Jennie Clarkson Home For Children v. Missouri, Kansas And Texas Railway

74 N.E. 571 (1905)

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Nature of the Case

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Facts

P is a domestic corporation organized for charitable purposes. It was the owner of 4 bonds issued by D, which by their terms were not transferable after registration unless made on the books of D by the registered holder or by his attorney duly authorized and noted on the bonds. George W. Lessels, treasurer of P, without the knowledge or consent of any of the officers or directors of P, took the bonds from the safe deposit vault where they were stored, for the purpose of converting them to his own use. Lessels took them to the office of Robert Gibson, who was a member of the Stock Exchange, doing business as stockbroker under the name of the limited partnership of H. Knickerbacker & Company, and asked that they be sold. The cashier of the defendant Gibson informed Lessels that before the bonds could be sold the registration must be so altered that they would be payable to bearer. Lessels was instructed to take them to the transfer office of D and that there he could find out what was to be done in order to effect the change. Lessels was told he would have to have a resolution of the board of directors of P authorizing a transfer of the bonds, and the furnishing of the company with a copy authenticated by the certificate of the secretary under the seal of the corporation, to the effect that the copy presented was a true and correct copy of the resolution of the board; and that a power of attorney would have to be executed by P authorizing the transfer of the bonds to bearer, the signature of which must be witnessed by some Stock Exchange house. Lessels returned to the office of H. Knickerbacker & Company and had the power of attorney drawn, and signed it in the name of P, the Jennie Clarkson Home for Children, George W. Lessels, treasurer, and underneath is the statement that it was signed and acknowledged in the presence of John F. Busch, who was the cashier for H. Knickerbacker & Co., and by H. Knickerbacker & Co. which was signed by Gibson. Lessels then presented to H. Knickerbacker & Co. a paper purporting to be a copy of the resolution of the board of directors, authorizing a sale of the bonds with the certificate of the secretary, under seal, attached. This last document was forged. Gibson transmitted them to the office of the railway company, and there the bonds were changed and made payable to bearer, and then they were returned to Gibson who sold them and paid the proceeds over to Lessels, who converted the money to his own use and subsequently disappeared. P sued D. D then sued Gibson (D) in that the stock exchange had a rule that an indorsement by a member guarantees the signature of the security owner. The court held that Gibson (D) was liable to D. Gibson (D) appealed and the judgment was affirmed. Gibson (D) appealed again contending that the guarantee was the Lessels signed but not that Lessels had any authority to sign for P.