Wood v. Smith , 92 Pa. 379 ( 1880 )

Mr. Justice Trunkey

delivered the opinion of the court, May 3d 1880.

The able and elaborate report of the master so well sustains his conclusion and the decree of the court, as to obviate labor in affirmance.

The appellants concede 1. That where the owner sells stock and gets his price, and delivers the certificate, together with a blank bill of sale and irrevocable power of attorney, signed by himself, the title vests in the purchaser ; and 2. When a living owner signs such papers in blank, if he has not actually sold and got his price for the stock, by intrusting them to another, he delegates all his powers in respect to the stock, which being unlimited, he by estoppel will lose his property, if his agent abuses his confidence. They deny that such papers pass title by delivery, and allege, they are only symbols in the 'hands of the holder, affording no presumption that he is the owner of the stock, but-are consistent with an agency to act for the signer.

The rights of a bona fide holder, as against the true owner of the stock, to whom the apparent owner has either sold or pledged, do hot depend on a negotiable character in the certificates, but rest on another principle; “ namely, that one who has conferred upon another by a written transfer all the indicia of ownership of property, is estopped to assert title to it as against a third person, who has in good faith purchased it for value from the apparent owner.” As a general rule, the vendor or pledgor can convey no greater right or title than he'has. Simply intrusting the possession of a chattel to another as a depositary, pledgee or other bailee, is insufficient to prevent the real owner reclaiming his property in case of an unauthorized disposition of it by the person so intrusted. The mere possession of chattels, without evidence of property or authority to sell from the owner, will not enable the possessor to give good title. But if the owner intrusts to another the possession of property, and also written evidence of title and power of disposition over it, as respects innocent third persons, he is deemed as intending it shall be disposed of at the pleasure of the depositary. If there be conditions on which this apparent right of control is to be exercised, not expressed on the face of the instrument, the case, in principle, is like that of an agent who receives secret instructions qualifying or restricting an apparent absolute power. If the owner of the stock voluntarily give certificates with blank assignment and power to make transfers, to his brokers, who betray the confidence reposed in them, such owner must suffer the loss, rather than innocent strangers whose money the brokers wmre thereby enabled to obtain. The principle applies to pledges of stock, and one who purchases from the pledgee may hold against the pledgor. And if the pledgee pledge it to secure payment of his own debt, the second pledgee may hold it as security till his debt be paid. “ A person loaning money on such certificate and power, has a right to believe that the borrower from whom he receives them has an absolute right to pledge the stock.” By commercial usage, a certificate of stock accompanied by an irrevocable pow'er of attorney, either filled up or in blank, is, in the hands of a third party, presumptive evidence of ownership in the holder. And where the party in whose hands the certificate is found is a holder for value, without notice of any intervening equity, his title cannot be impeached: Moore v. Metropolitan National Bank, 55 N. Y. 41; McNeil v. Tenth National Bank, 46 Id. 325; Pratt et al. v. Tilt et al., 28 N. J. Eq. 480; Bridgport Bank v. New York and New Hampshire Railroad Co., 30 Conn. 275 ; Mount Holly Turnpike Co. v. Ferree, 2 C. E. Green 117.

The doctrine of these and kindred cases is notin the least shaken or qualified by the late decision in Shaw et al. v. The Merchants’ National Bank of St. Louis, S. C. U. S., 37 Leg. Int. 135, where the distinction between negotiable paper and bills of lading is pointed out with great clearness. Between such paper and certificates of stock, the distinction may be as wide. Perhaps, under similar circumstances, like rule would be applied to the holder of a stolen certificate as to the holder of a stolen bill of lading, but such is not this case. There the court say, “ It may be that the true owner, by his negligence or carelessness, may have put it in the power of a finder or thief to occupy ostensibly the position of a true owner, and his carelessness may estop him from asserting his right against a purchaser who has been misled to his hurt by that carelessness. But the present is no such case. It is established by the verdict of the jury that the' bank did not lose its possession of the bill of lading negligently. There is no estoppel, therefore, against the bank’s right.” The bill of lading having been stolen without fault in the owner, he was held entitled to recover against a purchaser who had reason to believe that his vendor was not the owner, but held it to secure the payment of an outstanding draft. Nothing in the case tends to show that if the owner had voluntarily given that bill of lading to another, he coüld have recovered against a purchaser for value who took it in good faith.

