
    William T. Emmet, as Superintendent of Insurance of the State of New York, Appellant, v. The City of New York and William A. Prendergast, as Comptroller of the City of New York, Respondents.
    First Department;
    July 10, 1914.
    Corporation—assignment or transfer of stock of municipal corporation —when municipal corporation and its comptroller not liable for conversion—estoppel.
    Where the directors of a title and guaranty company owning stock of the city of New York, authorize its president or one of its directors to transfer it, and the assignment is duly presented to the finance department of the city, which canceled the certificate and issued a new one for the benefit of the vendee, a traction company, and the city then paid to said company a certain amount of money which had been deposited with it as security under the terms of its franchise and received the stock in lieu of such deposit, and the traction company then paid to the title company the value of said stock, the transaction will be deemed complete.
    The fact that the officers of the title company misappropriated the amount received for the stock cannot make the city and its comptroller liable for a conversion.
    The title and guaranty company and the State Superintendent of Insurance seeking to enforce its rights are both estopped from holding the city liable for the default of its officers duly authorized to act for it.
    Scott and Dowliku, JJ., dissented.
    Appeal by the plaintiff, William T. Emmet, as Superintendent of Insurance, from a judgment of the Supreme Court in favor of the defendants, entered in the office of the clerk of the county of New York on the 30th day of March, 1914, dismissing the complaint upon the decision of the court after a trial before the court without a jury at the New York Trial Term.
    
      George M. Mackellar, for the appellant.
    
      E. Crosby Kindleberger, for the respondents.
   Ingraham, P. J.:

The Title" and Guarantee Company was a domestic corporation organized under chapter 538 of the Laws of 1885 for the purpose of examining titles to real estate and guaranteeing such titles and issuing and guaranteeing bonds and mortgages on real estate. It was, prior to the 1st day of April, 1910, the owner of certain corporate stock of the city of New York for $47,000 and this action was brought by the plaintiff, as Superintendent of Insurance, against the city of New York and the defendant Prendergast, as the comptroller of the said city, to recover for the conversion of such stock. The complaint alleges that plaintiff as such Superintendent was duly authorized and directed to liquidate the business of the said Title and Guarantee Company in pursuance of section 63 of the Insurance Law and became vested with all the property of said corporation; that on April 1, 1910, the company, was the owner of said stock, and that on said day the defendants unlawfully converted and disposed of said corporate stock and the certificate thereof to their own use, to the damage of the said corporation in the sum of $60,000. The action was tried by the court without a jury, who filed a decision directing judgment for the defendants, upon which judgment was entered, and from which the plaintiff appeals.

The court found that on and prior to the 1st day of April, 1910, the Title and Guarantee Company was the owner and entitled to the possession of the corporate stock of the city of New York for the sum of $47,000, registered in the name of the company, transferable by the holder in person or by attorney upon the surrender of said certificate; that the said certificate was a promise to pay money to the Title and Guarantee Company or its assigns; that on March 31, 1908, the directors of the Title and Guarantee Company duly passed a resolution that “Benjamin B. Chase, Vice President, or Anthony Stumpf, Director, be and either of them is hereby authorized to sell, assign and transfer all or any part of the Forty-seven thousand dollars ($47,000) three and one-half per cent corporate stock of the City of New York, N. Y. due November 1st, 1940. Certificate No. 249, standing in the name of The Title and Guarantee Company of Rochester, N. Y., on the books of the Comptroller of the City of New York, and to appoint one or more attorneys for that purpose; ” that on the 1st day of April, 1910, certain persons, purporting to represent the South Shore Traction Company and the Title and Guarantee Company, presented to the chief stock and bond clerk in the finance department of the city of New York this certificate of stock for $47,000, No. 249, together with an irrevocable stock power to transfer the certificate, with an assignment of said certificate in blank, signed “ The Title & Guarantee Company of Rochester, [by] Anthony Stumpf, Vice President, [and] C. W. Day, Treasurer,” and under the seal of the company, duly acknowledged before a notary, and with a certified copy of the resolution of the directors of the company, and requested said clerk to transfer on the books of the finance department of the city of New York said certificate of corporate stock, No. 249, from the name of the Title and Guarantee Company of Rochester, N. Y., to that of the comptroller of the city of New York; that the said clerk of the finance department, concluding that the papers were regular, transferred on the books of the finance department the said certificate of stock to the comptroller of the city of New York, in trust for the South Shore Traction Company, as security for its compliance with a certain resolution of the board of estimate and apportionment, canceled the said certificate, No. 249, and issued two new certificates, one for $33,750, and one for $13,250, in the name of the comptroller of the city of New York, which are now held as security for compliance by the South Shore Traction Company with the provisions of its franchise which had been granted to it, and the sum of $50,000 which had been deposited with the comptroller was paid to said South Shore Traction Company; that on the same day, April 1, 1910, the market value of the said certificate was $41,830, and on the said day a check for that sum was drawn by the said South Shore Traction Company to the order of the Title and Guarantee Company, which was duly deposited to the credit of the Title and Guarantee Company and was duly paid, so that the Title and Guarantee Company received the value of the stock; that said transfer of the certificate of corporate stock was complete and regular on its face and was accepted by the officials of the finance department in good faith, without notice of any infirmity in the instrument or defect in the title of the person presenting it.

