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false certificates were issued, and the spurious stock transferred by an officer of the corporation. A corporation aggregate being an artificial body - an imaginary person of the law — so to speak, is from its nature incapable of doing any act, except through agents, to whom is given by its fundamental law, or in pursuance of it, every power of action it is capable of possessing or exercising ; hence it is liable to the same extent, and under the same circumstances that a natural person is chargeable with the acts or negligence of his agent, and if the agent conducts himself fraudulently, the same principles prevail where the principal is a corporation.

From these premises, the following, among other conclusions, are reached :

“ Where the principal has clothed his agent with power to do an act upon the existence of some extrinsic fact necessarily and peculiarly within the knowledge of the agent, and of the existence of which, the act of executing the power is itself a representation, a third person dealing with such agent in entire good faith, pursuant to the apparent power, may rely upon the representation, and the principal is estopped from denying its truth to his prejudice.” North River Bank v. Aymar, 3 Hill, 262; N. Y. f. N. H. R. R. Co. v. Schuyler et al. 34 N. Y. 73.

As a consequence of these principles, the court held that certain defendants who had acquired spurious stock from Schuyler, although not entitled to become stockholders, were entitled to indemnity from the company for the fraudulent acts of their president and transfer agent, whose authority they were estopped from denying by the facts and circumstances of the case. 34 N. Y. Reports, 50, 51, 53, 61.

In the very recent case of Titus y. The President, fc. of the Great Western Turnpike Road, 5 Lansing, 250, 255, the corporation was held liable for money advanced to the treasurer by an innocent third person, upon spurious certificates of stock issued by the treasurer to himself, and signed by him, in conformity with their by-laws. In that case the supreme court of New York said: “ The liability of the principal for such acts of its agent was distinctly affirmed in the N. Y. $ N. H. R. R. Co. v. Schuyler, and in Bruff v. Mali, 36 N. Y. 200.”

The cases cited by the appellees, prior in date, and in conflict with the principles announced in 34 N. Y. and 5 Lansing, are of course overruled. We do not think the case of Swann v. The North British Austrn. Compy. in the court of exchequer chamber, 46 Law Journal, 273, conflicts in principle with the cases above cited; but differs rather as to the degree of negligence which constitutes estoppel in pais. The broker in that case, who forged the instruments, was not clothed with a general authority to represent his principal, and conduct their business, as in the present case.

The case of the Bank of Ireland v. The Trustees of the Evans' Chari ties, 5 Ho. of Lords Rep. 389, relied on by the appellees, is of the same general character. The stock sought to be transferred was not that of a corporation issuing stock, of which the defaulting agent was the secretary, but stock held by the trustees in the Bank of Ireland. Grace, the secretary of the trustees, was not transfer agent of that stock, or authorized to affix the seal of his principals to any instruments. “He took advantage of his being secretary to the trustees, and thereby having the custody of [No. 10.

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signed hes of owney, had aut

the seal.” The power to order and dispose of the seal of the corporation, and the use and application thereof, was vested in three trustees; Crawford, on the contrary, had authority to affix the seal of the company to all certificates of ownership of stock, properly issued by the company and signed by the president. The doctrine laid down by that case is, “ that the negligence which would deprive the corporation of the right to insist the transfer was invalid, must be negligence in, or immediately connected with the transfer itself,” a position, in our opinion, not inconsistent with the facts on which the prayers of the appellant are based.

Since the argument of this cause, the case of the Queen on the prosecution of Robson v. The Shropshire Union Railways and Canal Company, in the exchequer chamber, has been reported in 8 Queen's Bench (Law Rep.), 420, 421.

This was an application for a mandamus, requiring the defendants to register certain certificates of stock held by the administratrix of an equitable mortgagee of certain shares, standing in the name of the equitable mortgagor, who was a trustee of the stock and a director of the defendants.

The queen's bench, consisting of Cockburn, C. J., Mellor, Hannen, and Quain, JJ., refused the mandamus, but on appeal to the exchequer chamber their judgment was reversed, and it was held “ that the defendants are, under the circumstances of this case (as between them and the prosecutrix), the persons who must suffer for the consequences of a breach of trust of G. Holyoake (the trustee), which consequences are attributable to their giving him, or rather perhaps negligently allowing him to obtain, he being a director, indicia of property which he did not possess.”

