McCarthy v. Crawford

• Decision Date: 15 December 1908
• Citation: 86 N.E. 750,238 Ill. 38
• Parties: McCARTHY v. CRAWFORD.
• Court: Illinois Supreme Court

238 Ill. 38

86 N.E. 750

McCARTHY

v.CRAWFORD.

Supreme Court of Illinois.

Dec. 15, 1908.

Appeal from Branch Appellate Court, First District, on Appeal from Superior Court, Cook County; George A. Dupuy, Judge.

Action by Matthew H. McCarthy against Henry Crawford. From a judgment for defendant, complainant appeals. Reversed and remanded, with directions to enter decree for complainant.Jule F. Brower and Samuel B. King, for appellant.

Julius A. Johnson (Charles H. Aldrich, of counsel), for appellee.

In 1903 the United States Circuit Court for the Northern District of Illinois appointed James H. Eckels and Marshall E. Sampsell receivers for the Chicago Union Traction Company. The receivers, acting under the authority of an order entered July 10, 1905, with the consent of all the parties, issued to the appellee, Henry Crawford, a certificate of indebtedness, in which the receivers certified that the Chicago Union Traction Company was indebted to Crawfordin the sum of $10,815.24, with interest at 6 per cent. per annum, payable to the registered holder of the certificate quarterly at the office of the treasurer of said company; that the certificate was one of a series executed by the receivers in conformity with the order of July 10, 1905, to which reference was had; that the registered holder had in all things complied with the conditions of said order, and the claim upon which said certificate was issued had been audited and approved by the receivers under said order as a valid claim against the Chicago Union Traction Company; and that said certificate was registered and transferable only on the books of the company by the holder thereof, or his attorney, upon surrender of the same. On the back of the certificate was a printed form of assignment and power of attorney authorizing a transfer on the books of the company, with blank spaces left for the names of the assignor, assignee, and attorney. Crawford signed the certificate on the back in blank and delivered it to A. J. Whipple & Co., brokers in the city of Chicago, with directions to sell for him. On August 24, 1905, the appellant, Matthew H. McCarthy, employed Whipple & Co. to purchase for him 100 shares of Atchison, Topeka & Santa Fé railroad stock. The brokers represented that they had purchased the stock, and on August 28, 1905, McCarthy paid them $8,616.30, being, with $500 theretofore paid, the balance in full therefor. They told him the stock had come from New York, but had to be sent back to be transferred, because it was made out in the wrong name. The statements were false. The stock was not bought and paid for, but the entire amount paid by McCarthy was appropriated by the brokers to the payment of their own debts. In response to the demands of McCarthy for the stock or for his money or security, Whipple & Co. early in September delivered Crawford's certificate of indebtedness to McCarthy to hold as security for the delivering of the stock, telling him that Whipple was the owner of the stock. A few days later McCarthy proposed to buy the certificate of Whipple, and a sale was agreed on at a price of 95 per cent. of its face, or $10,274.49. The money McCarthy had paid on the stock purchased was credited on the price of the certificate. The balance, $1,158.19, McCarthy agreed to pay, and he has ever since retained the certificate. Meanwhile, Whipple & Co. having reported to Crawford that they had been unable to obtain an offer for his certificate that they cared to submit to him, on October 9, 1905, Crawford demanded the immediate return of the certificate. Whipple answered that he could not deliver it then because it had been sent to New York, where there were some people who wanted to bid on it. On October 13th a petition in bankruptcy was filed against Whipple & Co., and they were adjudged bankrupts and a receiver appointed. On October 14th McCarthy presented the certificate to the receivers of the traction company, having first written Crawford's name as assignor and his own name as assignee and attorney in the spaces left therefor in the printed transfer on the back, above the signature of Crawford, and he requested the receivers to issue a new certificate to him, which they refused to do. McCarthy subsequently filed his bill in the superior court of Cook county against Crawford, the Chicago Union Traction Company, and its two receivers, alleging that he was entitled to the transfer of the certificate by the receivers of the traction company and was the equitable owner thereof, and praying that the traction company be directed, through its receiver, to make the transfer, and that Crawford be enjoined from setting up any claim of right, title, or interest to the certificate.

The answer of Crawford admitted the issue to him of the certificate, and alleged that he employed Whipple & Co., as brokers, to negotiate its sale for cash at a designated price; that it was not delivered to them when defendant employed them or for a considerable period thereafter, and was not delivered in order that any intending purchaser could inspect it, the signature of the defendant to the blank assignment on the back having been placed there long before the employment of said brokers. He also filed his cross-bill, in which he prayed that the court would decree that he was the lawful owner of the certificate; that the assignment to McCarthy on the back of said certificate was without consideration or authority; that McCarthy should be enjoined from setting up any title or right of possession; and that the certificate be surrendered to the complainant in the cross-bill. McCarthy answered the cross-bill, and on the final hearing the court rendered a decree finding that Crawford was the lawful owner of the certificate, directing its delivery to him, and enjoining the receivers from recognizing the assignment to McCarthy or issuing a new certificate to him. The Appellate Court having affirmed this decree, an appeal has been taken to this court.

DUNN, J. (after stating the facts as above).

The certificate was not an ordinary receiver's certificate issued for money borrowed or a liability incurred by the receivers in the performance of their duties. It was merely evidence of the existence of a debt in favor of the appellee against the corporation whose property the court was administering. It was not a negotiable instrument. The debt, however, of which the certificate was the evidence, was a chose in action, and was assignable in equity. That it was expected and intended that the certificates, which by the order of the court were substituted for the original evidences of indebtedness of the corporation, would be transferred, is manifest from the fact that it was stated on the face of each certificate that it was registered and transferable only upon the books of the company upon surrender of the certificate, that the interest was made payable to the registered holder, and that on the back of the certificate was printed, for convenience of transfer, a form of assignment and power of attorney similar to those ordinarily found on the back of certificates of corporate stock. The effect of an assignment would be to substitute the assignee for the original certificate holder, to enable him to share in any distribution which might be made of the assets, and to enforce his rights in the pending proceeding to the same extent as the original holder. The registration of transfers enables the receivers and all others interested to know who were the parties interested.

Whipple & Co. were the agents of Crawford for the sale of his certificate. He contends that he is not bound by their sale because they were brokers, and the sale was beyond their authority because not made in the usual course of business or for cash, but in settlement of...