
    The C., N. O. & T. P. Ry. Co. v. Citizens’ National Bank.
    
      Certificate of stock — Issued by corporation through its proper officers m usual form — But fraudulently — Purchaser without knowledge of fraud — Entitled to have stock transferred to him on books of company — May recover value of slock from company — Corporation law.
    
    1. A certificate of stock of a corporation in the usual form is an assurance to the world, that the person named is the owner of the number of shares of its capital stock stated therein, and that these shares will be transferred on the books of the company to one purchasing the same, on a surrender of the certificate with a proper assignment; and one who purchases such certificate in the market, without knowledge of any fraud in its issue, is entitled to have it transferred to him on the books of the company : and if. on demand such transfer is refused, may recover of the company its value at the time of the demand.
    2. Where certificates of the stock of a company are required to be issued by the president and the secretary under the seal of the company, and no other mode is provided or can be used, and neither the secretary nor the president is prohibited from holding stock, and both with its knowledge do in fact hold stock, the fact that a certificate is issued in favor of the secretary is not, of itself, sufficient to put a party on inquiry as to whether the secretary is rightfully the owner of it.
    3. By reason of what appears on the face of a certificate of stock, and the fact that, as a matter of general knowledge in the business world, such certificates of stock are extensively purchased as investments, with no other inquiry than as to the genuineness of the signatures of the officers to the certificates, and that such use of them adds to the value of the stock of a company and is largely to its advantage, the company is charged with the duty of observing care in their issue, and of supervising their agents charged with the performance of the duty. This is a duty it owes to all persons dealing in its stock; and if, by reason of its negligence in this regard, spurious stock is issued, it is liable in damages to any one, purchasing it for value, without knowledge of its fraudulent character. And a failure of the party, under such circumstances, to inquire at the office of the company, is not such contributory negligence as will deprive him of the right to recover, although such inquiry would have disclosed the fraudulent character of the certificate.
    (Decided May 11, 1897.)
    Error to the Superior Court of Cincinnati.
    At the time of his death, which occurred May 25, 1882, George F. Doughty was the secretary of the plaintiff in error and had been such from the time of its incorporation in October, 1881. During this time he had fraudulently caused to be issued a large number of spurious certificates of the stock of the company, being shares in excess of its capital stock. These certificates were in the hands of various individuals, each of whom had either purchased what he held from Doughty, or taken it in pledge for money loaned him by the holder. Suits were brought by many of them against- the company for the value of the stock, on its refusal to transfer the stock to them on the books of the company ; and a judgment had been obtained in one case, and a verdict in another, when the suit below was commenced in the superior court, against all the individuals, claiming to own such stock, asking that they be required to set up their claims to the stock held by them, and the certificates be delivered u-p and canceled.
    The ' defendants answered separately, each claiming that whatever the character of certificates held by him, he was an innocent holder for value, and entitled to recover of the company the value of his stock. Two set up former adjudications in their favor. The case was tried in special term on the issues. . The court, at the request of the defendants, made a separate finding of the facts and the law, and rendered judgment in favor of the railway company. On error to the general term, the judgment was reversed, and judgments rendered in favor of the defendants respectively. The finding of facts, so. far as material to the question here presented — the right of the company to relief against innocent holders for value of the stock, is as follows :
    
      “First — That the plaintiff was incorporated under the laws of Ohio, on October 8, 1881, with an authorized capital stock of $3,000,000, divided into shares of $100 each, all of which shares were lawfully subscribed for by bona fide subscribers, paid in full, in cash, and proper certificates therefor duiy issued to such subscribers, on or before October 12, 1881, which certificates were duly signed by Theodore Cook, as president, and by George F. Doughty, as the secretary of the plaintiff, and were evidenced by the genuine seal of the plaintiff corporation.
    “That Theodore Cook was elected ana qualified as president of the plaintiff corporation at the date of its organization, and George F. Doughty was elected and qualified as secretary of the plaintiff corporation at the date of its organization, and that the said Theodore Cook and George F. Doughty were re-elected and qualified as president and secretary respectively of said corporation on the first Monday in Januarjq 1882, and the said Theodore Cook continued to be president thereof until January, 1883, and the said George F. Doughty continued to be its secretary until his death on May 25, 1882.
    “That the plaintiff’s capital stock has never been increased by any express action of the .directors, or of the stockholders, as provided by the statutes of the state in that behalf. That upon its organization the plaintiff corporation adopted, among others, the following bv-laws in reference to the issue of its certificates of stock,- which continued in force until January, 1883.
    ‘‘ ‘Article 8. Certificates of stock shall be issued to each subscriber for the number of shares which he may own, under the corporate seal of the company, signed by the president and secretary, setting forth "the amount due upon each share.
    “ ‘Article 9. It shall be the duty of the secretary to keep the office of the company open during business hours ; he shall be the custodian of the seal of the company and shall affix the same with his attestation thereto whenever the official business of the company may require; he shall attend all meetings of the stockholders, directors and executive committee, unless excused, and keep and record a full and true minute of their proceedings; he shall also attend the meetings of any committee appointed by the directors or stockholders, if requested, and keep a record of their proceedings ; he. shall keep the stock ledger of the company and make transfers of stock upon the surrender, and properly indorse and cancel all stock certificates which may be presented for transfer. He shall give bond for fifty thousand dollars with two good securities, to be approved by the executive committee.’
    
      “Second — All of the stock certificates of the plaintiff issued by it, and all the stock certificates of the plaintiff purporting to be issued by the plaintiff and held by the defendants were in the same form and were as follows, with the blanks for the number of shares and the party in whose favor they were issued filled in writing, to-wit:
    
      “ ‘FORM OF CERTIFICATE.
    “ ‘This is to certify that-----— is entitled to -----shares of one hundred dollars each in the capital stock of the Cincinnati, New Orleans & Texas Pacific Railway Company, transferable only on the books of the company, in person or by-attorney, on the surrender of this certificate. Witness the seal of the company and the signature of the president and secretary at Cincinnati this-■ day of---.--, Secretary;--president.’ (Corporate seal.)
    “That all of said certificates issued during the lifetime of George F. Doughty were filled out and signed by George F. Doughty as secretary;-they all bear the signature of Theodore Cook, as president, with the exception of two, which were signed by John Scott, the'vice president; and all bore the seal of plaintiff corporation, affixed by George F. Doughty, its secretary.
    “ Third — The certificates, before issue, were bound in two books called the certificate books, with stubs, numbered from one to five hundred in the first and from five hundred to one thousand in the second ; each certificate bears the same number as its stub. The secretary, Doughty, was provided with a stock ledger and stock journal and register of transfers, and the books containing the blank certificates, regularly numbered, as above stated. There was no book designed to contain the actual transfer of the stock, but, instead of that, each certificate was indorsed with a blank form of assignment, to be filled out when assigned or surrendered in form as follows:
    “ ‘For value received--sells to —---the stock within mentioned, and authorize--Attorney, to transfer the same on the books of the company. Witness my hand and seal this —1— day of--, A. D., 188 — . In presence of---.’
    “The register of transfers was a book containing a regularly ruled page with the numbers on it to correspond with the numbers of certificates, and was arranged with reference to each so as to permit the bookkeeper to show both the certificate from which and the one into which it was transferred. The stock ledger simply kept a ledger account with each stockholder, and was posted from the stock journal in which the entries were journalized. The secretary’s (Doughty’s), mode of keeping- the certificate books was to mark upon a stub.of the new certificate the number of the certificate surrendered, in addition to the date the name of the transferrer and the transferee, and the number of shares; the stub had a place for the receipt of the transferee upon getting the new certificate.
    “Fourth. The president, Theodore Cook, gave but little, if any, personal attention, to transfers of stock, except to sign the certificates. After the issue of the certificates to the original subscribers to the capital stock of the plaintiff, the president was in the habit of signing a number of certificates in blank and leaving them with Doughty, as secretary, to be filled out when necessary upon the presentation to said Doughty, as such secretary, of outstanding certificates for transfer duly indorsed as above provided, and for no other purpose. When the said Doughty died, there had been signed by the president and the secretary, with the corporate seal affixed and removed from the book, .certificates for 34,000 shares of stock which had not been canceled or surrendered by them. The authorized stock was 30,000 shares.
    