Numerous other authorities establish by analogy the principles above announced ; among these may be cited 2 Hill, 461, the case of the U. S. v. Davis, and Merchants' Bank v. State Bank, 10 Wallace, 642. In the former, a director of the bank took a note for discount, and appropriated the proceeds to his own use; in the latter, a cashier certified that a person having no deposit, had gold on deposit; in both cases the bank was held responsible. So also in 10 Gray, 532, the case of the Atlantic Bank v. The Merchants' Bank — a bank whose teller certified a check when the drawer had no funds, was held responsible for the act of its officer.

In the case of Lister f Supplee v. Allen, 31 Md. 547, this court has adopted the language of Judge Story in his work on Agency, sec. 443, as follows : “ But the responsibility of the principal to third persons is not confined to cases where the contract has been actually made under his express or implied authority. It extends further, and binds the principal in all cases where the agent is acting within the scope of his usual employment, or is held out to the public, or to the other party, as having competent authority, although in fact he has, in the particular instance, exceeded or violated his instructions, and acted without authority. For in all such cases, where one of two innocent persons is to suffer, he ought to suffer who misled the other into the contract, by holding out the agent as competent to act, and as enjoying his confidence.”

“So if the principal should clothe the agent, although a mere special agent, with all the apparent muniments of an absolute title to the property in himself, the principal would be bound by the acts of the latter;

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[No. 10.

as, for example, if he should clothe him with the apparent title to property by a bill of lading of a shipment, as by making the shipment appear to be on account of the agent, or should trust him with negotiable securities, indorsed in blank, a sale or disposal thereof by the agent, although in violation of his private orders, would bind the principal, and give correspondent rights and remedies to third persons, who become bona fide possessors under such sale, or other act of disposal, against him.”

The parallel between the instances above cited, in which the principal's liability was fixed, and the facts upon which the appellant's first and second prayers are based, is too obvious to require comment. If the principal is civilly responsible for the frauds of his agent, as seems to be settled by the foregoing authorities, it cannot be material what shape the fraud assumes. It would be illogical to suppose that the liability of the principal is lessened by the magnitude of the fraud — that the greater the breach of trust on the part of the agent, the less the responsibility of his employer.

Every species of " crimen falsi” not accompanied with force — theft, forgery, and perjury — are only frauds of a deeper dye. To exonerate the principal because the fraud of his agent amounted to a felony, would violate the reason of the rule, “respondeat superior,” deprive innocent third persons of all indemnity, expose them to the risks of fraudulent devices, most dangerous, because most difficult to detect, and leave them without any protection, other than the fear of prosecution and punishment.

The common law, which, in some cases, suspends or merges the civil remedy against the culprit, does not, in any case, take away the remedy against those who are expressly or impliedly responsible for him.

The decisions of the highest courts of Pennsylvania and New York establish the principle that the liability of the corporation is not limited to acts within its chartered powers, done by its agents, but they are responsible notwithstanding the act is beyond its legal capacity to do or contract; hence, although the stock issued by Schuyler and Davis was spurious, that is to say false, the principals were held liable in damages to innocent third persons.

The act of Crawford in issuing stock without the genuine signature of the president is not a greater violation of the charter of the appellees than the over-issues of stock in the cases cited. Both were frauds on the respective corporations and their stockholders ; the act of Crawford differs only in form. :

It is essential to public welfare, that where the acts of acknowledged agents are accompanied with all the indicia of genuineness, and issued for a valuable consideration, the principal shall be responsible, whether the indicia are true or not. Such liability would conduce to greater vigilance on the part of the principal, greater fidelity in the agent, and greater security to all dealing with them.

It necessarily results, we think, from the foregoing reasoning and the cases cited, that the appellant's first, second, third, and seventh prayers should have been granted, and the appellee's counter proposition, viz. : first, third, fourth, and seventh rejected.

The conclusion arrived at as to the appellant's first, second, third, and

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seventh prayers renders it unnecessary, in our judgment, further to discuss the prayers involving the question of negligence which has been incidentally referred to in the cases cited, as the ground of " estoppel in pais.” Independently of that aspect of the case, there was enough in the facts mentioned in the prayers of the appellant above enumerated, which, if found by the jury, would have entitled the appellant to recover.

The appellee's second prayer, which places the appellant in the position of bailee of Crawford, and asserts he has no other or better title than Crawford, at the time of the pledge, is founded, we think, on a misapprehension of the true relation between the appellant and appellee. It does not appear that the loan was made to Crawford, or that the certificates of stock were ever held by him ; on the contrary, the loan was made to one Rich, without knowledge of the appellant, until Crawford's difficulties became public, that he was the person for whom Rich wanted the money.

