Taliaferro v. First National Bank

McSherry, J., delivered the opinion of the Court. Miss Prances Cornelia Taliaferro and her sister, Mrs. Sarah L. Waters, each owned 88600 of registered Virginia coupon consols, payable to them respectively or to their respective order. Wishing to dispose of these securities as soon as the market price should reach sixty cents on the dollar they entrusted them to I. Parker Veazey for sale, hie procured printed forms of transfers and powers of attorney — one for each bond — and caused Miss Taliaferro and Mrs. Waters to sign them in blank. The blanks were thereafter partially filled up by Veazey, and when so filled up the instruments read as follows: (the italics indicating the written portion.) “Know all men by these presents that I, Frances Cornelia Taliaferro, -for value received, have bargained, sold, assigned and transferred, and by these presents do bargain, sell, assign and transfer unto- one thousajnd dollars of the registered debt of the Commonwealth of Virginia, issued under the Act approved the 30í/¿ day of March, 1871, standing in my name on the books of the said Commonwealth of Virginia, as per certificate ²⁰⁶ number (2838) tiuenty-eight hundred and thirty-eight-I clo hereby constitute and appoint'-my true and lawful attorn ey, 'irrevocable for me and in my name and stead, but to-use, to sell, assign, transfer and set over; all or any part of said stock, and for that purpose to make and execute all necessary acts of assignments and transfers, and one or more persons to substitute with like full power, hereby ratify and confirm all that my said 'attorney or-substitute or substitutes shall lawfully do by virtue hereof.

In witness whereof I have hereunto set my hand and seal, the 16th day of April, 1886. Frances Cornelia Taliaferro. (Seal.)” Shortly after signing these assignments and powers of attorney, the appellant went to the country for the summer. On Sunday, August the 15th, 1886, Mrs. Waters was informed by a letter from I. Parker Yeazejr that these bonds had been hypothecated, but she does not seem to have understood the meaning’ of that transaction, and she made no communication of it to the appellant until the following day, when she merely showed her the letter.

On Monday, the 16th, Mrs. Waters went to I. Parker Yeazey’s house, but failed to see him. Sub-' sequently on the same day Duncan Yeazey, a brother of I. Parker Yeazey, called upon her at the house of her aunt and informed her that the bonds had been sold by the bank, but he did not name the bank; he said to her, ccthe bonds have been sold by the bank which they had a perfect right to do;” and he stated that the sale had been made through Wilson, Oolston and Company. Duncan Yeazey further told her that the bonds would sell for more in Richmond than they had brought in Baltimore, and that this extra amount, if secured in Richmond, would be under the control of I. Parker Yeazey, and would pass to her and her sister; hut that in order to effect this result, the powers of attorney already executed, would have to he acknowledged before a notary jmblic by ²⁰⁷ ten o’clock the next morning. She was urged to acknowledge them immediately.

She accordingly did so and sent by the notary to Miss Taliaferro, who was still in the country, such of the powers of attorney as were to be acknowledged by her. This was done by Miss Taliaferro. The bank then paid over to Duncan Yeazey for I. Parker Yeazey the sum of $2094.67, being the increase in price which Wilson, Colston & Co. obtained upon a sale of these securities in Richmond. About the first of September following, the securities were sent from New York to the notary who had taken the acknowledgments referred to, and he was requested to procure the endorsements of Miss Taliaferro and Mrs. Waters respectively upon the securities themselves, and to take their acknowledgments thereto under his seal.

This was effected by him. It is perfectly clear from the record that Miss Taliaferro certainly never comprehended during all these occurrences how her securities had been acquired or disposed of by the bank, or what was meant by their hypothecation. When she realized that Veazey had pledged them to the bank as collateral for his own debt, and had therefore deliberately misapplied them, and that the bank had sold them, she brought an action of trover against the bank for their value. The trial resulted in a judgment against her, and from that judgment she has prosecuted this appeal.

