Wood's Appeal
| Decision Date | 03 May 1880 |
| Citation | 92 Pa. 379 |
| Parties | Wood's Appeal. Wood <I>versus</I> Smith. |
| Court | Pennsylvania Supreme Court |
Before SHARSWOOD, C. J., MERCUR, GORDON, PAXSON, TRUNKEY and STERRETT, JJ. GREEN, J., absent
Appeal from the Court of Common Pleas, No. 4, of Philadelphia county: Of January Term 1878, No. 72. In Equity.
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J. B. Townsend and R. C. McMurtrie, for appellants.—The master's report recognises what most of the cases he cites clearly declare, that certificates of stocks accompanied with such blank transfers as were used here, are not negotiable. And yet, in spite of this recognition of what the authorities state upon the subject of their non-negotiability, the master reaches a conclusion which cannot be attained, except by attributing to them the very character of negotiability which he has denied them; for while he yields to the overwhelming proof of the fact, that MacDowell & Wilkins never had any interest in the stock in question, and recognised that their possession and use of them was wrongful, still he finds them as able to invest the appellees, by the mere delivery of these papers, with an interest and right as pledgees, superior to what George R. Wood himself could have given and conferred upon them.
The cases cited and relied on by the master are expressly put on the doctrine of agency, which enables the holder to pass the title of the signer under circumstances which make the assignee a purchaser, not that the papers do, per se, pass or confer title.
The authority and power of the agent is limited to the power that his principal is able to convey to him, through his power of attorney: Kortright v. The Bank, 22 Wend. 360; Fatman v. Lobach, 1 Duer 361; Leavitt v. Fisher, 4 Id. 1; McNeil v. Tenth National Bank, 46 N. Y. 325.
The vice of the argument on the other side is, that they take the authorities which rest the title on agency, apparent and acted upon which gives the title, and then contend that a title passes irrespective of the limited extent of the powers of the signer of the blank. They forget, that a power by an executor to sell and dispose of such property, does not apparently give the holder the right to pledge for his own debt.
Where certificates get out of the owner's possession, without his knowledge or laches, by fraud or otherwise, he does not lose his title thereto, although they may have found their way into the hands of an innocent purchaser: Biddle v. Bayard, 1 Harris 150; Swan v. North British Association Co., 32 Law Jour. Rep. Exc. 273; Tyler v. Peninsular Railroad Co., 28 Law Jour. Rep. Eq. N. S. 285.
A careful reading of the facts and judicial opinions in each of the cases decided in this country and in England, where owners of stock have lost their title through such papers (where they did not intend that result), will show that a living owner of the stock voluntarily placed the certificates and blank transfers in the hands of a broker or agent; then, whatever the owner's instructions might be, the broker or agent had an apparently unrestricted power and authority to do in the owner's behalf, whatever he, the owner himself, could do. And if there was anything done in respect to the stock beyond the owner's instructions, he would yet be bound by the act of his agent, in favor of a bona fide purchaser or pledgee without notice, and estopped from denying that his agent had not authority to do what had been done.
The master erred in holding, that the same rules apply to these stocks as if they belonged to a living owner, who had signed such blanks and delivered the same and the certificates to MacDowell & Wilkins.
The interest in and power of an executor over his testator's assets and personalty, is very different from that which he has in his own proper securities and property; the latter he holds in proprio jure; the former en autre droit.