      
      “Fifth — Said Geoorge F. Doughty originally suberibed for 650 shares and received therefor certificates Nos. 86, 87, 88, 89, 90 and 91. Of these Nos. 87 for 250 shares, and 88 for fifty shares belonged to others, who paid the subscriptions therefor, and the certificates therefore indorsed by Doughty, were at once • delivered to them, and never again came into his possession. The certificates, Nos. 89 for fifty shares, 90 for 100 shares and 91 for 100 shares, were subscribed for by said Doughty on the equal joint account of himself and defendants, Herman Klein & Son, and issued in the name of George F. Doughty. The subscription therefor was paid with funds borrowed on a pledge of said certificates 89, 90 and 91, and on October 8, 1881, by said Doughty and Herman, Klien & Son, and such certificates were never afterwards in the possession of said Doughty and said Herman Klein & Son, until the same were redeemed and returned to said Doughty on May 17, 1882.
    On November 9, 1881, Doughty issued certificates Nos. 255 and 256 to himself, and noted upon the register of transfers that they had been issued upon the surrender of certificate No. 86. No. 86 was then in the bank of Kuhn & Sons, and pledged, as above stated. On May 20, 1882, the secretary, Doughty, delivered to Herman Klein & Son, certificates Nos. 547 and 548, for one hundred and twenty-five shares, "but made no entry thereof on the books of the company. On May 5, 1882, Joseph Rawson & Sons purchased a note of George F. Doughty for $7,500, secured by one hundred shares of plaintiff’s stock, represented by certificate No. 86, which they continued to hold until November 27, 1882, and then sold the same in the' market. Subsequently to Doughty’s death to wit, on September 61, 882, Herman Klein & Son surrendered to the company certificates Nos. 547 and 548, and Theodore Cook, as administrator of George P. Doughty, surrendered certificate No 89 for fifty shares, and seventy-five from certificate No. 90 for one hundred shares, and the company issued to Herman Klein & Son certificates Nos. 597 and 598 for one hundred and twenty-five shares. Said Doughty afterward became the owner of fifty shares, on December 23, 1881, represented by certificate No. 373,.which he sold and transferred to other parties than the defendants herein. He also became the owner by purchase, of twenty-five shares, on December 31, 1881, represented by certificate No. 434 which was found indorsed by George P. Doughty, in an envelope marked ‘George F. Doughty,’ in the safe of the company, and came to the possession of Theodore Cook and the court find that said certificate was the private property of George P. Doughty, and that it came into possession of Theodore Cook as his administrator, and was subsequently transferred by said Theodore Cook as administrator to other parties than the defendant named in this case. He also became the owner by purchase on February '27,' 1882, of one hundred shares, evidenced by certificate No. 466, which he subsequently sold and transferred to parties other than the defendants in this case, and on April, 1882, said Doughty purchased one share of capital stock, evidenced by certificate No. 513, which was neither found in the possession of said Dough oy nor of said plaintiff at the time of his death. The above were all the shares which the court find that the evidence shows were ever held' or owned by said George F. Doughty.
    
      u Sixth. The court further find the personal account of George F. Doughty on the stock ledger at the death of Doughty was as follow:
    “Dr. George F. Doughty, 1881, Oct. 15. To Meyer Bettman, 4, $5,000; Dec. 8. Sundry, parties, 10, $1,000.
    “Cr. 1881. Oct. 8. By capital stock, 3, $60,000; Oct. 8. By capital stock, 3, $5,000; Nov. 11. By L. Markbreit, 7, $1,000; Dec. 23, By Simon & Huseman, 10, $5,000.
    “But that the account as sljown by comparison with the stock certificate book and the register of transfers was neither complete nor correct.
    ‘ ‘And the court find that the stock certificate book and the register of transfers contain the only entries of the issue of fraudulent certificates by said George F. Doughty. That the entries upon the stock certificate books and the register of transfers disclose from November 9,. 1881, down to the death of said George F. Doughty, entry after entry that was suspicious upon its face, and was fraudulent, in fact, and that very little investigation of these books would have disclosed the fraud which Doughty was engaged in perpetrating in issuing stock certificates hereinafter referred to, and found to be spurious by the court; and that the directors and president of the plaintiff company were negligent in the examination and supervision of the said certificate books and register of transfers, and of the certificates from time to time surrendered and in the possession of said company for cancellation and of the use of being made by said Doughty of certificates signed in black, and that such negligence enabled said Doughty to commit the frauds hereinafter returned.”
    To the latter part of which finding plaintiff excepted.
    The seventh, to and including the eighteenth findings are on the special facts of the case of each defendant, and are, in general, as summarized by the judge in delivering the opinion in general term:
    “That George F. Doughty, disregarding his duty in the premises and without the knowledge of-the plaintiff or any of its officers other than himself, falsely and.fraudulently filled up the certificates in his own favor that had been signed in blank by the president, and either falsely and fraudently entered upon the books of the company that the certificate had been issued, or falsely and fraudulently made no .entry of the certificate upon the books of said company; that the said George F. Doughty made and executed his promissory notes and sold the notes through a banker with the certificates properly indorsed by the said George F. Doughty for transfer; that the defendants bought said notes relying upon the representations in said certificates contained, and made no inquiry in respect to the validity of said certificates or the issue thereof of any officer of the company; and that no defendant had any knowledge of the issue of any notes or certificates by said Doug-hty, or in his favor, other than the notes and certificates bought by him.
    “It also appears in these findings that although the fraudulent certificates bore dates ranging from November, 1881, to May, 1882, yet no one of the defendants made his or her loan prior to February 18, 1882, and some of them as late as May 20, 1882.” -
    
      The nineteenth finding is as follows:
    
      “Nineteenth — The court further find that each of the above named parties defendant are holders and owners, respectively, of said promissory notes; that they purchased the same in the ordinary course of business, without any actual knowledge of any fraud or irregularity of said Doughty in respect to, or in the issue of, said certificates of stock, and relying upon them as genuine and valid security for the money advanced by them in the purchase of said notes; that each of said parties knew that the said George F. Doughty was the secretary of said company; and that none of said parties made any inquiry of any of the officers, agents or stockholders of said company in respect to said certificates of stock, or the issue thereof, before purchasing notes, except as hereinafter stated.
    “And the court find, that if any of the parties defendant, in the purchase of the foregoing notes, had made inquiry as to the genuineness of the certificates pledged to secure any one of said notes, such inquiry would have disclosed the fraudulent character of such certificates; to which conclusions each of the defendants severally except.
    “The court further find, that each of the said parties defendant presented his aforesaid certificates to the plaintiff corporation, and made demand for the transfer of the same at the da;tes alleged in their several answers and cross-petitions, and that the plaintiff refused to make transfers. The courtfurther find, that each of said parties defend.ant thereupon commenced an action in the superior court of Cincinnati, and in the court of common pleas of Hamilton county, as alleged by them in their several answers and cross-petitions, and that the plaintiff filed it, answers as therein set forth, and that several actions are still pending in said courts.”
    The court also found the market value of the stock at the time the demand for its transfer was made, and also made a finding designating the stock it found to be genuine and that which it found to be spurious.
    Its conclusions of law may be stated generally as follows: (1.) That the presence of the name Doughty — both as secretary and as owner — on each of the spurious certificates, put the party in acquiring it on inquiry, and that a failure to inquire of some officer of the compan}7, other than Doughty, was contributory negligence, depriving him of the right to recover. (2.) That the signing of the spurious certificates by Doughty was not the act of the company, and imposed no obligation on it to recognize the holder as a stockholder. (3.) That the plaintiff is entitled to have the spurious certificates to be delivered up and canceled.
    The plea of res adjudicata set up by two of the defendants was sustained.
    In general term the finding “that if any of the parties defendant, in the purchase of the foregoing notes, had made inquiry, as to the genuineness of the certificates pledged to secure any of said notes, such inquiry would [have disclosed the fraudulent character of such certificate, ’ ’ was set aside as not sustained by the evidence.
    Harmon, Oolston, Goldsmith db Hoadly; Ramsey Maxwell <& Ramsey ; J. B. Foraker; Frank R. Laxox-ence and Gordon T. Hughes, for plaintiff in error.
    The finding of fact is that each of the "parties, when they took the fraudulent certificates in Doughty’s name to secure personal loans, knew he was one of the issuing officers ; that none of them made any inquiry of any one, but merely relied on the certificates, and that “if any of the parties defendant, in the purchase of the foregoing notes, had madeinquiry as to the genuinness of the certificates pledged to secure any one of said notes, such inquiry would have disclosed the fraudulent character of such certificate.” Strong v. Strauss, 40 Ohio St., 89; Bank v. BLakesley, 42 Ohio St., 654.
    Inviewof the fact now admitted even by opposing counsel that stock certificates are not negotiable— Hammond v. Hastings, 134 U. S., 404 — and of the fact that even bona fide purchasers for value must therefore necessarily take instruments of that nature subject to all defenses. Bank v. Walbridge, 19 Ohio, St., 419.
    To be perfectly within the boundaries of- legal principles, the company, as the evidence shows, took up every fraudulent certificate filled up by Doughty in the names of others than himself, and contests only those filled up in his own handwriting to his own favor, and pledged for his private debts to persons neither having nor supposing they were having any dealings whatever with the company. Mine Co. v. Bank, 39 Mich., 656; Ring v. Sparks, 77 Ga., 285; Smith v. Los Angeles Assn., 78 Cal., 289; 1 C. O. Rep., 209; 11 W. L. B., 98; Fifth Ave. Bank v.Ferry Co., 17 N. Y., Supp., 826; Manhattan Life Ins. Co. v. Ferry Co., 19 N. Y. Supp., 90.
    The question of contributory negligence of the pledgees is wholly immaterial, unless the company is liable to them upon the ground of negligence. No such liability can be successfully asserted.- This view is against the law of Ohio. The law of negligence, as applied to instruments issued without the authority of the obligor, applies only to negotiable instruments. Swan v. N. B. Australasian Co., 2 Hurl & C., 175, S. C.7H.&E, 603.
    Thus it is seen that there must be more than negligence to create • estoppel. There must be fraud or “bad faith.” That which will create such an estoppel is shown in Ensel v. Levy, 46 Ohio St., 255. It is the “willful act” of the party who delivers the instrument which precludes his denial of its recital. Mechanics Bank v. N. Y. <& N. II. JR. B. Co., 13 N. Y., 599.
    Any attempt to apply a rule to stock certificates, different from that which applies to warehouse receipts and bills of lading- must fail, unless the stock certificate be declared negotiable. A warehouse receipt or bill of lading will estop the maker if issued willfully. The only reason that the defendant was held no't liable in Pollarcl v. Vinton, 105 U. S. 7, was that an agent had issued the bills of lading without the authority of his principal. The same ground of decision appears in & hr. Freeman v. Buckingham, 28 How. 172, and in all cases relating to bills of lading.
    The Court of Appeals of New York treats bills of lading- and stock certificates exactly alike, so far as law of estoppel is concerned. Armour v. B. B. Co., 65 N. Y. 111. In that case the clerk had acted in good faith and in the course of his agency. The principal was held to be estopped. The case, however, is in direct conflict with Bean v. King, 22 Ohio St. 118; Emery v. Bank, 25 Ohio St., 360. It overrules the leading English case of Grant v. Norway, which is expressly approved and followed by this court in 19 Ohio St., 419.
    
