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U.S. Supreme Court

Telegraph Company v. Davenport, 97 U.S. 369 (1878)

Telegraph Company v. Davenport

97 U.S. 369


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 chanroblesvirtualawlibrary

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 chanroblesvirtualawlibrary

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.

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