lawyer, he would at once inquire about the legal estate, and if it related to shares he would probably commence to think about estoppel. With reference to land no doubt the law is at present firmly founded upon various "technical and unsatisfactory" rules as to legal and equitable estates. If the purchaser from the trustee acquired the "legal" estate he is safe; and if he did not he loses. A former chapter has dealt at length with that subject.2 And there are not wanting cases relating to shares in which the same rules have been applied. But the rational principles of estoppel by ostensible ownership are superseding these "technical and unsatisfactory" rules; if indeed (as seems probable) they may not already be said to be in possession of the field. Reserving judgment upon this point for a moment, let us pass on to the consideration of cases in which the trustee not merely misappropriates shares, but in order to do so fraudulently fills up blank transfers intrusted to him. For if in such an instance a purchaser (upon principles of estoppel) is safe irrespective of questions of legal estate, we shall have no difficulty in the simpler case which we are leaving behind. - The Swan cases in 1859-1863 with reference to shares are interesting and instructive. The owner of shares in two companies A. and B.- employed a broker to sell the A. shares, and gave him several signed but blank transfers; the broker fraudulently filled up one of the transfers with the B. shares, and sold them to an innocent purchaser. After much doubt it was determined that the true owner of the shares was not estopped by handing over the blank transfers. But the judg ments leave little room for doubt that had the true owner further equipped the broker for the fraud, by intrusting him with the B. certificates. he would have lost his shares. 1 Ante, p. 255. 2 Ch. XVIII. Reg v. Shropshire (1873), L. R. 8 Q. B. 420; L. R. 7 H. L. 496; 45 L. J. Q. B. 31; Marshall v. National Bank, etc. (1892), 61 L. J. Ch. 465; Weaver v. Barden (1872), 49 N. Y. 286. Whatever the true ground of decision there is no doubt that the purchaser will be safe if he acquire the "legal" title. Crocker v. Crocker (1865), 31 N. Y. 507. 4 Ex parte Swan (1859), 7 C. B. N. S. 400; 30 L. J. C. P. 113; Swan v. North British (1862), 7 H. & N. 603; 31 L. J. Ex. 425; 2 H. & C. 175; 32 L. J. Ex. 273. A few years afterwards (1871) a New York case of much importance (McNeil v. Tenth National Bank1) was decided. The owner of shares pledged them with bankers, giving to them the certificate upon which was indorsed a blank assignment and power of attorney to do "all necessary acts of assignment and transfer;" the bankers fraudulently disposed of the shares; and the owner was held to be estopped upon the ground "that where the true owner holds out another or allows him to appear as the owner of or as having full power of disposition over the property, and innocent parties are thus led into dealing with such apparent owner, they will be protected." The principle of this decision has been approved in Pennsylvania Ry. Co.'s Appeal (1878),2 in Otis v. Gardner (1883),3 in Colonial Bank v. Hepworth (1887),* and Williams v. Colonial Bank (1887, 1890),5 in Hone v. Boyle (1890), in Waterhouse v. Bank of Ireland (1892),' in Robinson v. Montgomeryshire (1896),8 in Coffey v. Coffey (1897),9 in Boultbee v. Gzowski (1897),1o in Gilbert v. Erie (1898)," in Smith v. Rogers (1899)," in Brown v. Equitable (1899),13 in Masury v. Arkansas (1899)," and may now be said to be firmly established. The interesting question now arises, Upon what principle can such decisions rest? It seems to be impossible to stretch the word "negotiability" so as to account for a transferee of shares acquiring a better title than that of his grantor.15 The doctrines associated with distinctions between legal and equitable estates too are insufficient, for in many of the cases only an equitable interest (as it is still called 16) in the shares was transferred. Both of these suggestions moreover have been distinctly repudiated in the House of Lords as well as in the United States. 1(1871) 46 N. Y. 325. 286 Pa. St. 80. And see Davey's Appeal (1981), 97 Pa. St. 153. 3105 Ill. 436. 4 36 Ch. D. 53; 56 L. J. Ch. 1097. 5 36 Ch. D. 659; 38 Ch. D. 388; 57 L. J. Ch. 826; s. c. sub nom. Colonial Bank v. Cady (1890), 15 App. Cas. 267; 60 L. J. Ch. 131. 627 L. R. Ir. 137. 7 29 L. R. Ir. 384. 8 (1896) 2 Ch. 841; 65 L. J. Ch. 915. 974 Ill. App. 241. 10 24 Ont. App. 502; 29 S. C. Can. 54. 13 78 N. W. R. 103; 79 N. W. R. 968. 15 See the remarks of Jessel, M. R., with reference to warehouseman's warrants in Merchants v. Phoenix (1877), 5 Ch. D. 205; 46 L. J. Ch. 418. See ch. XXIV as to this word "negotiability." 16 See the remarks in ch. XVIIL The only remaining ground seems to be estoppel; but this in its turn was repudiated by Kekewich, J., saying that it was not applicable (to a case in which certain executors intrusted Messrs. Thomas with blank transfers) in "the strict technical sense of the word, as it cannot be suggested that the executors are precluded from asserting the truth. On the contrary, my judgment goes on an examination of the real facts. What they are precluded from asserting, in my judgment, is that Messrs. Thomas were not by the custody of these documents, with their assent, authorized to deal with them as they from time to time considered desirable."1 But this is precluding them from asserting the truth; for the admitted fact is that the brokers were not so authorized. They appeared to be authorized; and upon the faith of that appearance a third person changed his position - that is estoppel. Mr. Justice Chitty admits estoppel as the governing principle, but states it in this way: "What then is the estoppel here? Having regard to the practice proved and the condition in which these documents are when they pass from hand to hand, the right principle to adopt with reference to them is to hold that where (as is the case before me) the transfers are duly signed by the regis tered holders of the shares, each prior holder confers upon the bona fide holder for value of the certificates for the time being an authority to fill in the name of the transferee, and is estopped from denying such authority; and to this extent and in this manner, but not further, is estopped from denying the title of such holder for the time being." But there is confusion