      An instrument is either negotiable or non-negotiable. There is no middle ground. If negotiable, the maker is bound by the engagement which he recites, if he issued it, or if he carelessly allowed to get into circulation, otherwise not. If non-negotiable, he is entitled to defend against it unless he has by his own fraudulent conduct, with reference to it, precluded himself from so doing. The case of Bciily v. Smith, 14 Ohio St., 396, shows that only the legislature of the State can enlarge the list of negotiable instruments.
    The recital in a non-negotiable prommissory note, that “value” had been “received,” is an explicit declaration of a pre-existing fact and yet it has never been held that such a recital precludes the defense of want of consideration, because the note was negligently issued. A striking case for the application of such law, if any such law existed, was Boalt v. Brown, 13 Ohio St., 364.
    Concerning The subject of negligence, we respectfully submit:
    
      First — It is not a question in this cause that a stock certificate is a non negotiable instrument. Dewing v. Per dicaries, 96 U. S.,193; Bank v. R. R. 13 N. Y., 599; Schuyler’s cases 34 N. Y., 39; Moore v. Bank, 55 N. Y., 41.
    Is it possible that it is claimed that Doughty was a bona fide holder, or that he really acquired title to 4,000 shares bjr the misuse which he .made of the blank certificates? If not — if he had no right — how could he confer one?
    
      Second — The law of negligence, as applied to the creation of liability by carelessly allowing instruments to get into' circulation, does not apply to non-negotiable instruments. This is because the negligence in such case is not the proximate • cause of the loss, and because there is no privity. Swan v. Australasian Co., 7 H. & C.,172; Bank of Ireland v. Evans Charities, 5 H. L., 389; Davenports. Telegraph Co., 97 U. S., 369; Bingham v. R. R., 29 Ohio St., 364; Arnold v. Cheque Bank, 1 C. P. 'D., 578; Johnson v. Credit Lyonnais, L. R., 3 C. P. D., 32; Salem Banks. Gloucester Bk., 17 Mass., 1.
    
      Third — Mere negligence never creates estoppel in pais, except in cases where a duty is cast upon one party to exercise care toward the other. McKenzie s. Steele, 18 Ohio St., 38; Sinton s. Board of Education, 41 Ohio St., 504; Ilenshaw s. Bissell, 18 Wall., 255. Brant s. Coal Co., 93 U. S., 326.
    
      Fourth■ — It is not negligent to rely upon the integrity and faithfulness of an agent of good reputation. Doughty’s reputation was unquestioned, Baxendale s. Bennett, 3 Q. B. D., 525; Lehman s. R. R., 12 P. R., 595; Scott s. De Peyster, 2 Edw., Ch., 513.
    
      Fifth — Merely affording’ another an opportunity to perpetrate a fraud, is not actionable negligence, even if negligent. Bank s. Telegraph Co., 30 Ohio St., 555; Lotory s. Telegraph Co., 60 N. Y., 198i Ogdens. Ogden, 4 Ohio St., 182; Lowell s. Inhabitants, 8 Allen, 109; Massey s. Beecher, 3 Cush., 511.
    In the present case, which is for damages for false representations, it is admitted that the representations were made, not by the principal, but by an agent. Not in the business of the principal, but in the execution of a scheme of fraud by the agent, acting in his own behalf, outside the business of his agency, in a dealing with which the principal had no interest; with which he had no connection; from which he derived no benefit; of which he had no knowledge, and which he did not ratify. The court will pardon us for recalling some elementary principles:
    
      First — It is conceded on all hands that there is no rule upon the subject which is peculiar to corporations, but the corporation is bound only as an individual would be bound. Angelí & Ames, section, 382; Bank v. Bank, 10 Wall., 604; Banger v. By., 5 H. L., 72.
    
      Second — Where an agent is known to be dealing for himself, the party dealing with him is put upon inquiry, if the dealing affects the principal in any way. Bank v. Bank, 4 Am. L. Rec., 705; Platt v. Co., 41 Conn., 255; Wright’s Appeal, 99 Pa., St., 425; Winchester v. B. B., 4 Md., 241; Claflin v. Bank, 25 N. Y., 293; Moores v. Bank, 15 Fed. R., 141; Moores v. Bank, 111 U. S., 156.
    In the present case, Doughty presented his own note for discount, with what purported to be a false certificate that he owned an interest in the corporate property.
    
      Third — A principal is liable for a misrepresentation by his agent only.
    
