O'herron v. Gray

• Court: Supreme Judicial Court of Massachusetts
• Writing for the Court: KNOWLTON, J.
• Citation: O'herron v. Gray, 168 Mass. 573, 47 N. E. 429 (Mass. 1897)
• Decision Date: 15 June 1897
• Parties: O'HERRON et al. v. GRAY et al. (two cases).

168 Mass. 573

47 N.E. 429

O'HERRON et al. v. GRAY et al. (two cases).

Supreme Judicial Court of Massachusetts, Suffolk.

June 15, 1897

COUNSEL

H.S. Dewey, for appellants.

R Foster and H.J. Ryan, for appellees.

OPINION

KNOWLTON J.

Each of the plaintiffs is the owner of stock in the Boston & Albany Railroad Company, represented by certificates in the possession of Gray, Dewey & Co., the appellants. The plaintiff in the first case owned two certificates,--one for 19 shares, and one for 12 shares,--both of which passed into the hands of the appellants, and were surrendered by them in exchange for a new certificate for 31 shares, issued in their own names. The plaintiff in the second case is the owner of one certificate for 12 shares which the appellants received, and which has not been surrendered. Both of the plaintiffs are minors, and their respective certificates were made in their own names. These certificates were deposited for safe-keeping by their mother who was their guardian, in the Pittsfield National Bank. While the certificates were in the bank, the guardian borrowed money from the bank for her personal use, for which she gave her notes, and at the same time signed upon the back of each of her son's certificates a blank form of transfer, with a signature as follows: "Simon John O'Herron, by Mrs. Catherine O' Herron, Guardian." In like manner, on her daughter's certificate, she signed with the signature, "Nora L. O'Herron, by Mrs. Catherine O' Herron, Guardian," and left the certificates as collateral security for the payment of her notes. This transaction occurred on or about December 17, 1889. On or about December 20, 1889, the cashier of the bank, one Francis, who had access to the vault where these certificates were kept, took them, without authority from anybody, and delivered them to the appellants, as security for one of his personal debts. In May, 1890, the guardian paid her notes at the bank. Some time in the year 1891, the appellants took the two certificates standing in the name of Simon John O'Herron to the office of the Boston & Albany Railroad Company, and asked to transfer the stock, and have a new certificate issued in their own names. The corporation refused to permit a transfer of the stock or the issue of new certificates, without a decree of the probate court authorizing the sale of the stock. Thereupon the appellants requested Francis to procure such a decree. He then had a petition prepared by the register of the probate court for the county of Berkshire, in the name of the guardian, praying for leave to sell and transfer the certificates, and he signed the petition as follows: "Catherine O'Herron, Guardian, by E.S. Francis." On this petition, on July 21, 1891, the probate court issued a decree in the usual form, authorizing the guardian to sell or transfer the whole or any part of the stock. All this was done without notice of the petition by publication or otherwise, either to the plaintiffs or to their guardian, and without the knowledge of either of them. The transfer of the stock was then made on the books of the Boston & Albany Railroad Company, and a new certificate for 31 shares issued to the appellants. Francis continued to act as cashier of the bank until his death, by suicide, on July 27, 1893, when his fraudulent conduct was discovered, and his estate was found to be insolvent. He paid the dividends on the stock to the plaintiffs' guardian regularly as long as he lived. At the time of receiving the certificates, the appellants supposed that Francis was rightfully in possession of them, and they had no notice of his want of authority to pledge them, except the form of the certificates and of the transfers. The question is whether the appellants acquired a good title to the stock as against the plaintiffs. It is not necessary to consider the original claim of the bank to the stock as security for the loans to the guardian, as the loans were paid. It is clear that the guardian had no right to pledge the stock, and we do not intimate that the bank acquired a valid title to it.

Francis, under whom the appellants derived their title, had no right to the certificates, but held them feloniously. They were the general property of the plaintiffs, and the special property of the bank, which had the possession of them as bailee. The act of Francis in taking them, and pledging them as his own, if not larceny at common law, was at least embezzlement, which, by our statute, is deemed to be larceny. Pub.St. c. 203, §§ 37, 41. A bona fide purchaser for value, from one who has taken property in such a way, acquires no title to it. The only exception to this rule is when the property consists of negotiable securities. Heckle v. Lurvey, 101 Mass. 344, 345; Spooner v. Holmes, 102 Mass. 503, 507. But certificates of stock, even when indorsed in blank for the purpose of authorizing the making of an instrument of transfer over the signature, are not negotiable securities. This is settled by the highest authority. Shaw v. Spencer, 100 Mass. 382, 388; Shaw v. Railroad Co., 101 U.S. 557, 565, 566; Knox v. American Co., 148 N.Y. 441, 42 N.E. 988; Power Co. v. Robinson, 52 F. 520; London & County Bank Co. v. London & River Plate Bank, 20 Q.B.Div. 232. It is plain, therefore, that the appellants cannot maintain their claim, on the ground that the nature of the property takes it out of the general rule that no title can be acquired from one who has no title.

It is contended that St.1884, c. 229, is applicable to these cases. If we assume in favor of the appellants that this statute will protect a bona fide purchaser or pledgee for value, to whom a certificate of stock has been delivered with a written transfer of it, or a written power of attorney to sell, assign, or transfer it, signed by the owner, it does not help the appellants. The signature on the back of these certificates was not that of the owner, but of a guardian whose trust relation to the property was disclosed on the face of the papers. In their report on the revision of the statutes (1834), the commissioners say, in a note to chapter 79, § 28 (which is section 29 in the final enactment), that they have made the provision as to sales of property by guardians the same as that for trustees appointed under wills. The provision for trustees under wills is found in Rev.St. c. 69, § 11, in Gen.St. c. 100, § 14, and with certain broader provisions from more recent legislation in Pub.St. c. 141, § 20. The provision in regard to guardians is found in Gen.St. c. 109, § 22. As a part of the history of the legislation, see, also, St.1817, c. 190, § 35, and St.1820, c. 54, § 3. It is the duty of one purchasing property held by a trustee to ascertain whether the transaction appears to be within the trustee's authority. Atkinson v. Atkinson, 8 Allen, 15; Shaw v. Spencer, 100 Mass. 382; Loring v. Salisbury Mills, 125 Mass. 138; Smith v. Byrgess, 133 Mass. 511; Loring v. Brodie, 134 Mass. 453; Bank v. Cady, 15 App.Cas. 267; Duncan v. Jaudon, 15 Wall. 165.

It is contended, further, that the plaintiffs are estopped from reclaiming their property by the negligence of their guardian in leaving their certificates at the bank, indorsed with her...