Robinson v. Goldfield Merger Mines Co.

By the Court, Sanders, C. J.: This is a proceeding in equity to compel the Goldfield Merger Mines Company, a corporation created under the laws of the State of Washington, to transfer to plaintiff, upon its books, 2,000 shares of its capital stock, evidenced -by certificates No. 6107 and No. 6108, for 1,000 shares each. Upon the filing of the complaint, Catlin & Powell Company, a corporation created under — 295 — the laws of the State of New York, upon leave, filed its complaint in intervention, demanding that said certificates be transferred to it. The defendant made no claim to the stock, but professed its willingness to abide the decree of the court as between the rival claimants. The court caused findings of fact to be entered in accordance with the facts stated in plaintiff’-s complaint, and adjudged and decreed the plaintiff to be the owner and entitled to the possession of the stock, and ordered the defendant to make transfer thereof to plaintiff. Upon motion of the intervener, the court granted and caused to be entered an order for a new trial. The appeal is taken from that order. In April, 1915, the stock of the Merger Mines Company was actively dealt in by brokers and the public. The plaintiff and Charles S. Sprague were copartners, doing a stock-brokerage business under the firm name of Thomas S. Robinson & Co. U. S. Waugh & Co. were stock-brokers at Goldfield, Nevada, and the Catlin & Powell Company were engaged in a general brokerage business in the city of New York. The latter had had numerous prior transactions with U. S. Waugh & Co., with whom its course of dealing was, without exception, substantially as follows: Upon the filling of buying orders for stock, the certificates were shipped by registered mail, with draft attached, for the purchase price, to John S. Cook & Co., bankers at Goldfield, Nevada, with a letter of directions that, upon the payment of the draft, the certificates be delivered to Waugh & Co. In this instance, the Catlin & Powell Company, upon the receipt of a buying order from Waugh & Co., purchased for them, in due course of its business, 3,000 shares of the Reorganized Booth Mining Company and 3,000 shares of the Merger Mines Company. The 3,000 shares of the Merger Mines stock were represented by certificates Nos. 6107, 6108, and 6110, for 1,000 shares each. All the certificates bore an assignment and power of attorney to transfer the same on the corporate books, — 296 — executed in blank. The certificates were placed in what is called a “draft envelope,” which had a string affixed. A sight draft for the purchase price of all the certificates was placed on the outside of the draft envelope and tied thereon with the string, making one compact enclosure. In this condition the certificates and draft were, with a letter of instructions, given the stenographer of intervener, with express directions to ship the certificates by registered mail to John S. Cook & Co.; but the stenographer, instead of registering and mailing the enclosures to John S. Cook & Co., in accordance with the express directions, inadvertently and mistakenly addressed the mailing envelope and registered it to Waugh & Co. direct, which in due course of mail was delivered to and receipted for by the latter. Waugh & Co. opened the draft envelope and appropriated and converted the certificates of stock to their own use, made no mention to John S. Cook & Co. or to the intervener of the receipt of the enclosures, and, in due course of trade, sold to Thomas S. Robinson & Co. the certificates of stock in controversy for value. Prior to the institution of this suit, the intervener filed with the defendant corporation an affidavit alleging that the certificates of stock had been stolen, and offered to indemnify the corporation with a bond in double the value of the stock if it would issue to it new certificates, which offer was refused. Por answer.to the complaint in intervention, setting up these facts more in detail than here stated, the plaintiff pleaded in.bar or for a defense to the action in intervention that the intervener, by its involuntary act and gross negligence, had made it possible for Waugh & Co. to inj ure and deceive plaintiff, and that, by reason thereof, the intervener should be estopped from claiming, as against plaintiff, its title to the shares of stock evidenced by said certificates. There is nothing in the record to show what disposition was made of the issue tendered by the complaint, answer and reply to the complaint in intervention, except what is to be implied from the findings and — 297 — judgment in favor of plaintiff. The ruling of the court, upon the intervener’s motion for a new trial, in substance and effect, is that plaintiff was a bona-fide purchaser of the stock; that the evidence tended to show' that Waugh & Co. had embezzled the certificates; and that, by reason of the statute (Crimes and Punishments A'ct, sec. 385, Rev. Laws, 6650), no title to the stock could be acquired by plaintiff, and its sale and delivery was void. In passing upon the motion, the court took occasion to say that said statute was not called to its attention upon the trial, and had come to its notice only in the argument on the motion for a new trial, and that, upon consideration of the statute, as applied to the undisputed facts, it was impelled to grant a new trial. The question for determination on appeal is whether section 385 of the crimes and punishments act (Rev. Laws, 6650) infringes upon or abrogates the rule of law estopping an owner from asserting, as against a bona-fide purchaser, his title to shares of stock transferred in blank from a felon, where the owner was guilty of such negligence or culpable carelessness as to be the proximate cause of the deceit. Section 385 of the crimes and punishments act reads as follows: “All property obtained by larceny, robbery, burglary, or embezzlement, shall be restored to the owner, and no sale, whether in good faith on the part of the purchaser, or not, shall divest the owner of his right to such property. Such owner may maintain his action, not only against the felon, but against any person in whose possession he may find the property.” This section has formed a part of the crimes and punishments act since 1861. Stats. 