      First — Where it is done in the course of his employment as agent; Second, within the scope of the agency/ Third, where it is done upon behalf of the principal; or, Fourth, where the principal voluntarily retains the benefit of the misrepresentations. Wharton Agency, sections 129, 158, 472; Schuyler case, 34 N. Y., 30; Schuylkill Bank case, 1 Pars. Sel. Cas., 180; Charter Oak v. Smith, 3 Bull., 608; Lowell y. Savings Bank, 8 Allen, 109; Sinton v. Board, 41 Ohio St., 504; Udell v. Atherton, 7 H, & N; Barwick v. Bank, L. R., 2 Ex. 259; McGotoan v. Dyer, L. R. 8 Q. B., 141; Swift v. Winterbotham, L. R. 8 Q. B, 244; Swift v. Winterbotham, L. R. 9 Q. B., 301; Charnwood Co., v. Bank, 18 Q. B., 724;
    
      
      Vagliao v. Bank, 22 Q. B., 103; Mackey v. Bank, 5 Privy O; Kennedy v. McKay, 14 Vroom, 288; AY/¿/fc v. Aadie, L. R. 1 Scotch App., 145; Foster v. Essex Bank, 17 Mass., 478.
    It is not pretended by anybody in this ease, that ¡Mgciiuy, ur uuiiu ju the course of his employment, or on behalf of his principal, or that the principal received any benefit from it. In this state of case, it is difficult to see what there is-for argument, so far as the law of agency is concerned. was within the scope of his
    The statement, so often repeated, that “where one of two innocent parties mustsufferby the acts of a third, he who has enabled such third person to occasion the loss must sustain it,” is much better adapted to use in a town meeting than in a court of justice. It expresses no truth. It tends bo mislead. If accepted literally, it has no meaning whatever, or, if any, an absurd one. The innocence of a defendant being established, he is always, ipso facto, entitled to judgment. He can only be made responsible in any action upon the g-round .that he has made and broken the contract sued upon, or done the act which creates liability. 13 N. Y. 635; Arnold v. Cheque Bank, 1 C. P. D. 587; Isnard v. -Torres, If) La. An., 103; Holmes v. Trumper, 22 Mich. 427; Ilowk v. Minnich, 19 Ohio St., 467 ; 2 Hilliard Torts, 137; Hern v. Nichols, 1 Salk, 289; Briedlander v. B. B. Co., 130 U. S., 426; British Banking Co. v. Charmoood Forest Co., 182 B. D., 714. Bapps v. Gottleib, 142 N. Y., 164 ; Citizens' Saving Bank v. Belakesley, 42 Ohio St., 645.
    The law applicable to this ease has its foundation, both in England and America, in decisions in which it is held that a ship-master, signing a bill of lading for goods which have never been shipped, is acting without the apparent as well as the real scope of his employment; and hence is not to be considered as the agent of the ship-owner so as to render the latter responsible to one who has made advances upon the faith of bills of lading’.so signed. The leading case is 'Grant v. Norway (1851), 10 C. B., 664, which has been followed in an overwhelming number of cases in both countries, and has been approved by this court. Ilubbersty v. Ward, (1853), 8 Ex. 330; Coleman v. Riches (1855), 10 C. B., 103; Meyer v. Dresser (1864), (1867), 16 C. B., (N. S.), 646; Dessel v. Bath L. R. 2 Ex., 267; McLean v. Fleming (1871), L. R. 2 H. L. (Scotch), 128; Brown v. Poioeh Coal Company (1875), L. R. 10 C. P., 562;’ Cox v. Bruce (1886), 18 Q. B. B., 147 ; Walter v. Breioer (1814), 11 Mass., 99; Schooner Freeman v. Buckingham (1855), 18 How. (U. S.), 182; Seers v. Wingate (1861), 3 Allen, 103 ; Union R. c& T. Co. v. Yaeger, (1870), 34Indiana, 1; Stollexoick v. Thacher. (1874), 115 Mass., 224; Pollards. Vinton (1881), 105 U. S., 7; Robinson v. Memphis <& Charlestoxon R. R. Co. (1881), 9 Fed. Rep., 129; Erbs. Great Western R. R. Co. (1881), 5 CanadaS. C. Rep., 179; The Qnerini Stamphcdia (1883), 19 Fed. Rep., 123; Williams c& Company v. W. & W. R. R. Co. (1885), 93 N. C., 42; St. Louis, etc., R. R. Co. v. Knight (1886), 122 U. S., 79; Fried-lander v. Texas, etc. R. R. Co. (1888), 130 U. S., 416 ; National Bank of Commerce v. C. B. c& N. R. R. Co. (1890), 44 Minn., 224 ; Dean v. King (1871), 22 Ohio State, 118.
    Applying the principles settled by eases involving the wrongful issue by agents of bills of lading and receipts for goods notin possession, it becomes clear that it is not within the apparent scope of the employment of the secretary of a railroad company to issue, in his own name and for his own purposes, stock certificates where the total authorized capital stock has been issued, where no certificates have been returned, and where the by-laws expressly provide that the power to issue certificates can only be exercised upon the return of prior certificates. And — by an application of the principles settled in those cases — it has been so held by the supreme court of the United States and the court of appeal in England. And this court has held that it is not within the apparent or incidental authority of the treasurer of a board of education wrongfully and for his own purposes to re-issue bonds that have been redeemed. Moores v. Citizens National Bank of Piguaif'BEB), 15 Fed. Rep., 141, and (1883) 111 U. S., 156; and British Mutual Banking Co. v. Charnwoocl POrest B. B. Co. (1887), 18 Q. B. £>., 714.
    Cases involving bills of lading and warehouse receipts wrongfully issúed by agents of carriers and warehousemen, for their own purposes, cannot be distinguished from this case. Stock certificates, like bills of lading and warehouse receipts, are not negotiable within the sense of the law applicable to bills of exchange and promissory notes. The secretary of a corporation has not wider apparent authority than the agents of carriers and ware-housemen who issue bills of lading and receipts.
    
      Knox v. Eden Co. (1896), 148 N. Y., 441, p. 456; Hammond v. Hastings (1890), 134 U. S., 401; Loioell on Transfer of Stock, section 129; Cook on Stock and Stockholders, 3d edition, section 412, et seq., and cases there cited.
    The so-called New York rule, unfounded in authority, unsound in principle, expressed differently at each application, has been gradually abandoned by the court of appeals of that state, and in the most recent cases has not been applied, but has been replaced by the true theory, according to which the question turns on whether or not the given act was within the express or apparent authority of the wrong-doing agent.
    The so-called New York rule seems to have been formulated by the ultimately unsuccessful counsel in North River Bank v. Aymar 3 Hill, 262; Farmers <& Mechanics' Bank v. Butchers & Drovers' Bank, 14 N. Y., 623-,Farmers, c& Mechanics' Bank v. Butchers <& Drovers' Bank, 16 N. Y., 125; Griswold v. Haven, 25 N. Y., 595; R. R. Go. v. Schuyler, 44 N. Y., 30; Armour v. R. R. Go.., 65 N. Y., 111; Bank of Batavia v. R. R. Go., 106 N. Y., 199; Fifth Avenue Bank v. Forty-second Street R. R. Go., 137 N. Y., 231; Manhattan Life Ins. Go. v. Forty-second Street R. R. Go., 139 N. Y., 146; Goshen National Bank v. State, 141 N. Y., 387; Bank of Nexo York v. American Dock c& Trust Go., 143 N. Y., 559.
    The theory of estoppel seems to be invoked here upon two different grounds. The first is that the railroad company, as principal, is estopped by the conduct of Doughty, as agent, in the transactions involved. The second is that the company is estopped by its own negligence. Let us consider these separately.
    Of course, if the act relied upon as working an estoppel upon the principal is an act of that principal, and no question arises as to whether it was an act of his agent within or without the apparent scope of that agent’s employment, then the case is clear, and he who relies upon the principal’s act to his own prejudice is entitled to relief. That was the point decided in the following cases: Inre Bahia 
      
      and San Francisco B. B. Co., (1868) L. R. 3 Q. B. 582 Hart v. Frontino <&c. Mining Co., (1870) L. R. 5 Ex., Ill; In re Ottos Kopje Diamond Mines, (1893) 1 Chancery, 618, and Balkis Consolidated Co. v. Tomkinson, (1893) Appeal Cases, 396.
    But it is next contended by our adversaries that the plaintiff in error is estopped by its negligence. This is, we submit, an abuse of the real doctrine of estoppel. But a conclusive answer to such contention is that by the decisions of this court in Second Fational Bank v. Walbridge, 19 Ohio State, 419; Board of Educations. Sinton, Í885, 41 Ohio State, 504, and Ensell s. Levy,, 46 Ohio State, 255, it is established that in order to create a so-called estoppel by negligence, bad faith or fraud, or its equivalent, gross negligence, must be present. The findings of fact in this case do not bring it within that rule.
    
      Kitt/redge <& V'ilby and Paxton. Wansdngton & Boutet for defendants in error.
    We submit to this court four propositions, with the authorities that we rely upon in support of them, as preliminary to our argument:
    
      First — The issuing of a certificate of stock, signed by the president and secretary of the plaintiff in error, and under its corporate seal, is the corporate act of the company, and not the act of the president and secretary as the mere agents of the corporation. Such a certificate, to all intents and purposes, is the certificate of the defendant corporation in its corporate capacity. Rev. Stat. Ohio, 1880, section 3254.- Wilson s. Salamanca, 99 U. S., 499; Pollard s. Vinton, 105 U. S., 7-12; Scotland s. Thomas, 94 U. S., 682.
    
