assumption at their peril. Gallo v. Brooklyn Savings Bank, 199 N. Y. 222, 92 N. E. 633, 32 L. R. A. (N. S.) 66. As was said in Shipman v. Bank of the State of New York, 126 N. Y. 318, 27 N. E. 371, 12 L. R. A. 791, 22 Am. St. Rep. 821, the plaintiff bank in each case took these checks without inquiry as to the genuineness of the indorsements and relied entirely upon the responsibility of the person presenting the same for payment, and not in reliance upon anything done or foreborne, except the fact that the checks bore the indorsement of Bayliss. The defendant had a right to assume that any bank cashing or handling, or passing along, the checks which the defendant had issued in payment of claims, would ascertain with reference to the genuineness of any and all indorsements thereon. The plaintiff in purchasing these checks obtained no right, title, or interest in or to the checks; a forged indorsement does not pass a title to commercial paper, negotiable only by indorsement. Citizens' National Bank, etc., v. Importers' and Traders' Bank, 119 N. Y. 195, 23 N. E. 540. In the forgeries committed by Bayliss, in making false proofs of death, forging the names of the payees and through such instrumentality stealing the money from the plaintiff, he was not acting as agent of the defendant. Shipman v. Bank, 126 N. Y. 318, 27 N. E. 371, 12 L. R. A. 791, 22 Am. St. Rep. 821; Frank v. Chemical National Bank of New York, 84 N. Y. 209, 38 Am. Rep. 501.

This is not a case where the loss must fall upon the one of two innocent persons who has enabled the third party to do the injury, because the injury was brought about through the instrumentality of a criminal act. Nash v. Moore, 165 App. Div. 67, 151 N. Y. Supp. 96. The rule is laid down in Critten v. Chemical National Bank, 171 N. Y. 219, 63 N. E. 969, 57 L. R. A. 529, that the doctrine of ratification or estoppel has no application when money is stolen from a bank through the bank's contributory negligence.

[2] There is no proof that any of these moneys were paid by Bayliss to his employer. The facts upon the record show that the only moneys paid by Bayliss to the company were premium moneys which Bayliss had actually collected weekly upon policies issued by the company. Such money was received in the usual course of business and in good faith, and for that reason it cannot be pursued by the bank to make good the loss which the bank has sustained through the cashing of the forged checks. Ball v. Shepard, 202 N. Y. 247, 95 N. E. 719.

There was no mistake between the parties to this litigation. There was no privity of contract between them. The bank dealt with Bayliss as an individual, and only as such. There was no mistake of dealing between the bank and the insurance company. The checks were not payable to bearer; Bayliss forged the indorsements of the payees, and the bank upon Bayliss' indorsement purchased each check, without ascertaining whether the indorsement was genuine or otherwise.

Findings may be submitted in accordance herewith, and upon such findings judgment may be entered dismissing the complaint, with costs.

SELWYN-BROWN v. SUPERNO CO., Inc

(Supreme Court, Appellate Division, First Department. February 1, 1918.) 1. CORPORATIONS 98-STOCK-COMPELLING ISSUE EVIDENCE.

In a suit to compel a corporation to issue to plaintiff a certificate for shares of its stock, judgment that plaintiff was the owner and entitled to the certificate held sustained by the evidence.

2. CORPORATIONS 98-STOCK-REFUSAL TO ISSUE CERTIFICATE-REMEDY. Where a corporation has wrongfully canceled a stockholder's certificate, he may sue in equity to compel it to issue to him a certificate.

3. CORPORATIONS 98-STOCK-COMPELLING ISSUE OF CERTIFICATE-PAR

TIES.

In suit to compel a corporation to issue certificate, where plaintiff could prove his ownership of the stock, and required no relief from one alleged by defendant to be the owner, it was unnecessary for him to make such person a party.

4. APPEAL AND ERROR 671(4)—RECORD-SCOPE OF REVIEW-MATTERS NOT SHOWN.

There being nothing in the record with respect to the circumstances under which the capital of defendant corporation was decreased or increased, no adjudication concerning the validity of such decrease or increase of the capital stock could be made.

5. CORPORATIONS 98-ACTION FOR DELIVERY OF CERTIFICATE-Defenses.

Where plaintiff, suing to compel issuance of a stock certificate, showed that on a certain date he was entitled to a certain number of shares, but it appeared that subsequent to such date the capital stock of the corporation was decreased, a judgment ordering issue of the number to which he was originally entitled, which was in excess of its capital as decreased, was erroneous.

Appeal from Special Term, New York County.

Action by Arthur Selwyn-Brown against the Superno Company, Incorporated. Judgment for plaintiff, and defendant appeals. Reversed, and new trial granted.

