
    William G. Dunham, Plaintiff, v. City Trust Company of New York, Defendant.
    Second Department
    November 16, 1906.
    Principal and agent—failure of transfer agent to transfer stock — when, stockholder' cannot recover damages caused thereby—■ transfer tax on stock of foreign corporation.
    The stock of a foreign corporation owned by a non-resident decedent is not subject to a transfer tax in this State, although the transfer agent of the corporation does business in this State.
    But when such transfer agent refuses to transfer stock upon its books without a decision by the State Comptroller that the stock is not subject to taxation; arid by reason of the delay thus caused the stock was sold at a loss, the transfer agent is not liable for the loss, being the agent of the corporation and not the agent of the stockholders demanding the transfer.
    Such delay in making the transfer is not misfeasance for which the agent may be held liable to third persons.
    Nonfeasance and misfeasance distinguished.
    Motion by the defendant, the City Trust Company of Hew York, for a new trial, upon a case containing exceptions, ordered to be heard at the Appellate Division in the first instance, upon the verdict. of a jury in favor of the plaintiff, rendered by direction of the court after a trial at the Westchester Trial Term in December, ■1905.
    John Dunham, a resident of St. Louis, Mo., died in June, 1903, registered owner of certain shares of the capital stock of a corporation organized under the laws of Hew Jersey. His will was probated in St. Louis, and letters were issued to W. G. Dunham and Willard W. Boyd, who qualified and who thereby came into possession of the said stock. On July 13, 1903, Dunham, as executor, wrote to the defendant, which was the sole transfer agent of the said corporation, inclosing the certificates of this stock and requesting the issue of new certificates to specified persons. On July 15, 1903, the defendant acknowledged the letter and. inclosure and wrote that it required a certified copy of the will and proof of the issue of the letters before it could make the transfer. On the same day the defendant wrote to the Comptroller of New York State that this application had been made to it, as transfer agent of the said company, “a New Jersey corporation,” by the executors of “ John S. Dunham, deceased, late of St. Louis, Mo.,” for the transfer, and requesting that the “ usual consent to the transfer ” be granted as early as possible. On July 17,1903, the Comptroller acknowledged the letter and answered that as it was “ the estate of a non-resident decedent — no letters having been.issu'ed or applied for in this State,” the department requested that the defendant defer the transfer “ until it can ascertain as to the liability of said estate to taxation. If the estate proves to be exempt you will be immediately notified, and consent forwarded. . Notification of this action has been sent the representatives of said estate.” On July 20, 1903, the executor sent to the defendant a certified copy of the will of his testator and of his letters. On July 22, 1903, the defendant wrote to the executor requesting a verification of his signature. On July 25, 1903, the executor referred it to a source of verification, and asked for the transfer without unnecessary delay. On July 29, 1903, the defendant answered that the verification was satisfactory but it could not effect the transfer until the State Comptroller consented, and that he had not replied to its letter of request. On October 1, 1903, the defendant wrote to the State Comptroller asking if he was then prepared to give his" consent. On October 2, 1903, the Comptroller answered that on July seventeenth they had requested the defendant to defer the transfer until the department could ascertain as to the liability of said estate to taxation,, and that on the. same day the department had written to the executor in St. Louis requesting a verified statement showing the extent and value of the' estate, and not hearing from him they had written again without reply, and then wrote: “ We must therefore request that the transfer of such .stock be deferred by you,” On October sixteenth a firm of lawyers wrote to the defendant .stating that they were informed that because of a request from the transfer tax department of the State Comptroller’s office the defendant had declined to make the transfer until it.had received a consent from the Comptroller’s office, and that “ this is' the only reason why you decline to make such transfer. If there are other reasons, such as the fact that you have not proof that .the deceased'' at the time of his death Was á resident of St. Louis, we should be glad to furnish you with such proof. Otherwise, we m.ust request you to make the transfer without reference to the Comptroller, upon the ground that the decedent, being a non-resident, and his estate being administered in another State, to wit, in Missouri, and the corporation whose stock is in question'being a Hew' ' Jersey and not a Hew York corporation, the’stock is not subject, to transfer tax, and therefore the Comptroller has no right whatever •to interfere.” On October 11, 1903, the defendant replied that 'it had been acting under advice of counsel in withholding transfer, pursuant to section 228 of the Tax Law,of 1896 (Laws of 1896., ' chap. 908), as amended by chapter 101 of the Laws pf 1902. It ■also suggested a conference.with its own counsel,, as “of course we have no interest in withholding the transfer,” and adding that it had lately called the attention of the Comptroller to the fact that he was holding up the transfer for “ an unjustifiable lengtli.of time.’ As the result, the coiinsel for the defendant advised the defendant that this transfer was not subject to the provisions of section 228 of the Tax Law,, and., therefore, on October 24, -1903, the transfers were made and received. On Hovember 6, 1903, the attorneys for the legatees gave notice to the defendant of the .intention of .the legatees to institute an action for damages against it for refusing a transfer,"and in order that the defendant might purchase-in mitigation, .gave notice to it. of a public sale of the stock on Hovember eleventh. On Hovember ninth -the defendant wrote denying its ' liability, answering that the proposed disposition of the stock was a matter of unconcern. The stock was, therefore, sold for $31,115.
    