      As to the effect of the corporate seal; 8. Y. Ry. Co. y. G. N. Ry. Co., 9 Exchequer, 84; Lewis y. Mayor of Rochester, 9 Eng. Com. Law, 426; P., C., O. (É St. L. Ry. Co. Y.Lynde, 55 Ohio St., 23.
    
      Second — The stock certificate is an instrument of evidence, recognized by the law, of ownership of its stock, created and issued by the corporation in the exercise of its franchise, and in the interest of the whole body of its stockholders, to enable its shares to be freely dealt in by the public. It contains a representation to the commercial community, and to every person who may come to deal with it, that it was issued by the corporation upon a valid surrender of certificates of stock of the corporation; and it creates a contractual obligation on the part of the corporation in favor of any person who buys it in good faith, upon its presentation and surrender, properly indorsed, to issue a certificate for a like number of shares in favor of the holder of it. The corporation is estopped to deny as against a bona fide purchaser for value the validity of such a certificate if it was not an overissue; and if an over-issue, it is estopped to deny that the issue was a corporate act, and is responsible for the loss sustained by such a bona fide purchaser for value. N. Y. c& N. II. R. R. Co. v. Schuyler, 34 N. Y.,30; Bruff v. Mali, 36 N. Y. 200; Holbrook v. Zinc Co., 57 N. Y. 616; Titus v. Turnpike Co., 61 N. Y., 237; Tome y. R. R. Co., 39 Md., 36. Western Maryland 'Co. v. Franklin Bank, 60 Md., 36; Willis v. Fry, 13 Phila., Pa., 33 ; People's Bank y. Kurtz, 99 Pa St.,; Ky-. Bank v. Schuylkill Bank, 1 Pars. Sel. Cases, 248 ; Machinists' Nat. Bank v. Field, 126 Mass., 345; Shaw v. P. P. <& Co. Gold Mining Co., L. R. 13 Q. B. Div. 103; Moores y. Piqua Bank, 111 U. S., 156; Savings Bank v. Blakesley, 42 Ohio St., 645; Commonwealth v. Savings Bank, 18 Rep., 655 (Mass. Sup. Ct.); P. P. da C. M Co., 13 Q. B. Div., 103; Fifth Ave. Bank v. Ferry. Co., 143 N. Y., 559; C. F. Bank v. State, 141 N. Y., 379; Bank of Batavia v. F. Y-1. F. <& W. B. B. Co., 106 N. Y., 195.
    
      Thvrd — The negligence of the corporation (plaintiff in error) in intrusting Doughty, as its secretary, with certificates signed .in blank by the president, and with the corporate seal, and in failing to make any examination of the eer-. tificates in the certificate books, or other other books showing the issuing of stock, and of the certificates surrendered from time to time to such secretary, in lieu of certificates so signed in blank and left in his possession, or otherwise to investigate the use made of certificates so signed in blank, continued almost daily fora period of seven months, until it constituted a course of business, whereby the directors are chargeable with knowledge of all the facts included in this course of business, renders the corporation liable for the injury occasioned by such neglect, to the same extent that it would be if its board of directors knew and approved of all the acts of Doughty. Martin v. Webb, 110 U. S., 15; Merchants Bank v. State Bank, 10 Wall., 604; BankY. Wentworth, L. R. 5 Exch. Div. 96-105; Pompton v. Cooper Union, 101 U. S., 196 ; Dair v. United States, 16 Wall., 1; F. A. Bank v. F. S. S. & Q. S. F. B. B. Co., 137 N. Y., 231; Bank of F Y. F. B. Ass’n v. A. B, T. <& Co., 143 N. Y., 559; Hanover Bank v. American Bock & Trust Co,, 148 N. Y., 620. '
    
      Fourth — Under the circumstances of the case, it was not legally incumbent upon the defendants to make inquiry at all before acquiring the certificates of stock in question. Further, the finding of the trial court that inquiry would have disclosed the fraudulent character of these certificates was in conflict with the other facts proved at the trial, and expressly found by the trial court. And the general term of the superior court, upon both grounds, therefore, properly disregard that part of the nineteenth finding of fact. Titus v. Turnpike Co., 61 N. Y., 237; WestMd. R. R. Co. v. Bank, 60 Md., 36; Wills v. Fry, 13 Phila., 33, approved in People's Bank v. Kurtz, 99 Penn. St., 349.
    In place of discussing the case upon the facts and authorities thus ignored, our learned adversaries have based their argument upon what they claim to be the law applicable to bills of lading and warehouse receipts, having assumed, without argument, that a certificate of stock is identical in its form, character and purpose, with a bill of lading issued by an agent of a railroad company, or the master of a ship.
    Let us point out briefly the difference which exists between these several instruments.
    First as to form. The certificate of stock is signed by the president and secretary, or other executive officer of the corporation, and sealed with its corporate seal, in pursuance of the requirements of the statutes and of the by-laws of the corporation; whereas the bill of lading is unsealed and it is signed by a single agent as agent, and not as an officer of the corporation.
    Next, as to character and purpose. The certificate of stock is issued in the interest of the corporation and its stockholders, with the prime and paramount purpose of inviting and enabling third persons or the public generally freely to deal in the shares by indorsement and delivery of the certificates, and thereby enter into contractual relations with the company. The bill of lading expresses a contract of carriage between a carrier and a shipper, and although it is much used, as a symbol of the property described in it, in commercial transactions, this use is neither in the interest of the carrier, nor within the object of the contract which the carrier enters into.
    There is still another way of displaying the difference and consequent distinction between these instruments. It is the -difference between the property which is represented by stock certificates and that which is represented by bills of lading1. Shares of stock are themselves property distinct from the capital or property of the corporation. Bills of lading are symbols of the property described in them. Lee, Treas., v. Sturges, 46 Ohio St., 153.
    Following the distinction in this case the bill of lading is not a subject of taxation, as distinguished from the merchandise which it’ represents as a symbol. But shares of stock in a corporation being held to be property, distinct from the capital stock of the corporation, both are subject to taxation without impinging upon the rule against double taxation.
    In the case of Bradley v. Bowder, 36 Ohio St., Judge Ranney contended ‘in this court on the authority of The Mechanics’ Bank case in 13 N. Y. Rep., relied upon' by our adversaries here, that a certificate of stock was like a bill of lading and as such was a mere symbol or representative of property the situs of which was in another state. But this court and the supreme court of the United States have repeatedly held otherwise, and that the stock in a foreign corporation is itself property, subject to taxation in Ohio. Worthington v. Sebastian, 25 Ohio St., 1; Bradley v. Bowder, 36 Ohio St., 28; LeeY. Sturges, 46 Ohio-St., 153; Sturges v. Carter, 114 U. S., 512.
    Thus the certificate of stock has no reason to exist except to represent certain legal relations which its owner bears to the corporation, and those relations connote rights and privileges which in law constitute intangible property; but the bill of lading or a warehouse receipt stands for and represents tangible property only. Hence, when dealing with the oné we know we are concerned with an intangible interest the very existence of which is disclosed only by a representation which is intended to convey information for the purpose of influencing the conduct of third persons; while in dealing with the other we know we are concerned with tangible property, the possession of which is represented only as an incident of an ordinary receipt and contract of carriage, and not for the purpose of influencing third persons.
    A recent English writer, Mr. Scrutton, in his work on Charter Parties and Bills of Lading (third edition), p. 5, note X, refers to several English decisions, where, notwithstanding the decision in Grant v. Norway, statements in bills of lading are held to bind the owner as against an indorsee for value, though such statements were made without the owner’s authority. The author adds that the distinction drawn between those cases and Grant v. Norway, “is hardly very satisfactory, especially to the holder who has advanced money in good faith upon the representation that there are goods in the ship to which his bill of lading entitles him. ” Brook y.N. Y., etc., R. R. Co., 108 Pa. St., 529; Sioux City 
      
      R.R. Co. v. First Nat. Bank, 10 Neb., 556; Coventry v. Great Eastern R. R., 11 Q. B. Div., 776; Savings Bank v. R. R. Co., 20 Kan., 519; Armour v. Mich. Cent. R. R. Co., 65 N. Y., Ill; St.L.dhI.M.R.R.Co. v. Lamed, 103 111., 293; Bigelow on Estoppel (5th ed.), 474 to 476; 5 Thompson Com. on Corp., secs. 6332-3; Walters v. Western &A.R. Co., 56 Fed. Rep.,
    We are not unmindful of the decision of this court in the Walbridge case, nor of its citation of Grant v. Norway, nor do we seek to assail the doctrine of that case. What we contend for is, that that doctrine has been pressed far enough, and should not be extended to instruments of an entirely different character, like certificates of stock.
   Minshall, J.

