
    The Union Trust Company of Rochester, Plaintiff, v. Frederick W. Oliver, as Trustee in Bankruptcy of George K. M. Clarke and Olaf Oberg, Defendants.
    (Supreme Court, Monroe Equity Term,
    October, 1912.)
    Pledge — right to — voting trust certificates — corporations.
    Upon a cash purchase of certain stock, defendant 0 received from the secretary of the corporation a voting trust certificate. Several days thereafter, at the office of the corporation, he handed said certificate to said secretary for the express purpose of having it transferred to him on the books of the voting trustees in accordance with the arrangément by which the stock of the corporation was turned over to them, they in turn issuing the voting trust certificates. Said secretary gave a receipt showing that the stock was left with him for no other purpose, but without the knowledge or consent of 0 delivered it to plaintiff, a trust company, as security for his personal loan, and told its officer with whom he negotiated the loan that" the certificate had been sold to one L who was out of town and on his return he, the secretary, would get the money and pay the loan. In an action to foreclose the pledge, held, .that the transaction was sufficient to put the trust company on inquiry as to whether or not the secretary had any right to pledge the certificate.
    Held that it was a plain case of larceny,' ahd the true owner, the defendant 0, who was not chargeable with negligence, was entitled to a dismissal of the complaint.
    Actioh to foreclose a pledge.
    
      Carnahan, Adams, Jameson & Pierce, for plaintiff.
    William H. Burr, for defendant Oberg.
   Clark, J.

This action is brought to foreclose a pledge of shares of stock of the Rochester and Lake Ontario Water Company. It was established on the trial that the defendant Oberg bought 100 shares of stock of the Rochester and Lake Ontario Water Company, several days prior to the 12th day of October, 1910, paying therefor $2,500, and receiving voting trust certificate No. 40, which was actually delivered to Oberg at the time he made the purchase. The business was transacted with George 3L M. Clarke, who was the secretary of that company in charge of its office, and who had possession of this voting trust certificate. After the said certificate was delivered to defendant Oberg he retained it in his possession several days, and on the 12th day of October, 1910, he went to the office of the company and handed the certificate to the secretary, Mr. Clarke, for the express purpose of having it transferred to him on the books of the voting trustees, who had issued the certificate in question. Clarke had no interest whatever in the certificate, Oberg owed him nothing, and his authority was expressly limited in a writing signed by him to having the certificate transferred on the books — something that was required to be done in and by the terms of the arrangement by which the stock of the water company was turned over to voting trustees, who in turn issued the voting trust certificates.

While Clarke had the certificate in his possession after October 12, 1910, it was for the sole purpose of transfer, as above stated, and his name in no way appeared on the paper. Subsequently and on the 4th day of November, 1910, without the knowledge, authority or consent of defendant Oberg, Clarke appropriated the certificate to his own use, and delivered it to the plaintiff to secure the payment of a loan of $2,000. He did so with intent to deprive and defraud the true owner, defendant Oberg, of his property, and the use and benefit thereof, and thereby committed the crime of grand larceny. Penal Law, § 1290.

The very gist of the crime of larceny is the intent of the person who is charged with committing it, and when we remember that in this case the undisputed evidence is that Clarke was intrusted with this certificate for the sole purpose of having it transferred, and that instead of doing so he put it up as security for his own personal loan without the shadow of right or authority from the true owner, the conclusion is irresistible that he did it with a felonious intent to deprive and defraud the owner of his property, and under these circumstances he committed the crime of larceny (Penal Law, § 1290, supra), and he cannot give good title to property that he had stolen.

The defendant Oberg Cannot be charged with negligence in this matter for when he left the certificate with Clarke for the purpose of transfer he was particular to require the latter to give him a receipt showing clearly that the stock was left with him for no other purpose.

On the other hand, it appears that, when Clarke applied to plaintiff for the loan of $2,000 on the stock in question, his name did not appear on the certificate, but it was signed in blank by a former owner named Adams, and it bore no evidence that Clarke owned or had any interest in it, and he did not claim to own it, but plaintiff’s officer with whom the loan was negotiated was told by Clarke that the stock certificate in question had been sold to-a Mr. Lyon for $2,500, but he was out of town, and on his return he (Clarke) would get the $2,500 and pay the loan. So plaintiff made a loan of $2,000 to Clarke on a certificate which the latter did not claim to own, and which he frankly told the plaintiff’s officer had been sold to another man.

It impresses me that this transaction was sufficient to put plaintiff on inquiry at least as to whether or not Clarke had any sort of right to pledge this stock. When Clarke appropriated this certificate to his own use in the manner described, it was not a mere conversion, but was a plain case of larceny, and under the circumstances the true owner should be able to hold the stock .against this plaintiff. Knox v. Eden Musee Am. Co., 148 N. Y. 441; Treadwell v. Clark, 73 App. Div. 473; Matter of Mills, 125 id. 730; Merchants Bank v. Livingston, 74 N. Y. 223.

Judgment is, therefore, directed dismissing plaintiff’s complaint as against the defendant Oberg, with costs and disbursements to be taxed.

Judgment accordingly.  