rule, then, is that the corporation will not be liable for the issue of the forged certificates, unless one of two things concur: 1. They must have been issued by its officer, appointed to issue genuine certificates, — in which case as already seen, it is, on the best judicial opinion, liable for his frauds on the public, on the principle of respondeat superior; 1 or 2. If they are issued by an officer not appointed to issue its certificates, but if they have negligently put it in his power to commit the forgery, then their negligence must be such that business men of ordinary prudence would be likely to foresee that such a result might happen.2 § 2579. Principle Illustrated: Certificates Issued through a Forgery by the President.- In a recent case in Massachusetts, the president of a corporation, who was not its proper officer to issue its share certificates, but who was required to sign such certificates together with the secretary, was re-elected to his office after becoming pecuniarily irresponsible, and was allowed access to the blank certificate book of the corporation and to its corporate seal. He availed himself of these facilities to issue forged certificates of shares of the company, while away from its office. He had, with what might be regarded as the knowledge of the corporation, been guilty of previous misconduct in transferring shares of stock in his name to a third person, instead of transferring them to associate shareholders, as he had agreed to do. On these facts, it was held that the corporation was not liable for his act in issuing forged certificates, in other words, that a bona fide taker of such certificates could not make the corporation respond in damages for not admitting him to registry as a shareholder. Whether this case was properly decided upon its facts is open to some doubts; but it will stand as a valuable statement of the applicatory principle of law in such "On the whole," said Allen, J., after stating the case in detail, "we find nothing to show that the corporation, or its members, had reason to suppose from what Jewett [the president] had done, that he would be likely to issue forged certificates of shares, if allowed access to the certificate book and seal of the corporation; and, accordingly, it is not to be held responsible for his criminal fraud, as for an act made possible by its negligence." 3 cases. § 2580. Forged Transfer of Name of a Co-Executor.— A recent decision in the English Court of Appeal holds that when, 1 Ante, § 1495. 2 Post, § 2579. 3 Hill v. Jewett Pub. Co., 154 Mass. 172; s. c. 13 L. R. A. 193; 10 Rail. & Corp. L. J. 173; 28 N. E. Rep. 142. under the Companies Clauses Act of 1845, § 48,1 the names of executors of a deceased shareholder are placed on the company's register of shareholders, in respect of shares which belonged to their testator, they become joint shareholders in their individual capacity, although they may be described as executors in the register; and consequently that the shares can only be transferred by means of a transfer executed by all of them.2 If one of them forges the name of the other to such a transfer, it will not pass title to the shares, and the case will stand on the same footing as any other case of a forged transfer of shares. 3 § 2581. The First Taker of the Original Certificate has no Right of Action against the Company. The right of action against the company, on the principles already explained, is a right of action in bona fide sub-transferees of the new certificates which have been issued in consequence of the forgery. The first person deceived by the forgery has, on principle, no right of action against the company for recognizing the forgery and issuing a new certificate to him; since it is his duty to discover the forgery as much as it is the duty of the company.5 It was distinctly held by the English Court of Appeal in 1880 that the issue of the company's stock certificate under a forged transfer is not a representation by the company that the immediate transfer to the person procuring it is valid, so as to give him a right of action against the company if it proves invalid. 1 The statute relates to the manner of transferring shares to the successor in title in case of the death of the shareholder, and says nothing about joint executors. 2 Barton v. London &c. R. Co., 24 Q. B. Div. 77; ante, § 2373. 3 Ibid. 4 Ante, § 2572. 5 This is clearly brought out in Hildyard v. South Sea Co., 2 P. Wms. 76, where the tranferee of the shares under the forged letter of attorney was, by reason of his negligence, held to pay the cost of the suit in equity to restore the title to the real owner. See the language of the court, ante, § 2567. 6 Simm v. Anglo-American Tel. Co. 5 Q. B. Div. 188; s. c., 49 L. J. (Q. B.) 392. Compare Hart v. Frontino, &c. Co., 39 L. J. Exch. 93. In this last case (which is discredited by the case cited immediately before it) after a certificate of shares in a limited company had been issued to H., and he had been registered as the owner, he, on the faith of his registration, repaid to his transferor a call which the latter had paid on the shares after the sale. The company afterward removed H.'s name from the register, and substituted that of F., it having been discovered that the shares had been duly transferred previously to F. It was held that the company were § 2582. But the Company has a Right of Action against Him. On the contrary, if the purchaser exhibits to the corporation a forged assignment of some of its shares, or a forged power of attorney to assign it, and thus obtains a new certificate which he sells, he is liable to the corporation, not because it is his duty to attend to the transfer of the shares, but because he has impliedly represented to the corporation that the forged signature is the genuine signature of the stockholder, whereby he has deceived the corporation.1 § 2583. Rule as to Forged Commercial Paper Declared by the English Court of Appeal in the Case of the Vagliano Ac‐ ceptances. In a case which is frequently cited as the case of the Vagliano acceptances,2 there was a series of forgeries by which the Bank of England was defrauded out of a great amount of money. These forgeries were committed under the following circumstances: V., a foreign correspondent of the plaintiff, was in the habit of drawing upon him. sometimes making the bills payable to the order of C. P. & Co., another foreign firm. G., a clerk of the plaintiff, forged the signature of V. to certain bills purporting to be drawn on the