Independently of any question of negligence in the issue on the part of the company or its agents, it would seem, on the plainest principles, that the company should be held liable to an innocent holder for value of any part of the stock Issued by its secretary. The certificates were all signed by the president and the secretary, and had the corporate seal attached as required by law and the rules of the company. If stock so issued is not to be regarded as issued by the act of the company it is difficult to understand what would constitute an act of the company done in its corporate capacity. It is as much the act of the company as is the deed of a natural person signed, sealed and delivered by himself. This is so, or a corporation can do no act which can be regarded as done by itself. ' A corporation is a mere fiction created by law, and must, therefore, act through some human agency, or it cannot act at all. These agencies necessarily differ in character ; many simply • represent it as agents, others represent it as a corporation in what they do, and their acts are its acts as much so as the act of an individual done by himself in his own behalf; i This is so as to all acts appointed by the law and its own rules to be done by a particular agent or agents, and can be done by no other officer or agent of the company, as is the case in the issue and transfer of stock. In Bank of Kentucky v. Schuylkill Bank, 1 Parsons’ Select Cases, where the liability of a corporation for the acts of what is well termed its “statuteagents,” is considered, the court says, p. 240; “Although a bank corporation is compelled, ■ by the incorporeal nature of its essence, to act by others, yet, when these are parts' of its organic machinery, like the cashier, it is as much reponsible for their omissions and commissions, as a natural person who employs assistants in the execution of anjr commission.” And it was there held that the Bank of Kentucky was liable to the holders of its stock that had been fraudulently transferred by its transfer agent, the Schuylkill Bank situated in Philadelphia; and the latter bank was held liable to the Kentucky Bank, for the fraud of its cashier to whom it had intrusted the service it had undertaken as the transfer agent of the Bank of Kentucky. It is required by the statute, and, in this ease, by the by-laws of the company, that all certificates of stock should be issued by the president and secretary of the company, attested by its seal. Stock certificates can be issued in no other way and by no other agencies of the company. Section 3254, Revised Statutes, and rule 10 of the by-laws of the company. In the absence of any knowledge of fraud in its issue, we know of no rule of diligence that requires one in purchasing such stock to inquire beyond the genuineness of the certificate on its face. If the signatures of the president and the secretary are genuine and the seal has been, affixed, and the paper on its face a certificate of stock, to require one without knowledge of any fraud in its issue, before purchasing it, to inquire of the company or any of its officers as to whether it is genuine, would be to require a degree of care not exacted in any other similar business transaction; and not observed by the most careful business men in dealing in the stock of a company. And hence the omission to make such inquiry is not such negligence as to deprive the holder of stock innocently acquired, of his remedy against the company on a refusal to transfer it as promised in the certificate. The- fact that the certificate appears on its face to have been issued to the secretary as the owner of it, cannot be regarded as a suspicious circumstance, where, as in this case, he was not forbidden to hold stock, and, as found, 650 valid shares had been issued to him. Railroad Co. v. Bank, 60 Md., 36, 48; Titus v. Turnpike Road, 61 N. Y., 237, 242. As the secretary had the right to hold stock, and did hold it, and as but one mode is provided by statute and the rules of the company for the issue of stock certificates, the fact that a certifícateos issued in his favor, cannot, of itself, be adjudged a circumstance calculated to place an ordinarily prudent man on inquiry. This is shown by the fact that it did not excite inquiry in the minds of any of the numerous persons who became the owners of such stock, men accustomed to such business, and including some of the most careful business men of Cincinnati. Protection against the possibility of such frauds, is provided in the requirement that the certificate shall be signed by the president as well as the secretary. Either, by this requirement, must be deemed a sufficient check on the dishonesty of the other, where the company itself has provided no other check. Where, then, one of the officers becomes negligent, or conspires with the ‘other to commit a fraud on the company by the issue of spurious stock, which comes into the possession of an innocent holder for value, who should more reasonably suffer the loss, than the company, who selected its president and secretary, and thus placed it in the power of one or both to practice the fraud? The law has always been careful to protect the rights of the innocent third person under such circumstances. When one by the .fraud of another is induced to make and deliver him a deed, who then sells and conveys the land to an innocent purchaser for value, the latter is protected against the fraud that had been practiced by his grantor in acquiring the land; for the reason that having no knowledege of the fraud, he had the right to rely on the deed held by his grantor. This is the doctrine of innocent purchaser for value, and is of very general application. It rests upon the principle that where one of the two innocent persons must suffer by the wrongful act of another, he must bear the loss that placed it in the power of such person to do the wrong. This is but the application of the principle, sanctioned by time and the dictates of natural justice. Thus in Lickbarrow v. Mason, 2 D. & E., 70, it is said that “Whenever one of two innocent persons must suffer by the act of a third, he who has enabled the former to occasion the loss must sustain it.” The same principle is expressed in another form by Lord Holt in Hern v. Nichols, 1 Salk., 289, who there says: “For seeing somebody must be loser by this deceit, it is more reason that he that employs and puts a trust and confidence in the deceiver should be loser, than a stranger.” The principle has recently been applied in two cases in this court. Schultz's Admr. v. Colvin, 55 Ohio St., 274 ; Stranahan v. Coit, 55 Id., 398.

So far as we have considered the liability of the company to innocent parties as resting simply on the ground that the issue of the fraudulent certificates was an act done by the company in its corporate capacity, and affecting it, irrespective of any question of care, in the same manner that any similar act done by a natural person would affect him whether done by agent or not.

But there is another element in this case presented by the finding- of facts, on which the cross-petitioners rely as fixing the liability of the company to them, and that is negligence of the company and its agents in regard to the isssue of these spurious certificates by its secretary. The facts in regard to this are set forth in the fourth and sixth findings contained in the statement of the case. From these findings it appears that the president signed from time to time a large number of certificates in blank and entrusted them to the secretary, who fraudently filled them up in his own favor, and obtained loans upon them by pledging them as security; that the president gave little, if any, personal attention, to the transfer of stock; that from November 9, 1881, the books of the company showed entry after entry that was suspicious on its face, and that very little investigation of these books would have disclosed the fraud being practiced by Doughty; and the court then expressly finds that the directors and president ¿‘were negligent in the examination and supervision of the certificate books and register of transfers, and the certificates from time to time surrendered and in possession of the company for cancellation, and of the use being made by Doughty of certificates signed in blank, and that such negligence enabled Doughty to commit the frauds’’ before referred to.

The general rule is that a corporation, like a natural person, is liable for the negligence of its agents, causing injury to others, where the act done is within the scope of their agency, whether the act be one of omission or commission. Story on Agency, section 452; Tome v. Railroad Co., 39 Md., 36; Railroad Co. v. Bank, 60 Md., 36, 43. But in answer to the claim of liability on the ground of negligence the company asserts that there is no privity between it and third persons who may deal in its stock; that a certificate of stock is not negotiable; and therefore that neither the company nor any of its agents were under any legal obligation in favor of persons dealing in its stock to supervise the acts of its president and secretary in issuing or in transferring stock.

It is not necessary to determine whether a certificate of stock is a negotiable instrument, like a promissory note or bill of exchange. It is not a promise to pay money, and it has no period of maturity as such instruments have; yet as has been said, it is much like negotiable instruments. On its face, a certificate of stock is an evidence of the title of the person named in it to a certain number of shares, with an assurance to all persons that it will be transferred on the books of the company to any one purchasing it, on surrendering the certificate. In Bank v. Lanier, 11 Wal., 377, it is said: “Although neither in form nor character negotiable paper, they (certificates of stock) approximate to it as nearly as practicable. It is easjr to see why investments of this character are sought after and relied upon. No better form could be adopted to assure the purchaser that he can buy with safety. He is told under the seal of the corporation, that the shareholder is entitled to so much stock, which can be transferred on the books of the corporation, in person or by attorney, when the certificates are surrendered, but not otherwise. This is a notification to all persons interested to know, that whoever, in good faith, buys the stock and produces to the corporation the certificates, regularly assigned, with power to transfer, is entitled to have the stock transferred to him.” In re Bahia and San Francisco Railway Co., L. R., 3 Q. B., 584, is to the same effect; and it is there shown that the power of giving certificates is for the benefit of the company in general, as the effect of it is to make the shares of greater value. It is said in Cook on Stockholders, section 415: “To such an extent has the law of estoppel been applied to protect a bona fide purchaser of stock, that he is protected in almost every instance where bé would be protected if he were purchasing a promissory note or other negotiable instrument.”