1861, p. 67. The principle expressed therein is the outgrowth of the common law. 2 Blackstone, 449; 2 Kent, 324. It has ever been the law that a thief acquires no title to the property which he steals, and can convey none by any sale and delivery which he may make. Stealing continues stealing by whatever name is given it, and the owner of stolen property may recover it from whose-soever hands he finds it. It is obvious, from the statute — 298 — that an owner may maintain an action for the restoration to him of his property before the conviction of the felon. Newkirk v. Dalton, 17 Ill. 413. It is probable, considering that when the statute was first enacted it was held in some jurisdictions that, before the owner could maintain his action, he must prosecute and convict the thief, the lawmakers may have had these decisions in mind. From the fact that the owner is, by the statute, privileged to maintain an action for the restoration of his property, it follows that his right to recover is, and must be, controlled and governed by the rules of procedure and law incident to actions of that character, otherwise he might recover upon an ex parte motion, as was attempted in State v. Burns, 27 Nev. 289, 74 Pac. 983. The intervener having filed his complaint in intervention, the inevitáble sequence is that plaintiff had the right to interpose such defense as would in law or equity entitle him to be protected as against the intervener. The result of the court’s ruling on the motion for a new trial is that the statute makes a sale of property obtained in either of the ways pointed out ab initio void. This is true where no element enters into the transaction other than the criminal act. It was so held in the recent case of Robertson v. C. O. D. Garage Co., 45 Nev. 160, 199 Pac. 356. But we do not perceive the force of the court’s ruling, or of the contention of counsel for the intervener, that the statute was intended and designed to abrogate the general law of estoppel. Conceding that the rule of the statute is that no sale of property so obtained, whether in good faith on the part of the purchaser or not, shall divest the owner of his right to such property, it is manifest in the present ease that the right of the plaintiff to have the stock transferred was not made to depend upon the actual title of Waugh & Co. to the stock, or his authority to deal with Waugh & Co. directly, but from the act of the intervener, which precluded it from disputing, as against plaintiff, a bona-fide purchaser, the existence of the title or power which, through negligence and — 299 — carelessness, it caused or allowed to be vested in Waugh & Co., without notice of any of the infirmities set up in the complaint in intervention. Gass v. Hampton, 16 Nev. 185; Stone v. Marye, 14 Nev. 362. Undoubtedly it is the established rule that ordinarily no person can be deprived of his ownership of property save by his own consent or his negligence. The subject of this litigation being shares of stock, evidenced by certificates indorsed in blank, may, for the purposes of the construction of the statute, be conceded to have been stolen, but courts and text-writers recognize that certificates of stock have a law, an origin, and a nature different from other kinds of securities. Their character and status, however, as between the parties, the corporation, and the investing public are fixed and established, either by statute or by decision. The particular rule protecting a bona-fide purchaser of certificates of stock is based on the law of estoppel, which is condensed into the rule that, except in cases of certificates indorsed in blank, and lost or stolen without any negligence on the part of the owner, a bona-fide purchaser is protected. 2 Cook on Corp. (7th ed.) sec. 416. The reason for the rule is present in the Nevada cases above cited, and is reviewed at length in National Safe Deposit, S. & T. Co, v. Hibbs, 229 U. S. 391, 33 Sup. Ct. 818, 57 L. Ed. 1241. But it is contended that the case at bar is distinguishable from these authorities, because of the criminal act by which the certificates were obtained from the true owner, and the force of the statute. In Shaw v. Merchants’ Nat. Bank of St. Louis, 101 U. S. 557, 25 L. Ed. 894, and in Green v. Grigg, 98 App. Div. 445, 90 N. Y. Supp. 565, the court recognizes that, even in cases of theft of such securities, it may be that the true owner by his negligence or carelessness may have put it in the power of a thief to occupy the position of a true owner, and that his negligence or carelessness may estop him from asserting his right against a purchaser, who has been misled to his hurt by that carelessness and negligence. In Barstow v. Savage Mining Co., 64 Cal. 388, 1 Pac. 349, 49 Am. Rep. 705, it was expressly held that a — 300 — bona-fide purchaser, of stock, regularly indorsed, and stolen from the present owner, without his fault, gets no title. It was observed, in regard to the matter qf negligence, as follows: “But if the purchaser from one who has not the title, and has no authority to sell, relies for his protection on the negligence of the true owner, he must show that such negligence was the proximate cause of the deceit.” This doctrine is quoted and approved, and supported by the authorities cited in East Birmingham Land Co. v. Dennis, 85 Ala. 565, 5 South. 317, 2 L. R. A. 836, 7 Am. St. Rep. 73. We cannot discover upon what rule of construction the learned trial court could reach the conclusion that the statute infringes upon or abrogates the rule of estoppel established by the above authorities. Whether, under the uncontradicted facts, the intervener was guilty of negligence and, if guilty, was the proximate cause of the deceit, is not before us, and we pass no opinion upon it. The only question considered upon the motion for a new trial was the construction and legal effect of the statute, but for the existence of which it must be assumed the court would have denied the motion. We therefore restrict our review to the ground upon which the order was made. The court gave the statute an erroneous construction in extending its protection to any and all cases, even though it may have been of the opinion in the particular case that the owner should be estopped by reason of his negligence or carelessness from asserting his right against a bona-fide purchaser, misled to his injury by that negligence or carelessness. The order appealed from is reversed.