ANDREWS, Ch. J.

The rigid rule of the common law which prohibited the assignment of choses in action was, in England, at an early day, relaxed to some extent to conform to the usages of merchants and the necessities of commerce, and at length, by the aid of statutes and judicial decisions, bills of exchange and promissory notes were completely taken out of its influence, and they came to have distinct attributes and qualities not pertaining to any other form of contract. They were not only made transferable by delivery and suable in the name of the transferee, but, contrary to the general rule of the common law, "honest acquisition" for value was held to give to the transferee a new and original title, wholly independent of that of the prior holder and subject to no infirmity which affected the paper in his hands. The real owner, who had been despoiled of the paper by robbery or theft, or who had lost it without negligence, was concluded from re-claiming it, and the maker, although he had been defrauded into executing it, could not be heard to allege the fraud as a defense against a bona fide holder. And the transferee, although he may have been negligent in taking it, and omitted precautions which a prudent man would have taken, nevertheless, unless he acted mala fide, his title, according to the doctrine now settled, will prevail. These familiar but arbitrary principles applicable to commercial paper, originating in commercial policy, the encouragement of trade, the convenience of having some representative of money readily convertible and commanding confidence, while they operate in many cases with great severity upon the rights of innocent persons, have contributed greatly to stimulate commerce and advance the prosperity of states. The principles applicable to negotiable paper have been extended to embrace public debentures payable to bearer, and bonds of corporations, and some of the incidents of negotiability have either by custom or statute been applied to instruments not strictly negotiable. Certificates of stock, in business corporations, are embraced in the class last mentioned. They are not negotiable in form, they represent no debt and are not securities for money. But the courts of this country, in view of the extensive dealings in certificates of shares in corporate enterprises, and the interest both of the public and of the corporation which issues them, in making them readily transferable and convertible, have given to them some of the elements of negotiability. The owner of shares may transfer his title by delivery of the certificate with a blank power of attorney indorsed thereon signed by the owner of the shares named in the certificate. Such a delivery transfers the legal title to the shares as between the parties to the transfer, and not a mere equitable right. ( M.c.Neil v. Tenth National Bank, 46 N.Y. 325. ) The transferee in good faith and for value, holds his title free from latent equities between prior parties in the line of transmission. Under the doctrine of implied agency and the application of the principle of estoppel to the situation, the true owner is in many cases precluded from asserting his title. The case of McNeil v. Tenth National Bank is a leading case on the subject, and marks the limit to which the court has hitherto gone in subordinating the rights of the true owner of a stock certificate to the title of a transferee derived under one who, being in possession of the certificate by the consent of the true owner, has transferred it in fraud of his rights. That case holds that an agent to whom the owner has delivered a certificate of stock duly indorsed for transfer, with a limited power of disposition for a special purpose, may bind the title thereto as against the true owner by transferring it to a bona fide transferee who has no notice of the limitations of the agent's authority, although the transfer was made for an unauthorized purpose and with the intention on the part of the agent to commit a fraud upon his principal. The certificates there in question were pledged by the owner with brokers to secure advances, having indorsed thereon in form an unconditional power of attorney to make all necessary transfers, but with a limited authority to use the power only when necessary to make the pledge available. The brokers, in violation of their duty, pledged the shares for a large sum for their own purposes, and the controversy was between the original owner and the pledgees of the brokers. It was decided that, under the circumstances disclosed, the original owner, having placed the certificates in the hands of the brokers with power of disposition, was estopped as against the pledgees in good faith and for value, from denying their authority to transfer, upon the principle that the owner should rather suffer for his misplaced confidence in the brokers than those who dealt with them on the strength of an apparent authority. In the well-known case of New York and New Haven Railroad Company v. Schuyler ( 34 N.Y. 30) the same principle of implied agency was applied to charge the corporation with liability in damages for spurious stock issued by Schuyler, the president and transfer agent of the company.