The cases and authorities certainly show that the ciaim of the company that there is no duty (for that is all that can be meant by the use of the term privity), resting upon it or its agents, toward third persons, to observe care in the issue and transfer of its certificates of stock, and that as a consequence, it is not liable to them for negligence in such matters, is not well founded. From the character of the certificate it must be held to contemplate and know, that persons relying upon it will purchase the certificate in the market and meet with loss, should the person named in it not be the lawful owner of it. It must therefore be held to care in regard to this, and answer for any loss, the result of its negligence, or of its agents.

There has been an effort to liken a certificate of stock to a bill • of lading and a warehouse receipt, and to apply the rule as to liability that seems to obtain in those cases. The principal case cited is that of Grant v. Norway, 10 C. B., 664, where it was held that “the master-of a ship signing a bill of lading for goods that have never been shipped, is not to be considered as the agent of the owner in that behalf, so as to make the latter responsible to one who has made advances upon the faith of bills of lading so signed.” This case, with many others like it, is placed upon the distinction, that a bill of lading is simply a contract of carriage, and whilst it may be used as a symbol of property, it makes no representation to third persons which they have a right to rely on, that the fact is as stated in the bill. In this there is a broad distinction between a bill of lading and a certificate of stock — the latter, as already shown, being an asuranee to the world that the person named in it is the owner of stock in the company, and that it will be transferred on the books of the company to a purchaser on a surrender of the certificate. No case is cited in which the rule of this class of cases has been applied to certificates of stock. It has not been applied in England where the ease of Grant v. Norway was decided as appears from In re Bahia and San Francisco Ry.Co., supra. It wás there held that a certificate of stock amounts to a statement, intended by the company to be acted on by purchasers of shares in the market, that the person named in it is entitled to shares, and that the company is liable to one who in good faith acts upon it, though the certificate was void as between the company and the person named in it as owner. The case of Grant v. Norway, in its limited application, has not met with universal approval. Bank v. Railway Co., 106 N. Y., 195. In Mechem on Agency, section 717, it is said in commenting on the New York cases: “A different result has in some cases been-reached upon the same state of facts, but the doctrine of the New York court seems most consonant with reason and justice.” Among the eases so referred to he includes the case of Grant v. Norway. It is certainly much modified by the decision of this court, in Ensel v. Levy, 46 Ohio St., 255, where the maker of- a warehouse receipt was held estopped from setting up a claim against a bona fide purchaser, inconsistent with a statement in the receipt that the property would be delivered on compliance with the conditions named therein.

There are many cases decided by courts of last resort of the highest character, that either directly or in principle, sustain a recovery, in a case like this, on the part of an innocent purchaser for value, of a certificate of stock, on the refusal of the company to transfer the stock on its books to him. Every distinction does not constitute a difference ; for, as frequently observed by Lord Mansfield, the law. does not consist in decided eases, but of general principles that run through them and by which they have been decided. If it were different, the use of eases in applying the law would be of little help to the lawyer or judge. Cases are principally useful as tokens of what the law is in its generality. They bend to the principle, and not the principle to them. Therefore a difference in facts that does not amount to a difference in law, must be disregarded in applying the rule of a case. These observations are made because counsel, in commenting upon many of the cases relative to the subject, seem to have seized upon the slightest difference in facts, as calling for the application of a different rule. Some of the cases to which we refer as governing this one, are as follows: Railroad Co. v. Bank, 60 Md., 36; Railroad Co. v. Schuyler, 34 N. Y., 30; Bank of Kentucky v. Schuylkill Bank, 1 Parsons, 180, affirmed on appeal by the supreme court; Water Co. v. DeKay, 9 Stew. (N. J.), 548; Merchants, Bank v. State Bank, 10 Wal., 604 ; Bank v. Kurtz, 99 Pa. St., 344; Titus v. Turnpike, 61 N. Y., 237; Bruff v. Mali, 36 N. Y., 200; McNeil v. Bank, 46 N. Y., 325; Moore v. Bank, 55 N. Y, 41; Holbrook v. Zinc Co., 57 N. Y., 616; Bridgeport Bank v. Railroad, 30 Conn., 231; Tome v. Railroad Co., 39 Md., 36; Willis v. Fry, 13 Phila., 33; Bank v. Lanier, 11 Wal., 369; Allen v. Railroad Co., 150 Mass., 200; Jarvis v. Manhattan Beach Co., 148 N. Y., 652; Bank v. Street Railroad Co., 137 N. Y., 231.

Two of the cases above cited, the Bank of Kentucky v. Schyulkill Bank and Railroad Company v. Schuyler may be regarded as of the same family with this case. They both grew out of large over-issues of stock by a transfer agent of the respective companies. The large sums involved secured the employment of the ablest of counsel, who seem to have exhausted every resource of skill and ingenuity in making a defense for the companies against the claims of innocent holders of the spurious certificates. * Most, if not all, of the arguments advanced in subsequent cases, and now urged in this case, were there pressed upon the attention of the.courts. But, in each case,.after the fullest consideration, and in opinions of unusual ability, they were rejected, and judgment given for the holders of the stock. In The Bank of Kentucky v. Schuylkill Bank, it was, however, directly for the plaintiff, the suit being for indemnity against its transfer agent, the Schuylkill Bank.

' The principle on which the decisions have generally gone, is the liability of a corporation for the acts of its agents, done within the scope of the agency conferred on them. There has been some controversy as to what is meant by “the scope of the agency,” but it seems now well settled, that an act, though wilfully, fraudulently or negligently done by an agent, is within the scope of his agency and charges the principal as to innocent third persons, where the act done — the making of a contract, the disposition of property, the transfer of stock and the issuing of certificates therefor, are within the powers conferred on him, as an agent. The language of the court in Bridgeport Bank v. Railroad Company, supra, is applicable here; “it is said that Schuyler was the agent of the defendant only to do rightful acts, and when he did wrongful acts he ceased to be their agent. If he committed ' the wrongful act in the course of his employment, if the doing of like acts was within the scope of his employment, then he was their agent throughout, so far as third parties were concerned. If this convenient doctrine is sound, when can a principal be held liable for the wrongful act of his agent? No man appoints an agent to do a wrong, and if the moment an agent transcends his authority his relation to his principal ceases, when can a principal be held for a wrongful. act ? And yet it is well settled that he can be so held.” See, also, Mechera on Agency, section 739; Story on Agency, section 652; Beach on Priv. Corp., section 488; Bank v. Blakesley, 42 Ohio St., 645, 652.

In some of the cases importance has been attached to the negligence of the company, through irs proper agents, in not supervising the conduct of its business, and, whereby, the particular agent has been enabled to perpetrate his frauds. But I apprehend that upon an accurate analysis of the company’s liability in such cases, it will be found to rest on its liability for the acts of the agent who perpetrated the fraud. If the extent of his agency included the legitimate doing of an act of the kind done, then it will be liable though the act done was a fraud as to it and other persons. As to an innocent third person, affected by the agent’s wrong’ful act, the negligence of the company in not discovering or preventing the fraud, may accentuate his right of recovery, but does not, as I apprehend, add to nor create that right.

