1. The officers of a corporation are the custodians of its
books, and it is their duty to see that a transfer of shares of its
capital stock is properly made, either by the owner himself or by a
person having authority from him. In either case, they must act
upon their own responsibility. Accordingly, when the name of the
owner of a certificate of stock had been forged to a blank form of
transfer and to a power of attorney endorsed on it, and the
purchaser of the certificate in this form, using the forged power
of attorney, obtained a transfer of the stock on the books of the
corporation,
held, in a suit by such owner against the
corporation, that he was entitled to a decree compelling it to
replace the stock on its books in his name, issue a proper
certificate to him, and pay him the dividends received on the stock
after its unauthorized transfer, or to an alternative decree for
the value of the stock, with the amount of the dividends.
2. The negligence of their guardian cannot preclude minors from
asserting, by suit, their right to stock belonging to them, which
was so sold and transferred. If competent to transfer it or to
approve of the transfer made, they must, to create an estoppel
against them, have by some act or declaration by which the
corporation was misled, authorized the use of their names or
subsequently approved such use by accepting the purchase money with
knowledge of the transfer; but under the statute of Ohio, where the
minors who are the complainants herein resided, they were not, nor,
without the authority of the probate court, was their guardian,
competent to authorize a sale of their property.
These are suits in equity to compel the defendant, a corporation
created under the laws of New York, to replace, in the name of the
complainants, certain shares of its capital stock alleged to have
belonged to them and to have been transferred without their
authority on its books to other parties, and to issue to them
proper certificates for the same, and also to pay to them the
dividends received on the shares since such unauthorized
Page 97 U. S. 370
transfer. In case the company fail to replace the stock, the
complainants ask for alternative judgments for the value of their
respective shares.
The facts upon which the suits rest are these:
In March, 1865, Charles Davenport, a citizen of Ohio, died,
leaving a widow and two minor children, the complainants here, his
heirs. He was possessed at the time, besides other property, of
eleven hundred and seventy shares of the capital stock of the
Western Union Telegraph Company, which, upon the settlement of his
estate, were distributed equally between the widow and children, in
whose names respectively they were entered on the books of the
company and to whom separate certificates were issued. She was
appointed guardian of the children. To her as such the certificates
were delivered, declaring on their face that only upon their
surrender and cancellation they were transferable in person or by
attorney on the books of the company. On the back of each one was
printed a blank form of transfer and power of attorney. She put
those belonging to the children, with the one issued to her and
some government bonds, in a tin box which was locked and deposited
in the Fourth National Bank of Cincinnati for safekeeping. Her
brother, Robert W. Richey, at that time and for some years
afterwards an officer in the bank, had access to the box. He kept
the key to it during her absence from Cincinnati in order to get
for collection the coupons attached to the bonds when they became
due.
In February, 1871, he took from this box the certificate of
three hundred and ninety shares belonging to the complainant, Henry
Davenport, and forged his name to the transfer and power of
attorney on its back, adding his own signature as that of an
attesting witness. In this form he sold the certificate, and the
purchasers, using the forged power of attorney, obtained a transfer
of the shares on the books of the company. Subsequently Mrs.
Davenport was in Cincinnati, and on one occasion sent for the box,
but returned it to the bank without opening it or examining its
contents, and being about to depart for Europe, she left the key
with her brother. Soon afterwards, he took from the box the
certificate of shares belonging to the other complainant, Katharine
Davenport, and forged her name
Page 97 U. S. 371
to a like transfer and power of attorney, adding, as in the
former case, his own signature as that of an attesting witness. In
this form her certificate was also sold, and by the purchaser a
transfer was obtained under the forged power of attorney on the
books of the company. When these forgeries were committed, both
children were minors, Henry being seventeen and Katharine fifteen
years of age. Henry was at the time at school in Switzerland, and
in the summer of 1871 Mrs. Davenport and Katharine went to Europe.
None of them was informed of the pretended transfers of the stock
until the spring of 1873, and in 1874 these suits were brought.
They were originally commenced in one of the courts of the State of
Ohio, and were removed to the circuit court of the United States
upon application of the defendant. That court rendered a decree for
each complainant, and the company appealed to this Court.
MR. JUSTICE FIELD, after stating the case, delivered the opinion
of the Court.