The courts have been frequently importuned to extend the qualities of negotiability of stock certificates beyond the limits mentioned, and clothe them with the same character of complete negotiability as attaches to commercial paper, so as to make a transfer to a purchaser in good faith, for value, equivalent to actual title, although there was no agency in the transferrer, and the certificate had been lost without the fault of the true owner or had been obtained by theft or robbery. But the courts have refused to accede to this view, and we have found no case entitled to be regarded as authority which denies to the owner of a stock certificate which has been lost without his negligence, or stolen, the right to reclaim it from the hands of any person in whose possession it subsequently comes, although the holder may have taken it in good faith and for value. The precise question has not often been presented to the courts, for the reason probably that they have with great uniformity held that stock certificates were not negotiable instruments in the broad meaning of that phrase, but, whenever the question has arisen, it has been held that the title of the true owner of a lost or stolen certificate may be asserted against any one subsequently obtaining its possession, although the holder may be a bona fide purchaser. ( Anderson v. Nicholas, 28 N.Y. 600; Bangor Electric Light Power Co. v. Robinson, 52 Fed. Rep. 520; Biddle v. Bayard, 14 Pa. St. 150; Barstow v. Savage Mining Co., 64 Cal. 388. See Shaw v. R.R. Co., 101 U.S. 557.) It may be observed that the elaborate opinion of Judge RAPALLO in McNeil v. Tenth National Bank, to show that the plaintiff in that case was estopped from asserting his title on the ground of implied agency, was quite unnecessary if a transfer of a stock certificate indorsed in blank to a bona fide holder conferred a title as against the true owner, irrespective of the fact whether he voluntarily parted with the possession or was deprived of it by felony or fraud. It is plain, we think, that the argument in support of the judgment in this case, based on the complete negotiability of stock certificates, is not supported by, but is contrary to the decisions. If public policy requires that a further advance should be made in more completely assimilating them to commercial paper in the qualities of negotiability, the legislature and not the courts should so declare. Under the law as it has hitherto prevailed there does not seem to have been any serious hindrance in dealing with property of this character. It may, perhaps, be doubted, taking into consideration the interests of investors as well as dealers, whether it would be wise to remove the protection which the true owner of a stock certificate now has against accident, theft or robbery. The system of registry of negotiable bonds, which prevails to a considerable extent, authorized by statutes of some of the states, and of the United States, seems to indicate a tendency to restrict rather than to extend the range of negotiable instruments.

Nor, in our opinion, can the judgment below be sustained upon any principle of agency in Jurgens, express or implied, to issue the surrendered certificates, which, on the issue of the new certificates to Siebrecht, became mere vouchers in possession of the company. If it can be said that the direction of the president to Jurgens to cancel the certificates made him the agent of the company for that purpose, it was an authority to destroy and not to use. His act in abstracting them from the safe and uttering them as valid certificates had no relation to the authority conferred. It was not an act of the same kind as that which he was authorized to perform. He had no apparent authority to issue them as genuine certificates, because he had no authority to issue certificates for any purpose, and what he did was, as was said in Manhattan Life Ins. Co. v. 42 nd St. G.S.F.R.R. Co. ( 139 N.Y. 146), "a willful and criminal act perpetrated for private gain and not connected with any official authority or semblance of authority which he possessed as the defendant's agent." The certificates were, at all times after their surrender and before they were abstracted by Jurgens from the safe of the defendant, in the legal possession of the company. The company never placed them in the possession of Jurgens or invested him with the indicia of ownership. He had access to the safe as the mere servant of the defendant. The doctrine of implied-agency is, we think, wholly inapplicable to the circumstances of this case.

