
    WARNER VAN NORDEN, Respondent, v. JAMES R. KEENE, Appellant.
    
      Agency.—Contract giving option to call or deliver stock, meaning of word, “ bearer ” therein.
    
    ' In case of a contract to receive or deliver stock at certain fixed prices, within a specified time, a settlement of rights thereunder between the owner and the party obligated thereby, prior to the expiration of said period, is binding and effectual, and the owner will be deemed to have accepted, in satisfaction of his rights, the promise to pay a fixed sum.
    The term “ bearer,” as used in such a contract, means not simply a person having the paper in his individual custody, but a person apparently exercising an individual dominion thereof as owner.
    This would be proved in most cases by showing individual custody of the paper, but if it contemporaneously appeared that he who had the paper procured it wrongfully from the owner, he would not be the “bearer.”
    
      Where a party publishes a general request that such contracts be presented at his office for registry only to enable him to ascertain the extent of his liabilities, in making a settlement with one claiming to be the owner of the contract in question, but who was in fact entrusted therewith for purposes of registry, &e., only, such party is held to the risk of the person having in charge the contract, not being the real owner thereof.
    Before Sedgwick, Ch. J., Freedman and Truax, JJ.
    
      Decided June 23, 1887.
    Appeal by defendant from judgment entered upon report of referee.
    The facts ajtpear in the opinion.
    
      B. F. Dos Passos, for appellant.
    I. Settlement with Heath was binding upon plaintiff. (a.) The privileges being payable to béarer, Heath ivas the bearer within the terms of the contract. (5.) If Heath was plaintiff’s agent, and plaintiff voluntarily parted with the privileges, he conferred upon Heath the apparent ownership, and the defendant was justified in dealing with him. It was the duty of the plaintiff, in the first instance, had he desired to restrict any transactions by the defendant, to have notified him of his ownership, (e.) The defendant parted with value when he fixed his liability in the sum of $4,762.50 as his indebtedness upon the privileges. This indebtedness was fixed by Heath, as bearer, by the market price of the stock then prevailing, and the whole transaction, as appears by the defendant’s books, was a legitimate and bona fide settlement, (d.) The familiar rule applies to this case that where one of two innocent persons is to suffer, the person who is the cause of the injury is the person upon whom the loss should fall. So far as Keene Avas concerned, he had the right to deal, in the absence of notice, Avith any person Avho presented the privileges at his office. Wharton Agency, § 465 ; Story Agency, § 390; Voorhis v. Olmstead, 66 N. Y: 117; McNeil v. Tenth Natl. Bank, 46 Ib. 325; Allen v. Witherspoon, 50 Super. Ct. 417.
    II. The following cases relied upon by plaintiff are distinguishable : Booth v. Pierce, 38 N. Y. 463; Downer v. Carpenter, 1 Hun, 591.
    III. In the present case the adjustment between defendant and Heath—plaintiff not being known—is binding upon the plaintiff in the absence of fraud, where the latter voluntarily entrusted the privileges out of his possession and conferred upon Heath the apparent ownership. Voorhees v. Olmstead, 66 N. Y. 117; McNeil v. Tenth Natl. Bk., 46 Ib. 325; and cases cited, supra. Injustice would be entailed by the fact that although the instrument be in the name of bearer, and pass from hand to hand, yet the maker must, whenever the privilege is adjusted or presented for adjustment, find out at his peril whether the bearer is in reality the true owner. The contract does not cast such a burden upon the defendant. It will result in fraud, because if such a rule were adopted one party could present the privilege to the maker, fix the amount due upon it, and after waiting for either an advance or decline in the market could send another person to repudiate the first settlement, and, claiming to be the real owner, insist that it was without authority, and that a new adjustment should be made upon the higher or lower valuation. The rules which are applied to promissory notes, bonds and checks payable to bearer uphold the contention that the defendant had the right to settle and adjust his liability with Heath. Daniels Negotiable Instr., 3d ed., p. 516, § 593; p. 759, § 812.
    
      Sullivan & Cromwell and Algernon S. Sullivan, for respondent.
   By the Court.—Sedgwick, Ch. J.

