Anderson et al. v. Nicholas.

...shares in the capital stock of the American

Guano Company, standing in................

said Company.

name on the books of

"In witness whereof........have hereunto set........hand and seal this......day of........one thousand eight hundred and....

"A. G. BENSON President. [L. S.]

"Witness present, ARTHUR BENSON.

"Third. That the said stock was not sold and disposed of to the defendant; but that said Alexander, on or about the said 25th of October, 1858, offered to dispose of said twenty shares of stock to the defendant; that the defendant offered said Alexander $3 per share for the same, which amount said Alexander at first refused to take, but almost immediately afterwards agreed to accept, and so stated to the defendant, and that, thereupon, defendant took said stock from said Alexander, went out to inquire about the same; and, upon returning to his office, finding several persons waiting in the back room to do business with him, he stated to his clerk, George M. Bowen, that it was all right, and that he might do as he pleased about buying it, and thereupon handed said certificate of twenty shares to his said clerk, and thereupon the said clerk closed the transaction with the said Alexander, by paying him $3 per share, and retaining the said twenty shares of stock.

"Fourth. That at no time prior to the commencement of this suit was any intimation made to either of the plaintiffs that said clerk had ever had any interest in said stock; and that no part of said $60, received by said Alexander, was received by or went to the benefit of said plaintiffs, or either of them.

"Fifth. That shortly thereafter the said Bowen delivered said stock to the defendant to sell for him.

"Sixth. That the defendant thereupon caused said stock to be sold in his own name, by H. T. Morgan & Co., brokers, at the stock board, on the next day after same was obtained as aforesaid, of said Alexander, for $7 per share; received the proceeds of the sale, and accounted to said Bowen for such proceeds, less his commission for such sale.

Anderson et al. v. Nicholas.

"Seventh. That at the time of such sale by defendant, the said stock was of the value of $10 per share, amounting in the aggregate to the sum of $200.

Eighth. That a day or two after such sale, and before the commencement of this suit, the plaintiffs demanded of defendant the return of said stock, or the value thereof, stating to defendant that the plaintiffs owned the stock, and that the said Alexander had taken it without the leave or knowledge of plaintiffs, or either of them, and offering, if defendant would pay the difference between the $60 given for the stock and the $140 received by defendant on its sale, to take that in full satisfaction. Defendant admitted, at this time, in the presence of his said clerk, that he, the defendant, had purchased the said shares of said Alexander, for $3 a share, and had sold the same for $7 a share, and received the avails thereof; but that the said defendant refused to return or deliver the same, or to pay the value thereof, or any part thereof.

"Ninth. That thereupon, as matter of law, I do find and report that the defendant wrongfully converted said stock to his, said defendant's, use, and that plaintiffs are entitled to judgment in their favor against the said defendant for the sum of $200, being the value of said stock, with interest from the 10th day of November, 1858, to the date of this, my report, amounting to $205.83, and costs.

"Dated, New York, April 11th, 1859."

Judgment for the plaintiffs was accordingly entered, and the defendant appealed.

The only exceptions taken on the trial were to the final decision,

F. H. Upton, for the defendant, (appellant.)

I. The conclusion of law is wholly unsupported by, and at variance with, the Referee's several findings of the issues of fact.

1. The Referee having found that the defendant did not purchase the stock in question, and that he did not sell the same as his own, but as the agent of another, with whom he accounted, and to whom he paid over the proceeds, before any demand upon, or notice to him, that the stock had been wrongfully taken from

Anderson et al. v. Nicholas.

the plaintiffs, has found against the plaintiffs the very facts upon which alone they rest their claim for a recovery.

2. Having thus found these facts upon which alone the plaintiffs allege a wrongful conversion by the defendant, such conversion is completely and necessarily excluded by the findings.

3. A wrongful conversion, as matter of law, can only be predicated upon the findings of the issues of fact as made by the pleadings.

4. A wrongful conversion, as matter of law, cannot be predicated upon the admissions of the defendant at the time of the demand and refusal, if the issues of fact are from the other evidence found against such admissions. The Referee might have been justified in finding, as matter of fact, from those admissions, that the defendant was the principal in the transaction, and not the agent; but having found otherwise, a conclusion of law cannot be based upon the truth of admissions which he has found. to be untrue.

In the cases where the admissions of the defendant have been held sufficient evidence of conversion, those admissions have stood alone, uncontroverted by other evidence, and a portion of the conceded facts of the cases. (Laplace v. Aupoix, 1 Johns. Ca., 406; Everett v. Coffin, 6 Wend., 603; Dezell v. Odell, 3 Hill, 215.)

II. If any wrongful conversion of the stock in question has been made by any one, the findings of fact by the Referee clearly point to Bowen, and not to the defendant, as the party who has made, and who in law is alone liable for such conversion.