Argued before CLARKE, P. J., and LAUGHLIN, SCOTT, PAGE, and SHEARN, JJ.

Arthur L. Fullman, of New York City (John G. Pheil, of New York City, on the brief), for appellant.

Christian S. Lorentzen, of New York City, for respondent.

LAUGHLIN, J. This is a suit in equity to compel the defendant to issue to the plaintiff a certificate for 5,100 shares of its capital stock, and enjoining it and its officers from denying to him the right to vote the stock and the proportionate voice in the conduct of the affairs of the company to which such ownership entitles him. It was brought upon the theory that upon the incorporation of the company on or about the 4th day of June, 1914, one Geoghegan, to whom 20,400 shares of capital stock were duly issued, surrendered his certificate therefor, and authorized the defendant to issue three certificates in place thereof, one to plaintiff for 5,100 shares pursuant to a prior promoters' agreement between him and the plaintiff and one Matthews, and that certificates were thereupon issued accordingly, and

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proper entries of the transfer of the certificate from Geoghegan to plaintiff were entered in the books of the defendant, but that the certificate was not delivered to plaintiff, and delivery thereof was refused on demand duly made, and he has been excluded from exercising his rights as a stockholder.

The original name of the corporation was Lintross & Wylford Engineering Company, Incorporated, but the name was duly changed by an order of the Supreme Court made on the 12th day of May, 1915, to Superno Company, Incorporated, the defendant. The evidence satisfactorily showed and the trial court found that the original certificate for 20,400 shares of the par value of $5 each was duly issued to Geoghegan for full value, and that, pursuant to an agreement in writing and under seal, made between Geoghegan, the plaintiff and Matthews on the 26th day of May, 1914, in contemplation of the formation of the company, the defendant Geoghegan in consideration of $1 and other good and valuable consideration, receipt of which was admitted, sold, assigned, transferred, and set over unto the plaintiff with full power to transfer the same on the books of the corporation when opened all his right, title, and interest in and to 5,100 shares of the capital stock of the company; that when the original certificate was issued to Geoghegan he surrendered it to the company for cancellation, without, however, formally transferring by signing the blank transfer and power of attorney printed thereon, and authorized and directed the officers of the company to issue three certificates in place thereof, one to himself for half the amount, another to plaintiff for one-fourth of the amount, or 5,100 shares, and the third to Matthews for a like amount, pursuant to said agreement of May 26, 1914, which he then produced and delivered to and left with the officers of the company, and that thereupon the original certificate to Geoghegan was canceled, and certificates in place thereof were signed by the plaintiff as president of the company pursuant to the authority then verbally conferred by Geoghegan and pursuant to said agreement of May 26, 1914, and left with the treasurer of the company to be signed by him and to be held in escrow by him as treasurer and trustee pursuant to an agreement in writing then and there signed and executed between Geoghegan, the plaintiff and Matthews by which it was to be so held until they agreed that sufficient shares of treasury stock had been sold to enable the company satisfactorily to finance its business, such period, however, not to exceed two years, and by which the respective owners of the stock were to be entitled to vote thereon in the meantime; that these certificates were subsequently signed by the treasurer and held by him pursuant to the escrow agreement; that the plaintiff was not permitted to exercise his right to vote his certificate of stock, and that delivery of it to him after the expiration of the escrow agreement was refused, and that without his consent or authority from him, but by direction of Geoghegan it was indorsed by the president and secretary and treasurer of the company canceled on the 22d day of July, 1915; that the stock and minute books of the defendant showed that the certificate was so issued to the plaintiff, and that he held and owned the same on the 4th day of June, 1915, which is the date filled in in the

certificate signed in blank by the plaintiff as president on or about the 4th day of June, 1914, as aforesaid.

[1, 2] The judgment in favor of the plaintiff to the effect that he was the owner and entitled to the certificate of stock is fairly sustained by the evidence. The contention of the appellant that his sole remedy is an action at law is without merit. It is well settled that a suit in equity by a stockholder will lie against a corporation to compel it to transfer his stock on the books of the corporation or to issue to him a certificate of stock where it has wrongfully canceled his certificate. Bedford v. American Aluminum Co., 51 App. Div. 537, 64 N. Y. Supp. 856; Powers v. Universal Film Mfg. Co., 162 App. Div. 805, 148 N. Y. Supp. 114; Travis v. Knox Terpezone Co., 165 App. Div. 156, 150 N. Y. Supp. 621, affirmed 215 N. Y. 260, 109 N. E. 250, L. R. A. 1916A, 542, Ann. Cas. 1917A, 387; Cushman v. Thayer Mfg. Co., 76 N. Y. 365, 32 Am. Rep. 315; Robinson v. Nat. Park Bank, 95 N. Y. 637.