The action was for damages for the breach by the defendant of his contract to pay certain moneys for shares of stock under four agreements in writing made by him. These had similar terms, and it is not necessary to describe more than one of them. On January 10, 1884, the defendant signed the instrument of the following tenor : For value received, the bearer may deliver me or call on me, on one day’s notice, exc'ept last day when notice is not required, five hundred shares of the Union Pacific Railroad Co., at sixty-seven per cent, if put, or at eighty-seven per cent, if called, at any time in six months from date.”

Before April 30, 1884, the plaintiff for value paid by him, became the holder and owner of the four agreements, and remained such during the time in controversy.

About June 20, 1884, having elected to deliver, the plaintiff in due time tendered to the defendant the shares named in the agreement, and demanded the sums of money agreed to be paid according to the terms of those " agreements. The defendant refused to receive the shares or pay the money. The action was brought to recover this money, less the proceeds of the shares, which were duly sold.' The difference, for which the plaintiff recovered judgment, was about the sum of $49,000.

One defence was, that before the time for which the contracts might run, at the option of the bearer of them, had ended, and on May 2, the bearer of the contracts, one Heath, had settled with the defendant the rights of the bearer, that is, had agreed with the defendant to ascertain and liquidate the amount due by defendant, at the sum of $4,762.50.

If Heath were the owner of the contracts, there is no reason to deny that the settlement made discharged the defendant from further liability. The facts would have been that the owner had made his election, the parties had waived a tender or delivery of the stock, had agreed that it should be deemed to have been tendered or delivered, and the defendant had promised to pay a fixed sum, which promise the owner had received in satisfaction of his demand. The owner could not make another election or another tender.

The referee found, in accordance with the testimony, that Heath was not the owner, but that in fact the plaintiff was. Nevertheless, as the contract ran to bearer, Heath, although not owner, was, if he were the bearer within the meaning of the contract, competent to deal with the defendant so as to discharge the latter from the contract.

In my judgment the term “ bearer ” in the contract does not mean simply a person having the paper in his individual custody. It means .a person apparently exercising individual dominion of the paper as owner. This would be proved in most cases, by showing individual custody of the paper. If it contemporaneously appeared that he who had the paper procured it wrongfully from the owner, he would not be the bearer. The “ bearer ” in the legal sense, is as against the owner, supposed to have become possessed by transfer from the owner. In case there has been no transfer,* the party bound by the instrument ought not to suffer from the negligence of the owner, or his misfortune, after it has passed from his control to the apparent ownership of another.

But, in fact, the settlement referred to was not made in open market or under usual circumstances, so far as the defendant was concerned. It was made in his office under peculiar circumstances. He had stopped business, on account of losses, about April 30. He published in the newspapers a card that his books were very much confused; that he was unaware of the extent of the privileges which he had outstanding, having failed to keep a memorandum of them as they were issued; and that it would be a favor to him to present the same for registry, so that he might know the extent of his liabilities. In accordance Avith this request, the plaintiff handed the contracts to one Ransom, to be taken by him to defendant’s office to be registered. Ransom handed them, to Heath, and Heath took them there and made the settlement as claimed.

Under such circumstances, the defendant having asked owners generally to present their contracts only for registry, as he called it, he was bound to those owners who acted on his request, not to turn a special agency by the owner to a third person, into a general transfer of ownership. Such a transaction as his cards called for, in the ordinary course of business, might competently be done through an employee without a transfer of ownership to the employee. The defendant was not justified in thinking that every one taking a contract to his office was a transferee of the chose in action. He was bound to consider that he might only be the representative of the true bearer, for the special purpose of registry. The consequence of the card and the plaintiff’s action upon it was, that the defendant was held to the risk of the person having in charge the contract not being the transferee of the contract.

For these reasons my opinion is that the settlement did not bind the plaintiff.

The other defences have been examined. Their validity depends upon proof of facts, as to which the referee has found, upon sufficient evidence, against the defendant.

The judgment should be affirmed with costs.

Freedman and Teuax, JJ., concurred.  