The facts found are :

1. That the defendant did not purchase the stock from the plaintiff's son.

2. That in selling the stock he merely acted as Bowen's agent.

3. That he accounted with Bowen for its proceeds.

4. That he did this before any demand upon or notice to him of the plaintiff's claim.

Upon these facts, the action, if at all maintainable, can only be maintained against Bowen.

If, while the stock was in the hands of the defendant, as Bowen's agent, the plaintiffs had given him the notice, and made the demand, then his exercise of dominion, or his assertion of claim,

Anderson et al. v. Nicholas.

whether as principal or agent, might have been sufficient to render him liable in trover. But all the authorities agree in this, that the claim, or interference or exercise of authority, as the basis of an alleged conversion, must be in opposition to the real owner at the time of the demand, and while the person so claiming has the property in his actual control or power. (Connah v. Hale, 23 Wend., 462; Farrar v. Chauffete, 5 Denio. 527; Cobb v. Dows, 9 Barb. S. C. R., 230; Frye v. Lockwood, 4 Cow., 454; LaFarge v. Kneeland, 7 Cow., 456; Mowatt v. McClelan, 1 Wend., 173.)

III. The complaint of the plaintiff does not state those facts, nor does the Referee find those facts which are, in law, essential to be averred and proved, in order to justify the conclusion of a conversion of the property in question, either by the defendant or by Bowen. Those essential facts, neither averred nor found, are these:

1. That the son of the plaintiff acquired his possession feloniously.

2. That the defendant obtained it from him in bad faith and with notice of the felony-or,

3. With notice or knowledge of facts or circumstances which ought to have put him, as a man of ordinary prudence, on his guard.

(a.) The fact averred and found, that the plaintiff's son, "without the permission or knowledge of the plaintiffs," wrongfully took the stock from their possession, is not an averment inconsistent with an averment of a simple breach of trust, or fraudulent conversion on the part of the young man. And it being in evidence that he was or had been in the employment of the plaintiffs; that he was entrusted with the key of the safe, where their securities were deposited; and that he took the certificate in question from the safe in mid-day-are facts which negative the idea of a felony, and tend to show a violation of the confidence reposed in him, by allowing him to have access to and the control of the plaintiffs' securities.

If the complaint not only does not aver, and the Referee does not find the possession of young Anderson to have been a felonious one; but, on the contrary, the facts tend to show that such possession was the result of the position which he occupied, and

Anderson et al. v. Nicholas.

the confidence had in him by the plaintiffs, then the authorities are uniform, that a purchaser for value, without actual notice, is protected against the claims of the rightful owner. (Parker v. Patrick, 5 D. & E., 175; Mowrey v. Walsh, 8 Cow., 238; Saltus y. Everett, 20 Wend., 275; Lloyd v. Brewster, 4 Paige, 540; Andrew v. Dieterich, 14 Wend., 31; Hoffman v. Carow, 22 id., 285.)

(b.) There is neither averment nor proof, nor any pretense of any bad faith on the part of the defendant, assuming him to have been the purchaser from the plaintiff's son.

(c.) Bad faith in the defendant not being averred, it was essential, to entitle the plaintiffs to a recovery, that the Referee should expressly find, as a matter of fact, that the defendant had notice or knowledge of facts or circumstances which ought to have put him, as a man of ordinary prudence, on his guard. This the Referee does not find, and there is therefore no basis for his legal conclusion. (Pringle v. Phillips, 5 Sand., 161, and cases cited.)

IV. This notice or knowledge on the part of the defendant, of such facts or circumstances as shall put a man of ordinary prudence on his guard, is essential, as the basis of his liability, because the character of the property alleged to have been. converted was such as to bring it clearly within the exceptions to the rule that he who has himself no title to a personal chattel can pass no title to another.

1. The exceptions to this rule, as important as the rule itself, are established in favor of trade and commerce, and apply to all instruments and securities which are negotiable, and pass from hand to hand by mere delivery. (Miller v. Race, 1 Burr., 452; Grant v. Vaughan, 3 id., 1516; Gill v. Cubit, 3 B. & C., 466; Snow v. Peacock, 3 Bing., 406; Baynes v. Foster, 4 Tyrw., 65; Beckwith v. Corral, 3 Bing., 444; Snow v. Saddler, 3 id., 610; Strange v. Wigney, 6 id., 677; Easly v. Crockford, 10 id., 243.)

All these cases (cited with approbation in Pringle v. Phillips, before cited,) establish the doctrine, that the actual good faith of the purchaser or bailee for value of such a character of property, is not questioned, there must be proof in order to deprive him. of his protection in the purchase, of a want of reasonable caution or prudence on his part in omitting to make any inquiry when just grounds of suspicion exist, of which he has knowledge.