We are convinced that the master adopted the true principle applicable to the papers in question; he neither held that they were negotiable, nor that it was a mere matter of the actual agency or authority of MacDowell & Wilkins. t

Bo the same rules apply to these stocks as if they belonged to a living owner ? An executor holds under a trust; he is the minister or dispenser of the goods of the dead. He has the same property in the personal effects as the deceased, had when living. It is a general rule of law and equity, that an executor has an absolute power of disposal over the personal effects of his testator, and they cannot be followed by creditors nor legatees into the hands of the alienee. This results from the fact that in many instances the executor must sell in order to perform his duty in paying debts, &c.; and no one would deal with him if liable after-wards to be called to an account. Co-executors are regarded in law as an individual person ; and the acts of any one of them, in respect to the administration of the effects, are deemed to be the acts of all; as where one releases a debt or settles an account of a person with the deceased, or surrenders a term, or sells the goods and chattels of the estate, his act binds the others. An exception to this general power will be found in those cases only when collusion exists between the executor and purchaser. That the executor may waste the money is not alone sufficient to invalidate the sale; it must further appear that the purchaser participated in the devastavit or breach of duty in the executor. Thus, when the person to whom the executor passes the property, knows that the executor is acting in violation of his trust and in fraud of those interested in the due administration of the assets, the fraud vitiates the transaction, and the attempted transferís void. These familiar elements, the base of the master’s reasoning, are its sure support.

Were McDowell & Wilkins defendants instead of their pledgees, the appellants’ argument, would be irresistible; for they participated in the wrongful act of George R. Wood. As executor, he could not make a valid sale or pledge of the stock as a security for or in payment of his own debt to them ; the transaction itself gave them notice of the misapplication, and involved them as participants in the breach of duty. Where money was obtained on the security of stock belonging to an estate, the borrowers, sons of the testator, represented that they owned and had the right to pledge it, but the transfer was made by the executrix to the lenders, who gave her a receipt stating the purpose for which they held it, and that it was to be returned to the estate if their debt was paid, the transaction gave the lenders notice, and the trust was not divested : Prall v. Hamil, 28 N. J. Eq. 66.

An executor’s duty is not like that of a trustee, in whom property is vested, not for administration or sale, but custody and management for his eestuis que trust The party taking stock oil pledge from such trustee deals with it at his peril, for there is no presumption of a right to sell it, as there is in the case of an executor: Duncan v. Joudon, 15 Wall. 165; Shaw v. Spencer, 100 Mass. 382.

“ The executor has the right to sell and transfer, and one who buys of him in good faith, and pays in money the price agreed upon, is not responsible for the application of the purchase-money:” Per Hunt, J., Leitch et al. v. Wells et al., 48 N. Y. 585. Letters of administration are always sufficient evidence of authority to transfer, because a sale, and transfer of stock is in the line of the duty of an administrator. The powers of an executor or administrator differ from those of an ordinary trustee; the duty of the latter being custody and management, of the former to dispose of the personal property, to pay debts, &c. Executors may use specific legacies to pay debts, if necessary: Bayard v. Farmers’ and Mechanics’ Bank, 2 P. F. Smith 232. The fact that the legal title to the stock was known to have previously been in the executor, and that the title of the holder appeared on its face to have been derived from him in his representative capacity, will not raise a suspicion, or put a purchaser on inquiry, for the reasoii that it is the executor’s primary duty to dispose of the assets and settle the estate: Prall v. Tilt, supra. We think the master was right in holding “that the same principle which prevails in the case of an absolute owner applies in the case of an executor who invests the holder with apparent ownership.”

The defendants had a right to infer that MacDowell & Wilkins were the owners of the stock, although the certificates showed title in Challes S. Wood, and the blank assignments and powers were signed by George R. Wood as acting executor. They found McDowell & Wilkins clothed with apparent ownership. The testator had given George R. Wood the strongest expression of confidence in making him an executor of his will, thereby vesting absolute power in him to sell and transfer the stock in the line of his duty. He was acting executor. Neither his co-executors, nor others interested in the estate, had taken a step to prevent him from committing waste. The law casts no duty upon a purchaser to ascertain if the trusted executor of the decedent’s will is mismanaging the estate in fraud of creditors or legatees. The defendants had no knowledge of the collusive transaction between the executor and MacDowell & Wilkins, nor reason to believe that they, the pledgors, were not the real owners, as they appeared. If it be that the perfidious conduct of the executor results in loss to innocent persons, either those interested in the estate or the pledgees of the stock, it must fall on those whose interest he betrayed.

Decree affirmed, at the cost of appellants, and appeal dismissed.

Justice Paxson, dissented.