Knox v. Eden Musee Americain Co.

• Decision Date: 18 February 1896
• Citation: 148 N.Y. 441,42 N.E. 988
• Parties: KNOX v. EDEN MUSEE AMERICAIN CO., Limited.
• Court: New York Court of Appeals Court of Appeals

148 N.Y. 441

42 N.E. 988

KNOX

v.EDEN MUSEE AMERICAIN CO., Limited.

Court of Appeals of New York.

Feb. 18, 1896.

Appeal from supreme court, general term, First department.

Action by Edward M. Knox against the Eden Musee Americain Company, Limited, to recover damages for defendant's refusal to transfer to plaintiff on its books certain shares of its capital stock. From a judgment of the general term (26 N. Y. Supp. 482) affirming a judgment in favor of plaintiff, entered on the report of a referee (25 N. Y. Supp. 164), defendant appeals. Reversed.

Appeal from the decision of the general term of the First department, affirming the judgment entered on the report of a referee, which report was as follows:

‘Findings of Fact.

‘First. The defendant, the Eden Musee Americain Company, Limited, is, and at all the times hereinafter mentioned was, a business corporation organized and existing under and by virtue of the laws of this state, to wit, chapter 611 of the Laws of 1875. The capital stock of the company was at first the sum of four hundred thousand dollars, divided into four thousand shares of the par value of one hundred dollars each; but after the incorporation, and prior to the times hereinafter mentioned, the capital was reduced to the sum of three hundred and thirty thousand dollars, divided into three thousand three hundred shares, of the par value of one hundred dollars each, all of which had been fully issued and were outstanding prior to April 1, 1891.

‘Second. Under the powers conferred upon it by statute the defendant had adopted bylaws, regulating, amongst other things, the issue and transfer of certificates of its stock, and imposing upon certain of its officers various duties with respect to such issue and transfer. The method of issue and transfer of certificates was prescribed by sections 2 and 3 of article 3 of the by-laws, which were as follows, viz.: ‘Sec. 2. Certificates of stock shall be numbered and registered in the order in which they are issued, and shall be signed by the president or vice president, and countersigned by the treasurer, and the seal of the company shall be affixed thereto. All certificates shall be bound in a book, and shall be issued in consecutive order therefrom; and in the margin thereof shall be entered the name of the person owning the shares therein represented, with the number of shares, and the date thereof. Each certificate shall be receipted for in the certificate book. All certificates exchanged or returned to the company shall be canceled by the secretary, and such canceled certificates pasted in their original place in the certificate book; and no new certificate shall be issued until the old certificate has been thus canceled and returned to its original place in said book. Sec. 3. Transfers of shares shall only be made upon the books of the company by the holder in person, or by power of attorney duly executed and acknowledged and filed with the secretary of the company, and on the surrender of the certificate or certificates of such shares.’ By other by-laws it was further provided that it should be the duty of the president ‘to sign all certificates of stock of the company,’ of the treasurer ‘to countersign all certificates of stock signed by the president,’ and of the secretary to ‘affix the seal of the company to all certificates of stock when signed by the president and countersigned by the treasurer,’ and that the secretary should ‘have charge of the certificate book, transfer books, and stock ledger.’ The plaintiff had no knowledge of the by-laws.

‘Third. For a number of years prior to May 8, 1891, and down to October or November in the year 1891, Ernest Andre Jurgens was in the employ of the defendant as general manager of its business, which was the carrying on of a museum or place of show and entertainment in Twenty-Third street, in the city of New York. The office of the company was in the same building with its museum, and Jurgens, subject to the oversight of the president, was in charge of both the office and the museum. The stock certificate book was kept in a safe in the office. In April and May, 1891, and for some time prior thereto, one Frank M. Reynolds was in the employ of the defendant as a clerk. During the years he had been employed by the company Jurgens had been, so far as they were aware, perfectly honest, and nothing had come to the knowledge of the company prior to October, 1891, which would lead them to suppose that Jurgens was not honest and trustworthy. During the time of his employment by the company he had been intrusted with money and jewels to the value of more than $50,000, and he had faithfully fulfilled his trust with reference to the same.