To constitute the relation of bailor and bailee, there must have been evidence of title in the bailor, to the certificates in question, and a transmission of that title to the appellant, through the bailor. The agent, Rich, did not disclose his agency or borrow the money, upon any specific certificates already issued and held in the name of Crawford, but upon certificates which he procured to be issued directly to the lender, as of the date of the loan.

There was no privity between the appellant and Crawford. The appellant does not claim through him, but through the certificate issued by him as the agent of the corporation. The action is not "ex contractu," but “ ex delicto ; " it does not seek to enforce the contract contained in the certificate, but supposing it to be genuine, it claims damages for the non-performance of a public duty, which the corporation by its charter assumed; or if not genuine, for the loss and injury inflicted on the appellant by the fraud and tort of the agent of the appellee. As said in 34 N. Y., the fraud constitutes the cause of action, and no court would suffer a defendant to set up the fraud of himself or his agent (which is by construction his own act) as a bar to the action; otherwise, fraud would be invincible and incurable.

The measure of damages, prescribed by the modification of the court of the appellant's fifth prayer, is, as we understand that modification, the proper standard.

But that it is left to the jury to determine whether, under all the circumstances, without regard to the causes of depreciation of the stock (if any) at the time of the loan, the appellant is entitled to recover the amount of the money advanced on the stock with interest, or the amount of the market value of the stock with interest (if they deem it proper to allow interest); but in no event to allow more than the amount of the money loaned with interest, if the value of the stock should exceed said loan and interest.

The exceptions to the rulings of the court in respect to the evidence referred to in them will now be considered.

The testimony of J. L. Johnston, the rejection of which was the subject of the appellant's first exception, being supplied by the aulmission of the same evidence on the part of the appellee, it is unnecessary to com

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Tome v. PARKERSBURG Branch R. R. Co.

(No. 10.

they were propethe defendants as the stock sued upong

ment on its character and competency further than to say such testimony was pertinent and admissible.

The second bill of exceptions is waived by the appellant.

The third involves the admissibility of the record of the proceedings of the directors of the defendant's company, of the 10th of August, 1870.

By agreement of counsel, the record of the proceedings of the appellee's company is made a part of the record of this case. It appears from this, that at a meeting of the directors of the company, held in August, 1870, after the discovery of Crawford's frauds, a report was made by the finance committee, setting out in detail the extent of Crawford's overissues of stock, &c., - and that one of the certificates held by the appellant did not appear upon that list.

The plaintiff offered to read the proceedings of the 10th of August (which it is presumed are the proceedings referred to in the agreement of counsel, and which are described as of August, 1870), the bill of exceptions does not state for what purpose, but the appellant argues, “ That they were proper evidence to show what stock was reported to the board of directors of the defendants as fraudulent, and to let the jury see (which was the fact that some of the stock sued upon in this case had not been so reported, they might consider that fact as some evidence of its authenticity.”

The plaintiff read from the record of the various meetings of the stockholders and directors of the defendant prior to August the 10th, 1870, without objection ; but when he offered to read the proceedings of the 10th of August, the defendant objected and the court sustained the objection.

“ Books of a corporation are, at common law, regarded as public to a certain extent with respect to its members, but private with respect to strangers. A rule for a limited inspection of the documents of a corpora tion will be ordered by the queen's bench, provided it is shown such inspection is requisite with respect to a suit then instituted, or at least to some specific dispute or question depending, in which the applicant is interested; but in this case the inspection will be granted to such an extent only as may be necessary for the particular occasion.” 2 Taylor's Evidence, sec. 1346.

Although the right of the plaintiff, as a member of the corporation, was involved in the issue, the admission of the record of the proceedings of the 10th of August could not have been resisted on that ground, as the proceedings anterior were read without objection. The right of inspection was therefore conceded. The objection must have been the want of pertinency to the issue.

This objection, we think, was not tenable. The report of the commit tee on finance, that one of the certificates of stock held by the appellant did not appear upon the list of “over-issues of the stock of the company," furnished the strongest negative proof that the certificate referred to was genuine and not spurious.

By art. 75, sec. 69, of the Code of Pub. Laws, power is vested in the courts, in the trials of actions at law, on motion made at the first court after the appearance court, to require parties to produce copies certified by a justice of the peace, of all such parts of all books or writings in their VOL. I.


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