On the 17th of August, Lyle, who was then the discount clerk of the Eirst National Bank, but who is now “in Mexico, Canada or somewhere” beyond the jurisdiction of the Courts of Maryland, took these securities to Wilson, Colston & Co., brokers in the City of Baltimore, and stated that he wished them sold at once. These gentlemen bought them that day from the bank at private sale for thirty-six cents on the dollar. On the very same day Duncan Yeazey was informed by Mr. Sprigg, the ²⁰⁸ President of the appellee bank, and by Lyle that the securities were in a condition to be properly delivered in Baltimore, but not in Richmond, and Lyle handed the original powers of attorney to Duncan Yeazey that he might have them acknowledged before a notary public. I. Parker Veazey had no title whatever to these securities.

They did not belong to him. They had been entrusted to him for sale. Whether they are what they are styled on their face, bonds or certificates of indebtedness, or, whether they are merely promissory notes, as insisted bjr the appellee, they were not negotiable in the condition in which Yeazey first received them. Upon their face they disclosed the fact that he was not the owner.

The blank assignment and power of attorney did not operate as an indorsement of them to him. It was a power to sell and not a power to pledge. It can by no possible construction be made to appear to be a power to pledge for debt. Waiving all inquiry as to its defective condition on account of its blanks, it could never have any greater effect than to authorize Yeazey to fill up the blanks according to the authority given by the party who executed it.

The very face of the instrument shows that it authorized the attorney to bargain and sell and transfer to blank, but not to pledge for debt. Any one taking this instrument must necessarily see this. A power to sell does not authorize the agent to pledge for his own debt the thing which he was employed to sell. Story on Agency, sec. 78; Byles on Bills, 25; Merchants Bank vs. Livingston, 74 N. Y., 223 ; Haynes vs. Foster, 2 Cromp. & M., 237.

If these Virginia securities be promissory notes, and they possess many, if not all the characteristics of such instruments and are not under seal, the assignments and powers of attorney accompanying them did not make them negotiable, because such an effect results only from a transfer according to the law merchant; that is, from ²⁰⁹ an indorsement. An assignee stands in the place of his assignor and takes simply an assignor’s rights; hut an indorsement creates a new and a collateral contract. 2 Par. Notes & Bills, 46; Trust Co. vs. National Bank, 101 U. S., 68 ; Whistler vs. Forster, 14 C. B., (N. S.,) 248; Loses vs. Bissell & Co., 76 Pa. St., 459; Lancaster Nat.

Bank vs. Taylor, 100 Mass., 18 . Treating them, then, as promissory notes of the State of Virginia, Veazey did not take them as indorsee, and, as already stated, he took no interest in them at all, as assignee. The bank claiming through and from him took, therefore, no better title than Veazey had. "It is,” says Lord Justice Cotton in Williams vs. Colonial Bank, L. R., 38 Ch.

D., 399, "unnecessary to refer to authorities in English law to show that no one can transfer a better title than that which he possesses to a chattel or to an instrument which is not negotiable.” See also Levi vs. Booth, 58 Md., 305 . The assignment and power of attorney not amounting to an indorsement of the securities and, therefore, not converting them into negotiable instruments, and upon its face not being an authority to pledge, the bank took them as collateral for Veazey’s debt to itself with no better title than Veazey himself possessed. It took them, too, with distinct notice, imparted by the instruments and the powers of attorney, that there was ground to question whether Veazey was authorized to deal with them as he did. It is consequently not in the position it would have occupied liad these securities been duly indorsed.

It had, at least, "reason to suspect” that Veazey’s "authority was of a restricted character,” Haynes vs. Foster, 2 Cromp. & M., 237; and that suspicion was sufficient to have put it upon inquiry, because the securities were not negotiable when taken by it. Or in the more apt language of Lord Bramwell in Earl of Sheffield vs. London Joint Stock Bank, L. R., 13 Ap. Ca., 346, it had "notice of the infirmity of the pledgor’s title, or of such facts ” ²¹⁰ and matters as made it reasonable that inquiry should be made into such title. ” When properly indorsed nothing-short of actual notice or knowledge can affect the title of the holder of negotiable paper which has been acquired for value before maturity. Williams vs. Huntington, 68 Md., 600 .