Upon the facts stated, there ought to be no question as to the
right of the plaintiffs to have their shares replaced on the books
of the company and proper certificates issued to them, and to
recover the dividends accrued on the shares after the unauthorized
transfer, or to have alternative judgments for the value of the
shares and the dividends. Forgery can confer no power nor transfer
any rights. The officers of the company are the custodians of its
stock books, and it is their duty to see that all transfers of
shares are properly made either by the stockholders themselves or
persons having authority from them. If upon the presentation of a
certificate for transfer they are at all doubtful of the identity
of the party offering it with its owner, or if not satisfied of the
genuineness of a power of attorney produced, they can require the
identity of the party in the one case, and the genuineness of the
document in the other, to be satisfactorily established before
allowing the transfer to be made. In either case, they must act
upon their own responsibility.
Page 97 U. S. 372
In many instances they may be misled without any fault of their
own, just as the most careful person may sometimes be induced to
purchase property from one who has no title, and who may perhaps
have acquired its possession by force or larceny. Neither the
absence of blame on the part of the officers of the company in
allowing an unauthorized transfer of stock nor the good faith of
the purchaser of stolen property will avail as an answer to the
demand of the true owner. The great principle that no one can be
deprived of his property without his assent except by the processes
of the law requires in the cases mentioned that the property
wrongfully transferred or stolen should be restored to its rightful
owner. The maintenance of that principle is essential to the peace
and safety of society, and the insecurity which would follow any
departure from it would cause far greater injury than any which can
fall, in cases of unlawful appropriation of property, upon those
who have been misled and defrauded.
We do not understand that the counsel of the appellant
controvert these views, but they contend that the mother of the
plaintiffs, as their guardian, was chargeable with culpable
negligence in the keeping of the certificates, and therefore that
the plaintiffs are estopped from claiming them or their value from
the company. The negligence alleged consisted in the fact that she
entrusted her brother with the key to the box in which they were
deposited when she knew that he was insolvent, and that he had
used, without her authority, funds received by him on a previous
sale of a portion of her property, and the further fact that when,
in the summer of 1871, before leaving for Europe, she sent for the
box, she returned it to the bank without examining its contents. To
have allowed her brother, when known to be insolvent, to have
access to the box after he had, without her authority, appropriated
to his own use her funds, and to have returned the box to the bank
in 1871 without examining its contents, were, according to the
contention of counsel, offences of such gravity as to estop her
wards, the minor children, from complaining of the company for
allowing their stock to be transferred on its books under a power
of attorney which he had forged. We do not think it at all
necessary to comment at any length upon this singular position,
Page 97 U. S. 373
for even if it were possible, as it is not, to preclude the
minor heirs from asserting their rights to property received from
their father by reason of any negligence of their guardian, we are
unable to perceive any necessary connection between her brother's
insolvency and misappropriation of her funds and the forgery of the
children's names, or between such forgery and her omission to open
her box in 1871 and examine its contents. There is no circumstance
here upon which an estoppel against the plaintiffs can be raised.
To create an estoppel against them, there must have been some act
or declaration indicating an authorization of the use of their
names by which the company was misled, or a subsequent approval of
their use by acceptance of the moneys received with knowledge of
the transfer. No act or declaration is mentioned either of the
guardian or her children which tends in the slightest degree to
show that any assent was given to the use of their names. But
moreover, neither the guardian nor the children whilst they were
minors, were competent, even by the most formal act, to authorize a
transfer and sale of the property. Under the statute of Ohio, the
intervention of the probate court was essential to any such
proceeding. No inference could therefore be drawn from any
negligence of theirs in support of a transfer of the property where
no order of that court authorizing a transfer had been made.
There are numerous decisions of the English and American courts
in accordance with the views stated. They are cited by counsel in
their briefs, and are given in a note to this opinion.
* We do not think
it important to refer to them specially, for no number of
adjudications can add to the force of a simple statement of the
facts. The decree of the court below in each case must be affirmed,
and it is
So ordered.
*
Davis v. Bank of England, 2 Bing. 393;
Hilgard v.
South Sea Co., 2 P.Wms. 76;
Stoman v. Bank of
England, 14 Sim. 475;
Taylor v. Midland Railway Co.,
28 Beav. 287;
Ashby v. Blackwell, 2 Eden 299;
Lowry v.
Commercial & Farmers' Bank of Baltimore, Taney C.C.Dec.
310;
Sewall v. Boston Water Power Co., 4 Allen, 277;
Pratt v. Taunton Copper Co., 123 Mass. 110;
Chew v.
Bank of Baltimore, 14 Md. 299;
Pollock v. The National
Bank, 7 N.Y. 274;
Weaver v. Barden, 49
id.
286;
Cohen v. Gwynn, 4 Md.Ch.Dec. 357;
Dalton v.
Midland Railway Co., 22 Eng.L. & Eq. 452;
Swan v.
North British Australian Co., 7 Hurl. & Nor. 603.
