder thereof, and that if she had ever paid Reardon any money and received from him a purported stock certificate, she was guilty of gross carelessness and negligence in so doing, inasmuch as no such certificate had been authorized by the company or its proper officers, and that if plaintiff had any such certificate it was a forgery and utterly void and of no effect. The answer was verified. Plaintiff replied with a general denial.

¶4 Just before trial defendant was allowed to amend its answer to show that at the time the purported certificate was issued all the stock of the corporation had been issued It was stipulated at the trial that Reardon was vice president on the date the certificate bore and that his signature thereon was genuine. Thus there were two issues raised by these pleadings: First, whether plaintiff acquired the certificate in reliance upon the apparent authority of Reardon to issue it; second, whether the certificate was a forgery. Plaintiff had the burden of establishing the first, defendant the second. We think plaintiff failed and defendant succeeded.

¶5 The evidence showed that plaintiff did not acquire the certificate through any efforts of Reardon nor with prior knowledge that his name would appear on the certificate. She acquired it solely through the representations and efforts of one T. E. Burns, a stock salesman from Kansas City, whom she had known for a year or so prior to this transaction. He was in no way connected with the company and was unknown to any of its officers except, doubtless, Reardon. She did not know Reardon, had never met him, had never seen him, had never heard of him until she received the certificate. Burns had been her confidential business and investment advisor in whom she placed the utmost confidence, even entrusting him with the collection of dividends for her on other investments. On October 20, 1930, she gave him her check for $ 1,000 on her savings account in a Schell City bank, payable to defendant's order ostensibly for defendant's stock. Burns cashed this check two days later at a Kansas City bank by indorsing the check as defendant's agent. Later plaintiff received through the mail a purported certificate for 100 shares of defendant's capital stock, dated October 21, 1930, signed by Reardon as vice president and bearing the purported signature of one W. M. Burwell as secretary, and an impression of the purported seal of the corporation. The certificate was numbered 102 and was accompanied by a letter on defendant's stationery, signed by Reardon, in which he said the board of directors had just authorized an extra dividend of 3 per cent. to be paid January 1, 1931, along with the regular quarterly dividend of 7 per cent., and offering assistance to her in her investments whenever she needed it. Sometime in January, 1931, she received through the mail check on a Kansas City bank signed either by Burns or Reardon, she could not recall which, nor could she remember the name of the bank, for about $ 3, which she took to be the extra dividend. The check also was accompanied by a letter on company stationery signed by Reardon, congratulating her for being able to receive the dividend. Later in the month Burns brought to her in cash what she was led to believe was the regular quarterly dividend of the company. This was the last she ever received. She had not seen Burns for two years prior to the trial and did not know where he was. Her testimony was positive that she purchased the purported stock upon the sole representations of Burns and her implicit reliance upon him. There was no evidence that she had relied on anything that Reardon had done or said, or through any apparent authority vested in him by the company. No effort was made to connect the company with the transaction other than to show that Reardon signed the certificate.

¶6 Defendant was organized in the early part of 1930 with a capitalization of $ 100,000. All of the stock was issued immediately after organization. The corporation was purely a local affair. Its stockholders were limited in number and confined for the most part to intimate friends of its president and treasurer, B. P. Siddons, and of its secretary, Harry Hammerley. These two men have held office continuously since the corporation was organized. V. A. Reardon was its vice president during the transaction involved in this suit, but was dismissed shortly thereafter. The stock of the company has not been listed on any exchange. It is not dealt with in the open market. It has never paid any dividends, nor has it carried a bank account in Kansas City. But 100 stock certificates were ever printed by the corporation and these were numbered consecutively from 1 to 100. Not more than 75 have been issued. Unissued...

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3 cases
  • Gooch v. Natural Gas Supply Co.
    • United States
    • Oklahoma Supreme Court
    • 12 Noviembre 1935
    • United States
    • U.S. District Court — Western District of Oklahoma
    • 11 Noviembre 1944
    ...the third person to occasion the loss must suffer it, equally unavailable as a defense on the policy loan. Gooch v. Natural Gas Supply Co., 175 Okl. 153, 51 P.2d 932, 933: "The rule that where one of two innocent persons must suffer from the fault of a third, the loss must be borne by the o......
  • Linton v. Citizens State Bank
    • United States
    • Oklahoma Supreme Court
    • 16 Mayo 1961
    ...cannot be said that Travelite 'put the cause in motion' whereby the bank was induced to make the loan. See Gooch v. Natural Gas Supply Co., 175 Okl. 153, 51 P.2d 932, 933, wherein this court refused to apply the rule here concerned for the benefit of one who had purchased forged stock certi......

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