here. If "each prior holder confers . . an authority to fill in the name of the transferee,” it is incorrect and unnecessary to add that he "is estopped from denying such authority." If he has really given authority he cannot deny it anyway. The question only arises when there is no authority in fact; and then there is estoppel, not because there is authority, but because there is the appearance of authority, and by that the true owner is estopped. Mr. Justice Chitty's solution is open to the criticism that it imports as a fact that which is admitted to be untrue. It is said that "each prior holder .. confers an authority to fill in the name of the transferee;" but that is precisely what he does not do it is exactly because it was not done that the trouble arises making necessary an appeal to estoppel, which admits that there was no authority, and precludes the owner from so alleging. That is better than changing the facts. This remark supplies the answer to Mr. Justice Lindley's suggested explanation of Mr. Chitty's language- that the per I Williams v. Colonial Bank (1887), 36 Ch. D. 671; 57 L. J. Ch. 832. son upon whom authority is supposed to be conferred must not only be "the holder for value of the certificates," but also "the person entitled to the certificates." If it be necessary to prove the existence of authority, then no doubt it is only persons rightfully entitled to the certificates that can exercise that authority, for to them alone was it given; but if the estoppel arises from the appearance of authority, then it may exist apart altogether from the rightfulness of the title. One further point: The suggested solution will not apply at all under certain circumstances. If the person intrusted with the blank transfer exhibits it in its incomplete condition to a purchaser, there is no doubt appearance of (even if no real) authority to fill up. But suppose that the person intrusted has filled up the blanks with his own name before exhibiting them, there is then no appearance of authority, and no necessity for any. The document appears to have left its signer's hands in complete form. The case has now changed from one of ostensible agency to one of ostensible ownership.3 We thus arrive at the conclusion that the true rationale of the decisions in hand is ostensible agency, where the purchaser is aware of the existence of blanks; and ostensible ownership, where he has no such notice; and that "negotiability" and legal estate have nothing to do with the questions. Perhaps it is too much to hope that the mere, dicta of Lords Watson and Herschell will put a sudden termination to "negotiability " and legal estate as factors in such problems. Nevertheless they will certainly help powerfully the present trend of the law in that direction. Lord Watson has said: "Even when the delivery (that is by the persons intrusted with the transfers) has been fraudulent, as in the present case, the Supreme Court of New York has held that the registered owner cannot reclaim the document from a holder who has given valuable consideration in good faith and without notice of the fraud. But it is necessary to observe that the decision of the court did not attribute to the instrument any privilege or negotiability, in the legal sense of that term. It was based upon the circumstance that the registered owner has so dealt with that certificate as to lead the purchaser for value to believe that he was taking a good title to it. In other words, the foundation rests in the principle of estoppel. Thus far the principles of American cases appear to me to be in harmony with the principles of English law."3 Lord Watson added that cases "which relate to competition between equitable and legal rights to stock or shares have really no bearing here. Whether the respondents are estopped from saying that Blakaway had not their authority to dispose of the cer 1 Williams v. Colonial Bank (1888), 38 Ch. D. 407; 57 L. J. Ch. 826. 2 See ante, ch. XVII. * Colonial Bank v. Cady (1890), 15 tificates in question is, in my opinion, the sole question presented for decision in these appeals." Than these quotations there are few in all the books more acceptable to the present writer.1 Were they generally applied, all questions of "negotiability," and legal and equitable estate, in the determination of cases which involve the loss by one of two innocent parties on account of the fraud of a third, would soon be seen to be parts merely of obsolete systems and ideas. Seals. A very technical difficulty presents itself in the case of blank transfers of shares, which has not to be encountered in dealing with blanks in notes and bills of lading; for transfers have sometimes to be under seal, and it is said that the authority to fill up a document under seal must itself be under seal. If there be no such sealed authority (as is usually the case), and if there be no redelivery of the transfer after its completion, it is said that it is not sufficiently executed.2 Distinction must, however, again be made between cases in which the purchaser is aware of the insufficiency of the execution and those in which he is not. Suppose that I execute a transfer of shares in blank and hand it to a broker, who, before handing it over, and unknown to the purchaser, fills in the purchaser's name. My execution of the document is irregular, and it may even be said that the deed is not mine at all. that is not the question. Estoppel is not troubled with facts. It deals with appearances. The document appears to have been properly executed; I am responsible for such appearance; and I ought to be estopped.3 But Some discussion of the alternative case where the purchaser is aware that the deed was filled up after deliverywill be found in another chapter. DOCUMENTS OF TITLE LOST OR STOLEN. Speaking very generally, the law of England, the United States and Canada as at present received is correctly stated App. Cas. 278; 60 L. J. Ch. 137. And see per Lord Herschell to same effect. 1 Negotiability was eschewed also by Jessel, M. R., with reference to warehousemen's warrants in Merchants v. Phoenix (1877), 5 Ch. D. 205; 46 L. J. Ch. 418. 2 Société Generale v. Walker (1885), 11 App. Cas. 20. See per Lord Herschell in Colonial Bank v. Cady (1890), 15 App. Cas. 282. See also the discussion as to blanks in bills and notes in ch. IV; and as to estoppel with reference to deeds in ch. XXV. 4 Ch. XXV. |