[3] The defendant pleaded as a defense that Geoghegan was the owner of the stock claimed by the plaintiff and that he forbade the transfer of the stock to the plaintiff and demanded that it be delivered to him. It was neither alleged nor proved that stock representing plaintiff's certificate had been issued to a bona fide holder for value or to any one, or that issuance of the certificate to plaintiff would constitute an unlawful duplication of stock. See N. Y. & N. H. R. Co. v. Schuyler et al., 34 N. Y. 30–81. The plaintiff was able to prove his ownership of the stock and required no relief from Geoghegan with respect thereto, and therefore it was unnecessary for him to make Geoghegan a party defendant; but if defendant deemed it necessary for its protection against any claim by Geoghegan to have him bound by the judgment it could have interpleaded him. Powers v. Universal Film Mfg. Co., supra.

[4, 5] The defendant further pleaded as a separate and partial defense that on or about the 6th day of April, 1915, its capital stock was reduced from 40,000 shares of the par value of $5 to 5,000 shares of the par value of $5, and it offered evidence in support of that defense which was excluded, and it excepted to the ruling. Evidence, however, to the effect that the capital stock was so reduced, came into the record incidentally, and the court found at the request of the defendant that the capital stock had been so reduced. There is also an intimation in the record that the capital was subsequently increased. The record being barren with respect to the circumstances under which the capital was decreased or increased, there can be no adjudication concerning the validity of such decrease or increase of the capital stock. If the judgment were permitted to stand, the defendant would be required to issue to the plaintiff more than the entire amount of its present capital stock, provided its capital has been lawfully reduced to 5,000 shares. It would therefore, in any event, be necessary to limit the judgment on this record to the plaintiff's rights as of June 4, 1914. That, however, would only result in confusion, and would necessarily lead to further litigation to have it determined what his

ownership of 5,100 shares of stock as of June 4, 1914, represents at the present time. It does not appear whether or not a certificate of stock was issued in place of the plaintiff's certificate when or before or since it was canceled, nor does it appear whether when the capital was reduced or increased a certificate representing the plaintiff's stock or his interest in the increased stock was issued to another. The corporation should neither be required to issue certificates in excess of its capital as authorized by law, nor should it be required to duplicate shares lawfully represented by outstanding certificates; and it may therefore be essential to a complete determination of the issues to bring in other parties, to the end that the judgment to be entered shall finally authoritatively adjudicate these matters, and shall not require the unlawful duplication of stock or the issuance of stock in excess of the authorized capital. N. Y. & N. H. R. Co. v. Schuyler et al., 34 N. Y. 30, 79, 80, 81; N. Y. & N. H. R. Co. v. Schuyler, Cross et al., 17 N. Y. 592; Mechanics' Bank v. N. Y. & N. H. R. Co., 13 N. Y. 399; Kellogg v. Siple, 11 App. Div. 465, 42 N. Y. Supp. 379; Reno Oil Co. v. Culver, 33 Misc. Rep. 718, 68 N. Y. Supp. 303; Thompson on Corporations (2d Ed.) §§ 3545, 3550-3552, 3558.

It follows that the judgment should be reversed, and a new trial granted, but without costs. Settle order on notice.

CLARKE, P. J., and PAGE and SHEARN, JJ., concur. SCOTT, J., concurs in result.

BROWN v. CARPENTER et al.

(Supreme Court, Appellate Division, First Department. February 1, 1918.) 1. BROKERS 16-UNDISCLOSED PRINCIPAL-DISCLOSURE.

Where plaintiff purchased bonds on margin through a broker from defendant broker, and later went to defendant, who, after identification of plaintiff by the other broker as the purchaser, took orders from plaintiff and sold the bonds, the defendant became the agent of plaintiff, and was required to pay over the profits to plaintiff, except as to advances made to the other broker prior to the disclosure.

2. BROKERS 24(1)-DUTIES OF BROKER-UNDISCLOSED PRINCIPAL.

Where plaintiff purchased bonds on margin through a broker who purchased them through defendant broker, it was the duty of defendant, when the plaintiff was disclosed and ordered a sale of the bonds, to inform him, if they had already sold the bonds and had handled the transaction as a short sale.

3. BROKERS 24(1)—“SHORT SALE."

In a "short sale" the broker makes a delivery of bonds or stock, charging the price thereof to the customer, and the account is carried until the customer orders the broker to repurchase the bonds, and an adjustment is made between the broker and customer on the difference between the selling and purchasing price.

4. BROKERS 37-SALES OF BONDS SHORT SALE-QUESTIONS FOR JURY.

In an action against a broker for proceeds from a sale of bonds, whether the transaction was a short sale, held, under, the evidence, a question of fact for the jury.

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