It does not apjjear at what time the bank received these securities from Veazey, or whether it took them as collateral for an antecedent debt or for a loan made upon the faith of them; but it is certain beyond all question they were delivered by Veazey to the bank and sold by the bank to,the brokers at private sale before the notary's certificate was obtained or attached to the powers of attorney. Regarding these securities as promissory notes the bank knew, or was bound to know, when it took them as collateral for. Veazey’s debt that Veazey had, under the circumstances stated and the information disclosed on the face of the papers, no unimpeachable legal title to them. It consequently took no better title than Veazey had; and he had none.

It has been insisted, however, that the title acquired by an assignee of a promissory note is just as valid against the world as that of an indorsee, save as respects equities and defences which the malc'er may have-and may avail of when sued by an assignee. If this- were conceded it would destroy all distinction between an indorsement and an assignment except in the single instance indicated.. But the question before us is not one involving the right of the maker to defend against the claim of the bank; it is one of title to the securities. Miss Taliaferro was confessedly the owner of them when she delivered them to Veazey for sale, and she continued to be the owner of them.

His delivery of them to the bank was a flagrant breach of his restricted authority. He was not an assignee of them, he had no, title to them at all, and it was never intended that he should have. Receiving them from him ²¹¹ under tlie circumstances mentioned, the hank could take no Letter title than he had. Without subverting the most firmly established principles it is not possible to hold that the hank acquired from Veazey a title which he never had — a title good against the legal owner — when by assignment it could not under any circumstances take one superior to that which its assignor possessed.

An assignee stands in the place of the assignor with no greater rights than the latter had. If he had none neither can it have. On the other hand, treating these Virginia consols as registered bonds, though they do not answer the technical definition of a bond, then, in the absence of an assignment on the bonds themselves, and in view of the usage and custom existing in Baltimore in regard to them — a usage and custom “which will he considered in.a moment— the title of the owner was not divested by these unacknowledged transfers and powers of attorney; and the hank was not at liberty to deal with them as though they had been bonds “which -pass by mere delivery. The hank was, therefore, put upon inquiry, and for its own protection was hound to know when accepting these securities as collateral for the debt of Veazey, whether they were Veazey’s property.

Independently of the facts disclosed on the face of the securities, the assignment and the power of attorney, a usage or custom, if one prevailed on the Stock Exchange and among bankers and brokers of Baltimore, as to the form and character of transfers required to put these securities in condition for delivery and to pass title to them, was sufficient to put the hank upon inquiry as to Veazey’s title provided that usage had not been observed. A usage requiring these registered consols to he transferred in writing and^ to he accompanied by a power of attorney acknowledged before a notary public, and considering them as “not in order ” or deliverable unless in that condition, was ²¹² material to be known by the jury in the trial of the-cause as affecting the title acquired by the bank. In the case of Williams vs. Colonial Bank, supra, it was shown that Mr. Williams owned a large number of' shares of the capital stock of • the New York Central and Hudson River Railroad Company represented by certificates standing in his name. Upon his death in England his executors after proving his will, signed upon the back of these certificates transfers and powers-of attorney very similar to the one we are dealing with in this case, leaving the name of the assignee and of' the attorney blank.

They delivered these certificates to a firm of brokers, for transmission to America, that new certificates might be issued in the names of the executors, upon the surrender of the old ones. One of' the firm of brokers pledged the certificates with the bank as collateral for a loan instead of forwarding them to this country. Afterwards the firm went into liquidation, and the executors made demand on the bank for the stock. Their demafnd having been refused they instituted suit.