I think upon those facts that there was a sale of this stock by the Title and Guarantee Company to the South Shore Traction Company. The directors of the title company had, by a formal vote, authorized its vice-president or one of its directors to sell, assign and transfer the stock; the directors by an instrument in writing had, “for Value Received, * * * bargained, sold, assigned and transferred ” the stock, and that assignment was presented to the finance department with a request to cancel the certificate and issue a new certificate for the benefit of the South Shore Traction Company. That request was complied with, and the city then paid to the traction company $50,000, which had been deposited with it, and received this stock in lieu of the deposit, and the South Shore Traction Company then paid to the title company the value of the stock. The transaction was then complete. The stock had been transferred by an officer of the title company who had authority to sell and transfer it; the value of the stock had been paid by the traction company and received by the title company. It may be that the title company could have rescinded the transfer as made in bad faith, but as to third parties dealing with the stock based upon the legal title to the certificate, I cannot see why this transaction did not pass the title. If on these papers presented to the finance department it had issued a new certificate to the South Shore Traction Company, and it had sold the certificate to a third party in good faith without notice, certainly such purchaser would not be guilty of a conversion, and I do not see that the defendants were guilty of a conversion for accepting the transfer and treating the certificate as the property of the South Shore Traction Company. It in good faith paid to the South Shore Traction Company the $50,000 which it held as security for its compliance with its obligation, and I think it elected to hold the stock. The action is at law for a conversion. To entitle the plaintiff to recover on his complaint, the defendants must have converted the stock to their own use. All they did was to receive the certificate, comply with the request of the responsible officers of the title company to transfer the stock to the comptroller to hold for the benefit of the traction company, and it still holds the stock as so requested. There was no demand on the comptroller by the title company to return the stock, and unless the original receipt of the stock was a conversion, which it is clear to me that it was not, then the plaintiff could not recover in this action.

Nor do I see how under the circumstances the city could be liable for a conversion of the stock. It has done nothing with the stock. The city has neither disposed of the stock nor has it received any benefit from it. The comptroller claims to hold the stock as security for the performance by the traction company of the obligation which it assumed when it received its franchise. If the comptroller is not entitled to hold the stock for that purpose, the title company or the plaintiff as its liquidator will be entitled to recover the stock which it deposited with the comptroller; but on the facts as developed on the trial, the plaintiff failed to prove a conversion. I can find no evidence that the title company or the plaintiff ever elected to rescind the sale, ever offered to return the money that it received as the value of the stock, or sought to recover back from the traction company the stock that it delivered, and the traction company is not a party to this action. The fact that the officers of the title company misappropriated the amount that it received for the stock cannot make the defendants liable. Whether this results from a valid transfer of the certificate of stock by the title company to the traction company or by way of estoppel is not material. Certainly both the title company and the plaintiff, seeking to enforce its rights, are estopped from holding the city of New York liable for the default of its officers duly authorized to act for it.

I think, therefore, that the plaintiff was not entitled to recover and that the judgment should he affirmed, with costs.

McLaughlin and Hotchkiss, JJ., concurred; Scott and Dowling, JJ., dissented.

Judgment affirmed, with costs. 
      
       See Consol. Laws, chap. 28 (Laws of 1909, chap. 33), § 63, added by Laws of 1909, chap. 300, as amd. by Laws of 1910, chap. 634; Laws of 1911, chap. 366, and Laws of 1912, chap. 217. Since amd. by Laws of 1913, chap. 29.— [Rep.
     