The plaintiff in error relies much upon the case of Moores v. Bank, 111 U. S., 156. We think it sufficient to distinguish that case from this, that the court there found that the plaintiff made the cashier of the bank, who committed the fraud, her agent to procure and have transferred to her the stock on which she proposed to loan him money, and that in doing so he acted for her, and not the bank; and, therefore, that' she, and not the bank, was responsible for his wrongful act in filling up the certificate in fraud of the bank as well as of the plaintiff. If the court was right in its assumption as to the fact of agency, then the decision can have no application to this ease, because there is no such feature in it. In the facts as found, there is no suggestion that any' of the defendants employed Doughty to procure stock for them. If the court was wrong in its opinion as to the facts, then all that can be said of its decision, is, that it was upon a misconceived state of facts, and cannot apply here, although as a matter of fact the two cases should be found to be substantially alike in their facts. In the course of his opinion, the judge delivering it referred to a number of eases similar to this one, without any expression of disapproval, and placed the decision on the ground just stated. It may be further observed that the case does not seem to be in harmony with Allen v. Railroad Company, 150 Mass., 200, where, on a state of facts quite similar, the court held the treasurer who committed the frauds to be the agent of the company, and not of the party purchasing the stock. The case of Claflin v. Bank, 25 N. Y., 293, has been cited as sustaining the contention of the railroad company. But this case was distinguished from a case like the present one by the court delivering the opinion, as well as by the same court in the later case of Titus v. Turnpike Co., 61 N. Y., 243. In the former case the president of a bank, having a general ’authority to certify checks upon it as good, certified one in his own favor. This the court held was out of the ordinary course of business and contrary to business and legal rules and not within the scope of the agency, but was particular to distinguish it from the issue or transfer of a certificate of stock.

The recent case of Knox v. Eden Musee Company, 148 N. Y., 441, needs to be noticed. In that case it will be observed, that Jurgens, the wrongdoer, was not the agent of the company to issue or transfer stock. His employment was simply to cancel surrendered stock. Surrendered certificates were by him abstracted from the safe of the company and pledged as security for a loan. With respect to this the court said: “If it can be said that the direction of the president to Jurgens to cancel the certificates made, him the agent of the company, for that purpose, it was an authority to destroy and not to use. His act in abstracting them from the safe and uttering them as valid certificates had no relation to the authority conferred. It was not an act of the same kind as that which he was authorized to perform. He had no apparent authority to issue them as genuine certificates, because he had no authority to issue certificates for any purpose.” This broadly distinguishes the ease from the one before us. No disposition is shown to modify the doctrine of the same court as announced in many previous cases, as to the liability of a corporation for the acts of the agents done within the scope of their employment, although not only negligently, but even fraudulently, done, and contrary to the purpose and instructions of the company. This clearly appears from the decision in James v. Manhattan Beach Co., supra, decided at the same term. The case draws the- distinction between negotiable instruments and certificates of stock. The former, though lost or stolen, are valuable in the hands of innocent purchaser for value, whereas the latter are not; .and the court treated the certificates abstracted by Jurgens as stolen from the company.

The fact that the court in general term, on setting aside the finding made in special term, that inquiry at the office of the company -would have disclosed the fraudulent character of the stock in question, proceeded to render the judgment the special term should have rendered instead of remanding the ease for a new trial, was not error, for the reason that the finding was immaterial, as such care was not required under the circumstances; and its omission was not contributory negligence on the part of the defendants, or any of them, depriving them of a right to recover.

If the statements contained in a certificate of stock, made by a company, cannot be relied on by a purchaser in the market, without further inquiry, it may well be asked what real purpose •does the certificate subserve ? The language used by the court in Bridgeport Bank v. Railroad Co., 30 Conn., at 247, is pertinent to the question. “To require those who acted upon the certificate to ascertain, at their peril, from the books of the company, subject to the possibility of false entries by officers of the company in these books, whether the certificates were correct, is repugnant to the face of the certificate, to the purpose of it, and to the duties committed to the officers of the com•pany. It would defeat the transferability of the stock.” And, as observed in Willis v. Railroad Co., 13 Phila., p. 40, “Such an investigation is obviously superfluous where the officers of the corporation have done their duty, and will generally be. unavailing when they are engaged in the perpetration of a fraud.” And, in-Lavey v. Bank, Taney’s C. C. Dec., 310, 329, where it was held that purchasers of stock are not bound to look beyond the certificate, or to examine the books of the corporation, to ascertain the validity of the transfer, Taney, C. J., said: “A different rule would render the right of every purchaser of stock in a hank insecure or liable to doubt, and greatly, impair its value, and would, moreover, seriously disturb the usages of trade and the established order of business in relation to this subject,, in a manner highly injurious to the community; for purchasers always rely on the certificate of the bank in which it is held, as conclusive evidence of ownership.” See, also, Railroad Co. v. Schuyler, 34 N. Y., 30, 71. The ease of Board of Education v. Sinton, 41 Ohio St., 504, does not require a different rule of diligence. There the court found from the character of the act, under which the bonds were issued, that they might be redeemed before due, and for this reason held that Sinton should have' inquired of the board before taking the bonds of the treasurer as security for a loan. The bonds had in fact been redeemed and placed in the hands of the treasurer for cancellation, and inquiry of the board would have disclosed that fact. -These particular bonds were regarded as not negotiable.

We may add that the finding of fact set aside is, more properly, a conclusion of law, and, as such, is not warranted by the findings made in the case. As the company did not discover the frauds until after the death of Doughty, it is difficult to see how an inquiry at the office of the company would have disclosed anything as to the fraudulent character of the certificates in question. But the authorities show and reason suggests, that there is no such rule of diligence required of those who, in the market, for value and in good faith, purchase certificates of stock, that are genuine on their face.

Judgment affirmed.

Shauck, J.

(Dissenting). The failure of Doughty’s victims to make the investigation required of them by familiar rules of the law enabled him to perpetrate many frauds of much magnitude. Before the bringing of this suit by the company, numerous actions ' were brought against it by some of those who had loaned him money upon his notes and accepted as security his own false representations touching his ownership of stock. In those cases, and in this, the superior court of Cincinnati and the circuit court of Hamilton county have denied the company’s liability for Doughty’s frauds, vindicating that conclusion in opinions of much research and accurate discrimination. Force, J., in Bank v. Railway Co., 11 W. L. B., 86; Taft, J., in this case, 24 Do., 198; Peck, J., same case, 22 L. B., 248, and Railway Co. v. Bank, 1 C. C. R., 199.

The same conclusion has been reached by the supreme court of the United States in a case not distinguishable from this by any fact of legal import, and by a court of equal authority, in England. Moores v. Bank Piqua, 111 U. S., 156; Banking Co.v. Charnwood Forest Railway Co., 18, Q. B. Div., 714.

For extqnfBBliilsussion of the principles involved amUáilpvsis of the cases cited in the opinion of the^majority, these references are deemed sufficient.

Attention to the precise case before us will make apparent the irrelevancy of the cases and the inconclusiveness of the reasoning upon which the recovery is sustained.

These certificates of stock are spurious. The full amount of stock which the company might lawfully issue had been issued. The company was, therefore, without authority to transfer the shares which Doughty thus falsely claimed to own, and his pledgees have no demand against it for any failure of duty in that regard. The precise nature of the demand appears very clearly in the record. There was no transaction between the pledgees and the company. The demand is that because Doughty was secretary and agent of the company, it shall answer to them for frauds perpetrated in transactions in which he borrowed money for his own use, upon his own notes, transferring false certificates which bore upon their face conclusive notice that he had exercised his authority as agent for his own advantage and adversely to the interest of his principal. The company derived no benefit from the transactions and did not ratify them. Really, do the elementary principles of the law leave any occasion to doubt that in such a case a recovery should be denied ?

The case affords no place for the rule that when one of two innocent persons must suffer loss from the act of a third, it must be borne by him who enabled such third person t^^Mct it. The rule was not intended to pena^raHffl|SWpwnership of property. Its terms prqfflmffl^^eyo innocent persons. Can it be said th^lii^^W|ndants innocently disregarded the notice bl®m|r home to them that the agent was exercising'flfs authority adversely to the interests of his principal ? Unless the logical consequences of this recovery shall be averted by arbitrary exceptions, but little can remain of the familiar and salutary rules of law, founded on morals, and contrived to render fraud ineffectual and prevent the divestiture of title by crime. Why may it not be said to everyone who seeks to recover his • stolen chattel, from the vendee of the thief that he must fail because his ownership of the chattel enabled the thief to commit the wrong? No conclusive answer to that question can be given except by a court of last resort.

In Moores v. The Bank, the supreme court of the United States denied the liability of a corporation for the fraud of its issuing officer where he issued the stock directly to his pledgee with the false representation that it was a transfer of stock which he owned; while here the officer issued the stock to himself and indorsed it to his pledgees. The cases do not otherwise differ. To say that the defense is cut off by the assignment of the certificates is to affirm that they have an attribute of negotiability. But the view that they are negotiable is disclaimed by the majority and by counsel ■ for the defendants. For obvious reasons it could not be maintained. The attempt to distinguish the cases has, therefore, failed.

Spear, «L, not sitting.  