Brewster v. Sime

By the Court, Crockett, J.: There are in this case but two material questions of fact, and two of law. The questions of fact are: First, Did Tilden pledge to defendants plaintiff’s stock as collateral security for a loan made at the time? Second, Did the defendants then have actual notice that the stock belonged to plaintiff and not to Tilden? On both these points there is a substantial conflict in the evidence. The defendant Hastings testified explicitly that, this, with other stock, was hypothecated with the defendants by Tilden, as security for a loan made at the time, and that they had no knowledge or notice that the plaintiff owned any part of it, or that it belonged to any one else than Tilden. The defendant Sime testifies substantially to the same facts; and on the first point they are corroborated to some extent by the witness Sharp. On the other hand, Tilden testifies that the plaintiff’s stock was not included in the hypothecation; and his testimony tends to show that Sime had actual notice that the stock belonged to the plaintiff. It was for the Court below to weigh the evidence, and to determine what credence the respective witnesses were entitled to. In such cases it is not our prac[143]tice to disturb the judgment on the ground that it is not justified by the evidence, even though we should consider it to be against the weight of evidence.

The questions of law are: First, Whether the fact that the stock stood on the books of the corporation in the name of Tilden, “ trustee” was sufficient to put the defendants upon inquiry as to the plaintiff’s title, and operated as constructive notice of his equitable rights. Second, Whether the fact that the plaintiff, on his departure for Europe, had placed the stock in Tilden’s hands for sale, with "authority to transfer it on the books of the corporation, had the effect to clothe him with such indicia of ownership as to protect the defendants, if in good faith and ignorance of the plaintiff’s rights they advanced money to Tilden on the hypothecation of the stock.

I am duly sensible of the gravity of these questions, in a community where transactions in stocks to a large amount are daily made, and where it is a matter of general notoriety that it is a common practice to transfer stocks into the name of some person as “ trustee,” for the sole purpose of concealing the name of the real owner, whose transactions in buying or selling a particular stock, if his name were known, might operate to enhance or depress its market value. To avoid this result, and also, possibly, with a view to escape assessments upon stocks of doubtful value, or to protect his credit from the damage to which it might he exposed if it were known that he was a large operator in certain stocks, the owner frequently resorts to the device of causing the stock to be transferred into the name of some other person, as “ trustee.” In such cases the trustee is a mere man of straw, having no interest in the stock nor any trust to perform, except to manage and dispose of it as the owner shall direct. This practice has become so notorious in this State that we cannot affect to be ignorant of it.