Hudson Trust Co. v. . American Linseed Co.

I am of the opinion that upon the undisputed facts it was for the jury to say whether or not the corporation was negligent in permitting hundreds of its certificates of stock to be signed in blank by the president and treasurer, to be thereafter filled out by the transfer agent, assisted by other employees; in permitting the transfer agent to place such certificates in a vault to which many of its employees had access, and not to guard or protect them in any other way; in not having some system or method by which it could determine from time to time whether certificates had been improperly filled out or taken from the vault without authority; in not ascertaining — after the president had given directions to have all the certificates which had been signed by the former president and treasurer destroyed — if such order had been carried out; and whether the corporation, by its careless method in dealing with its stock certificates, made it possible for the one in question to be obtained by Corwin, which appeared to be regularly issued and valid upon its face.

If the jury found the corporation thus negligent, then it would have a right to say such corporation was liable to a third party for the damages sustained.

Such liability would rest upon the well-settled principle of law that where one of two innocent persons must suffer a loss by reason of the dishonesty of a third person, the loss must be borne by him whose negligence enabled the third party to commit the dishonest act. This principle is as applicable to corporations as to individuals. That there was a question of fact for the jury is sustained not only by the decisions of our own, but other states. (Allen v. So. Boston R.R. Co.,150 Mass. 200; C., N.O. T.P.R. Co. v.Citizens' Nat. Bank, 56 Ohio St. 351,380; National Bank of Webb City v. Newell-MorseRoyalty Co., 259 Mo. 637; Havens v. Bank of Tarboro,132 N.C. 214; Western Maryland R.R. Co. v. Franklin Bank,60 Md. 36; Green v. Caribou Oil Mining Co., 178 Pac. Rep. 950.)

The case is distinguishable from Knox v. Eden Musee Am. Co. (148 N.Y. 441), upon which the appellant chiefly relies. There, an employee extracted from a safe surrendered certificates and negotiated loans upon them. The employee had no authority, express or implied, to issue stock certificates. The certificates there were placed in the safe by the president of the corporation and the employee who took them out was directed to cancel them. Instead of doing that he took them and negotiated a personal loan. It was held in doing so he committed larceny and could give no better title to them than if they had been certificates of other corporations and he had stolen them.

The certificate here in question was delivered to the clerk, properly signed by the president and treasurer. It was delivered for the purpose of having him fill in the name of the person to whom it was to be delivered. When the blanks were filled, and the stock issued, the public had a right to rely upon the representation that the stock was duly issued to the owner and any one who loaned money upon its security would acquire, as against the corporation, a good title. It is true that the certificate was not sent to the registrar and that the signature of such officer was forged. The signature of the registrar was not necessary to give validity to the stock certificate, and especially so since it was not pledged with the plaintiff until upwards of seven years after it purported to have been issued.

I, therefore, vote to affirm the judgment appealed from.

HISCOCK, Ch. J., in memorandum, in which also CARDOZO and POUND, JJ., concur, and CRANE, J., concur with HOGAN, J.; McLAUGHLIN, J., reads dissenting opinion, with whom ANDREWS, J., concurs.

Ordered accordingly.