If then, George R. Wood was clothed with no right or title jure proprio in these stocks, but held over them the power of sale and disposal which the law confers upon him by virtue of his being one of four qualified executors, and in fact never did sell them, then he could at most delegate to his agents, MacDowell & Wilkins, the power to sell the same on his account to a bona fide purchaser; that was not done. But neither George R. Wood nor his agents (who, of course, were limited by the same limitations which the law puts on his powers if he had executed them in person), could pledge these stocks for money borrowed without placing the pledgee in this position, viz., he must show that the money he advanced actually went to the purposes of the trust; and the burthen rests upon him to do this, or failing it, he will be deemed to have notice of and become a participant in a breach of trust by the executor. Selling his testator's securities and choses in action, is in the ordinary course of administration by an executor of the estate of the decedent. Pledging them for money borrowed, is extraordinary and outside of his course of customary duties. It is not disputed that he may pledge, if necessity for that course be shown and conclusive proof be furnished, that the money raised went to the use of the trust; but without such proof, the inflexible inference drawn by the law is, that the executor was borrowing for his own purposes, and that the lender, by the very transaction itself, is deemed to have knowledge that such was the case: Petrie v. Clark, 11 S. & R. 377; Miller v. Ege, 8 Barr 352; Garrard v. Railroad Co., 5 Casey 154; Lowry v. Commercial and Farmers' Bank, 1 Taney's C. C. Decisions 310; Bayard v. Farmers' and Mechanics' Bank, 2 P. F. Smith 232; Shaw v. Spencer, 100 Mass. 389; Duncan v. Joudon, 15 Wallace (U. S. S. C.) 165; Walsh v. Stille, 2 Parsons's Eq. Cases (judgment by King, J.) 17; Christmas v. Mitchell, 3 Ired. 535; Simons v. Southwestern Railway Bank, 2 Am. Law Reg. 546; Dodson v. Simpson, 2 Randolph 294; Field v. Schiefflin, 7 Johns. Chan. 155; Williamson v. Branch Bank, 7 Ala. 906; Williamson v. Morton, 2 Maryland Chan. 94; Collinson v. Lister, 7 DeGex, M. & G. 634; Cubbidge v. Boatright, 1 Russell's Chan. Cases 549; Hill v. Simpson, 7 Ves. 152; Redfield on Wills, part 2, p. 214; 2 Williams on Ex'rs 824.
The alleged want of notice on the part of the appellees, cannot be recognised in the eye of the law, because 1. The only inscribed owner was the decedent; and the trust inhered in the property itself, and was patent on the face of the papers. 2. If an actual sale by the executor had not preceded or accompanied the delivery by him to the brokers of the papers — of which the appellees took the risk — then they were dealing with George R. Wood through his agents; and notice necessarily came to them, that, if agents and not owners, the brokers could not by the pledging divest the trust.
Lewis Waln Smith and Wm. Henry Rawle, for appellees.— Upon the death of a testator, his personalty vests in his executors, who have an inherent right to sell and convert the same, being responsible to the distributees for an improper use of this power; and a fortiori is this so of illegal investments: Bayard v. The Bank, 2 P. F. Smith 235; Perry on Trusts, sect. 809.
One of several executors has the same power over his testator's personalty as all the executors have jointly; and a fortiori is this so where to the executor disposing of the estate has been committed the sole disposition thereof: Williams on Ex'rs., sect. 946; Chew's Estate, 2 Pars. Eq. Cas. 153.
Where one, whether an executor or living owner, is legally possessed of stock with power of disposition, and delivers the certificates accompanied by absolute bills of sale and blank powers of attorney to transfer, the prima facie presumption is that the transaction imports a sale, and that all the title of the inscribed owner is vested in the holder: The United States v. Vaughan, 3 Binn. 394; Commonwealth v. Watmough, 6 Whart. 117; Building Assoc. v. Sendmeyer, 14 Wright 67; Finney's Appeal, 9 P. F. Smith 398.
The legal presumption flowing from the possession of a certificate, bill of sale and blank transfer, is that of ownership, and not of agency.
A certificate of stock, accompanied by an irrevocable power of attorney, either filled up or in blank, is, in the hands of a third party, presumptive evidence of ownership in the holder: Prall v. Tilt, 1 Stewart (N. J.) 479; Moodie v. Bank, 33 Leg. Int. 400; Robinson v. Hodgson, 23 P. F. Smith 202; Holbrook v. New Jersey Zinc Company, 57 N. Y. 624; Mount Holly Turnpike Company v. Ferree, 2 C. E. Green 117.
And the defendant was justified in presuming that the holder was the owner of the shares, and had a perfect right to make an absolute or conditional transfer, to sell or hypothecate them: Fatman v. Lobach, 1 Duer 355, 361.
Where a third person innocently and in good faith advances money to a holder of stock upon the faith of the certificates, thus accompanied with absolute bills of sale and powers to transfer, without any actual notice of the private equities existing between such holder and the executor, he will be protected to the extent of his advances as a bona fide purchaser for value without notice.
It cannot be denied that the appellee by his advance became a purchaser to the extent of the amount advanced: Petrie v. Clark, 11 S. & R. 377; Lancaster v. Dolan, 1 Rawle 231.
But it is submitted that neither the doctrines of agency nor of negotiability affect the question. The principle rests upon entirely distinct and well-established grounds, and it applies to the least negotiable of all securities, such as title deeds.
Where one is invested (either by the act of the law or of the parties) with the possession and authority to dispose of stock of an inscribed owner, and voluntarily delivers that possession and authority to others, and third...
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