‘Fourth. About May 8, 1891, Reynolds applied to the plaintiff for a loan of $2,500 to himself and Jurgens, by the discount of his (Reynolds') note, indorsed by Jurgens. Plaintiff declined to make such loan or discount unless security was furnished, whereupon Reynolds offered to give as security twenty shares of the capital stock of the defendant, which he stated to plaintiff belonged to him or Jurgens. The plaintiff thereupon consented to discount Reynolds' note, indorsed by Jurgens, on the pledge of twenty shares of the capital stock of the defendant as collateral. Plaintiff knew that Reynolds and Jurgens were in the employ of the defendant, and believed that Jurgens was its managing director.

‘Fifth. Thereafter, and on or about the day last aforesaid, Reynolds presented to the plaintiff four certificates of stock of the defendant, numbered, dated, and in the names of stockholders, as follows: Certificate No. 221, dated April 29, 1886, in the name of Mrs. Eva M. Chase; certificate No. 497, dated October 7, 1889, in the name of Mrs. Hattie L. Blish; certificate No. 498, dated October 7, 1889, in the name of Mrs. Hattie L. Blish; certificate No. 517, dated December, 1890, in the name of Seligsberg & Co. Each of the certificates was in the regular and proper form of stock certificate issued by the defendant, was duly and regularly signed by its president and countersigned by its treasurer, and bore the impress of its corporate seal, and each certificate set forth that the person named therein was the owner and entitled to five shares of the capital stock of the defendant, which were transferable only on the books of the defendant in person or by attorney on surrender of the certificate. Each of the certificates had printed upon it as an indorsement the usual blank form of power of attorney to transfer, and the powers of attorney on certificates Nos. 497, 498, and 517 were duly signed in blank by the respective persons named in the certificates as the owners thereof. The power of attorney indorsed on certificate No. 221 was signed by Eva M. Chase, the person named in the certificate as the owner thereof, but the name of Seligsberg & Co. was written in the power of attorney as the persons to make transfer of the certificate.

‘Sixth. On the receipt of the certificates of stock and the note of Renyolds for $2,500, indorsed by Jurgens, the plaintiff examined the certificates, and on them as security discounted the note, paying the proceeds thereof to Reynolds. When the note became due, it was renewed, and a new note for $2,500, made by Reynolds and indorsed by Jurgens, was given in its stead. On the maturity of this second note the sum of $500 was paid on account of it, and two notes of $1,000 each, made and indorsed in like manner as the former, one payable in two months and the other in three months, were given to plaintiff. When the first of these notes came due, $200 was paid on account of it, and a renewal note for $800 was given. The second note of $1,000 became due January 18, 1892, but was not paid at maturity, nor was the renewal note of $800 which became due March 2, 1892, paid, though both were duly presented for payment, and demand of payment made. Both have remained wholly unpaid, and are now in the possession of the plaintiff as holder and owner. On or about February 9, 1892, after the said renewal note of $1,000 had gone to protest, and before the said note of $800 matured, Reynolds notified plaintiff that he was unable to pay any part of the indebtedness aforesaid. At the time of the discount and receipt of the certificates the plaintiff did not observe that in the indorsement of No. 221 the name of Seligsberg & Co. was inserted. No claim is made by the plaintiff on this certificate. The statement of Reynolds that said certificates and stock belonged to him or Jurgens was false in fact and fraudulent so far as Jurgens was concerned. The certificates had ceased to be valid certificates of stock, and had become mere vouchers, belonging to the defendant. In accepting the alleged certificates from Reynolds, the plaintiff made no inquiry as to their validity or genuineness beyond an examination of the papers themselves. In making said loan he relied upon the apparent validity and genuineness of said certificates, and he believed the same to be valid and genuine. He believed the statement made by said Reynolds, as aforesaid, to be true.

‘Seventh. The four certificates of stock hereinbefore referred to, and the twenty shares of the defendant's capital originally represented by them, were, in April, 1891, the property of Seligsberg & Co., a firm of which Theodore Hellman, who was and had been from its organization president of the defendant, was a member. In April, 1891, Hellman accepted an offer for the sale of this stock to one Siebrecht at $114 a share. This offer was made through Jurgens, the manager of the defendant. Hellman took the certificates, indorsed as described, to the office of the company, but, learning that the purchaser was not then ready to pay for the stock, he left the certificates there in the office safe, and under the sole care and control of Jurgens, to be canceled by him when Siebrecht, the purchaser, paid for the shares. On April 27,...