plaintiff by V. to the order of C. P. & Co. These bills resembled the genuine bills which V. was in the habit of drawing on the plaintiff. G. placed among the plaintiff's correspondence counterfeit letters of advice with respect to these forged bills, resembling the letters of advice ordinarily received by the plaintiff from V. By these means G. procured the genuine acceptances of the plaintiff to the bills which he had forged. He then forged upon the bills indorsements purporting to be those of C. P. & Co., the payees named therein, and was paid by the cashiers of the Bank of estopped by the certificate which they had issued to H., and by the fact of his registration, from denying his title to the shares, and that he could maintain an action against them for damages for removing his name from the register. Referring to his opinion in this case, Lord Bramwell said, in the subsequent case of Simm v. Anglo-American Tel. Co., supra,— “I am afraid that I did not perceive the effect of the certificates which had been issued, and did not appreciate the judgment in Re Bahia &c. R. Co., L. R. 3 Q. B. 584; s. c. 37 L. J. (Q. B.) 176. 1 Boston &c. R. Co. v. Richardson, 135 Mass. 473. That it is the duty of the first transferee to examine the genuineness of the transfer, and that the loss is primarily upon him, see Ham. bleton v. Central Ohio R. Co., 44 Md. 551; Brown v. Howard Ins. Co., 42 Md. 384; s. c. 20 Am. Rep. 90. 2 Vagliano v. Bank of England, 22 Q. B. Div. 103; s. c. affirmed in Court of Appeal, 23 Q. B. Div. 243; s. c. reversed in the House of Lords (1891), 1 App. Cas. 107. England across the counter the amounts for which the bills were drawn. Before the payment of the bills, the Bank of England was advised by the plaintiff, in the ordinary course of business, that the bills were coming forward for payment. On this state of case two questions arose and were considered before Mr. Justice Charles in the court below, and before the Court of Appeal on appeal from his decision: 1. Whether the Bank of England was protected by a certain section of the English Bills of Exchange Act of 1882, relating to "fictitious or non-existent payees." 2. Whether the plaintiff had been guilty of negligence such as precluded him from maintaining the action. Mr. Justice Charles held that the Bank of England was not protected by the statute; and, secondly, that the plaintiff was not precluded by his negligence from maintaining the action. On appeal, his judgment was affirmed. Five justices of the Court of Appeal held that the bank was not protected by the statute (Lord Esher, M. R., dissenting), and the whole court held that the plaintiff had not been gullty of negligence such as precluded him from maintaining the action. On a further appeal to the House of Lords, a majority of the lords held that the bank was protected by the statute, Lords Bramwell and Field dissenting. Four of the lords also held that the bank was protected by reasons turning on the conduct of the parties, that is to say, they took the view that the plaintiff, by reason of his negligence, ought to bear the loss. Two of the lords held that the plaintiff had not been guilty of conduct which cast the loss upon him. It thus appears, from this statement of a most unsatisfactory case, that six judges and two law lords, eight judges in all, were of opinion that the plaintiff had not been guilty of such negligence as to disentitle him to maintain the action, while four law lords were of the contrary opinion, -eight judges against four, while the case is probably to be regarded as having been decided upon a construction of the statute. The opinion of Lord Esher, M. R., in the Court of Appeal is valuable as containing a very clear statement of the rule of the law merchant which casts on the acceptor of a forged bill of exchange the burden of bearing the loss; and if, as is sometimes reasoned, the attitude of a corporation admitting to its registry the holder of a forged transfer of its shares, is similar to that of the acceptor of a forged bill of exchange, then this language has an important bearing on the question under consideration. At all events, it may be regarded in the light in which the English judges sometimes regard decisions of the American judges, as the opinion of a professor of the common law. Lord Esher said: "The acceptor is estopped from denying the handwriting of the drawer. That has been decided. On what principle does the decision rest? By the custom of merchants, which has been so proved as a fact that it has, like so many other mercantile customs, come to be accepted (without further evidence) as a fact by the court, - an acceptor is bound to know the handwriting of the drawer. The custom is rather more convenient than just. The present case is an instance in which the forgery and imitation is so perfect as to defy the most careful examination. But the custom has made the law. That being so, it must be negligence in the acceptor if he mistakes that which he is bound to know. It is, further, part of the custom of merchants that the acceptor, by accepting, represents to all into whose hands the document may bona fide come, that the person purporting to be the drawer is the real drawer. If, then, such a person gives value for the bill, relying upon such representation, he would be injured by such representation unless the acceptor were estopped. But where one negligently represents that to be true which is in fact false, in order that another may act upon such representation as if it were true, and the other does act upon it believing it to be true, and acts in such a way that, it being untrue, he would suffer loss or damage, if the one making the representation were allowed to rely on the untruthfulness, the one making the representation is by the law estopped from averring the untruthfulness against the other. This is a general rule of the law of estoppel. The facts being ascertained, the law declares the estoppel. And when once the estoppel is effectual, the transaction between the two parties is to be treated as it would be if the representation had been true. In the given case the transaction is, as between the bona fide endorsee for value and the acceptor, though not as between any other persons, to be treated as if the person purporting to be the drawer was in truth the drawer. If there is no other defect in the supposed bill, the acceptor is in such a case liable to pay the endorsee the amount of the bill." 1 1 Vagliano v. Bank of England, 23 Q. B. Div., at pp. 249, 250. |