      Peter B. Olney, for the plaintiff.
    
      Albert B. Boardman, for the defendant.
   Jenks, J.:

The facts were stipulated; at the close of the testimony each party moved the court for a direction of a verdict, and neither thereafter requested any submission to the jury. The court directed q verdict for the plaintiff and ordered that the exceptions be heard by this court in the first instance. The action is not for a conversion, for the plaintiff received the stock and sued for the damages incident to the omission of the defendant to transfer it. "The proposition of the plaintiff is .that it became the duty of the defendant to make the transfer on or about July 29, 1903, but as it did not make the transfer until October 22 or 24, 1903, it must, therefore, respond for any damages incident to such delay. After the plaintiff received the stock it was sold at public vendue. The plaintiff sued for and has recovéred' the difference between the price realized and the value of the stock' on July , 29, 1903 — some $14,000 — with interest.

The stock in a foreign corporation owned by a non-resident was not taxable. (Matter of Whiting, 150 N. Y. 27.) Therefore, the consent of the State Comptroller, provided for • by section 228 of the Tax Law, was not necessary in order to protect the defendant. But I am of opinion that this action does not lie. In Denny v. Manhattan Co. (2 Den. 115) the resident transfer agent of a foreign corporation unjustly refused a transfer, and the plaintiffs brought action on the case. The court held that the action did not lie against the defendant, as it was not the agent of the plaintiffs and owed them no duty, but the agent of the defendant,, to whom alone it ivas answerable for any neglect in the discharge of agency. The judgment was affirmed in the Court of Errors, the chancellor and two of the senators delivering “ written opinions in favor of affirming the judgment of the Supreme Court upon the ground upon which its decision was made.” (5 Den. 639.) In Colvin v. Holbrook (2 N. Y. 129) the court say: “The question must be deemed at rest in this' State by the decision in Drury” (misprint for Denny) “ v. The Manhattan Co. (2 Denio, 118), affirmed in the court for the correction of errors.” (See, too, Montgomery County Bank v. Albany City Bank, 7 N. Y. 459, and 1 Morawetz Corp. [2d ed.] 537, citing Denny’s Case, supra.)

The eminent and able counsel for the plaintiff does not quarrel with the rule in Denny's ease, but would take this case out. of it upon the ground that the defendant is chargeable with a misfeasance, in that “ it undertook to do tliecbusiness in an improper manner.” Whether Mr., Wharton is correct when he speaks of the “now exploded distinction between misfeasances and, non-feasances” (Wharton’s Agency., § 537), it is • not necessary to discuss, for it seems clear that under the rule in this State the contention of the plaintiff cannot prevail. In Van Antwerp v. Linton, 89 Hun, 417, 419) the court, per Parker, J., say : “As between himself and his master he is bound to serve him with fidelity, and for a breach of his duty he becomes liable to the master, who in turn may be charged in damages for injuries to third persons occasioned by the non-feasance of the.servant. For misfeasance .the agent is generally liable to third parties suffering thereby. The' distinction between non-feasance and misfeasance has been expressed by the courts of this State as follows: ' If the duty, omitted by the agent or servant devolved upon him purely from his ■ agency or employment, his omission is only of a duty he owes his principal or master, and the master alone is liable. While if the duty rests upon him. in his individual character and was-one that the law imposed upon' him independently of his agency or employment, then he is liable.’ (Burns v. Pethcal, 75 Hun, 443.) ” The judgment was affirmed on the opinion below (157 N. Y. 716). In the case at bar the duty in which the defendant is said to be derelict Was one devolved upon it solely perforce of. the relation of principal and agent existing between it and the Hew Jersey corporation. In other words,;-the injury, if any, was not in failure of duty cast upon the defendant “ 'by law in common with all other men.” I recommend that the exceptions of the defendant be sustained and that a new trial be granted, costs to abide the event.

Hirschberg, P. J., Hooker and Rich, JJ., concurred.

Exceptions of the defendant, sustained and motion for new trial, granted, costs to abide the event. .  