We come, therefore, to consider the ground upon which the learned referee placed his judgment against the defendant, viz.: the negligence of the company: The claim of liability of the defendant on the ground of negligence is based on the fact that in violation of its by-laws it permitted the surrendered certificates to remain uncanceled in its safe, to which Jurgens had access, and thereby enabled him to commit the fraud, and upon the further allegation that the company neglected to exercise a proper supervision over its business and the conduct of its employees, and committed to Jurgens the management of its affairs without special inquiry into the manner in which he discharged his duties. We are of opinion that the company was not chargeable with any negligence which gives a right of action for the injury caused to the plaintiff by the fraudulent use by Jurgens of the surrendered certificates. The surrendered certificates were placed by the company in its safe in its office, of which Jurgens had the key, and thereby, it may be said, afforded him the opportunity to commit the crime of which he was guilty, in abstracting and uttering them as valid. But it is not true as a general rule that a man may not intrust his property to the custody of his servant, except at the peril of losing his title thereto if the servant steals and disposes of it to another. There must be something more than the mere intrusting to a servant of the custody of a chattel and the consequent opportunity for theft, in order to preclude the master from reclaiming it, if stolen by the servant and sold to another. (RAPALLO, J., in McNeil v. Tenth National Bank, supra, p. 329.) The rule declared by ASHURST, J., in Lickbarrow v. Mason (2 D. E.70), frequently quoted, that "Whenever one of two innocent persons must suffer by the act of a third, he who has enabled the former to occasion the loss must sustain it," has no application to such a case. The case in which the rule was stated affords a good illustration of its application. The consignor and vendor of the goods had by the delivery of a bill of lading delivered the possession of the goods to the holder with power according to the law merchant to transfer them by indorsement of the bill, and it was held that as against a transferee in good faith for value, the right of stoppage in transitu was lost. It was a case where the vendor had by his affirmative act enabled the holder to commit a fraud upon his rights and it was justly held that he should bear the loss rather than the innocent purchaser. The familiar statement of Lord HOLT, in Hern v. Nichols (1 Salk. 289), "for seeing somebody must be a loser by this deceit, it is more reason that he that employs and puts a trust and confidence in the deceiver should be a loser, than a stranger," was made in a case where the question was whether a merchant was liable for the deceit of his factor in the sale of goods represented to be of one quality when they were of another. The principle announced by Lord HOLT has been frequently applied to such and similar cases. But the employment of a servant to whom is intrusted the master's property, with no power of disposition, is not alone such a putting of trust and confidence in the servant by the master as to enable the latter by his wrongful act to defeat the master's title. The rule which would convert the mere employment of a servant into an authority in him, as to third persons, to sell or dispose of his master's goods intrusted to him for safe keeping, would be highly dangerous, and has no sanction in the adjudged cases.

It remains to consider whether there were any special circumstances in this case which take it out of the general rule adverted to. Jurgens had been in the employment of the defendant for several years prior to the transaction in question and nothing had come to the knowledge of the defendant which raised doubt as to his honesty and faithfulness. The facts found by the referee show that the defendant reposed confidence in his integrity, and, so far as appears, the abstraction and uttering of the surrendered certificates was his first act of malversation during his employment. His power in respect to the issuing of certificates on the transfer of stock was clerical only. In case of transfer, he was accustomed to cancel the surrendered certificates and paste them in the certificate book, prepare the new certificate and impress the company's seal thereon, and then procure the president of the company to sign it. In every case prior to the one in question, the president signed the new certificate only, when the surrendered certificate was presented to him by Jurgens, canceled, together with the new certificate. There was a departure from that practice in the single instance in question under the special circumstances found by the referee. The president of the company knew when he signed the new certificate that the old certificates had been surrendered and were then in possession of the company, because he had himself placed them in the safe, and the fraud of Jurgens was made possible because the president relied upon Jurgens to cancel the surrendered certificates as he had directed him. It is urged that the improper use made of the certificates might reasonable have been expected to result from leaving them in the safe of the company in his care uncanceled. In other words, the claim is that the company ought to have anticipated that Jurgens might commit the crimes of forgery and larceny, and put the certificates on the market if they were left uncanceled under his control. We do not assent to this suggestion. If the company knew that Jurgens was dishonest, or had reason to suspect his honesty, a different question would be presented. But it is not generally an omission of ordinary prudence that an employer deals with his employees on the assumption that those who have hitherto been faithful in the performance of their duties will continue so to be, or because he does not anticipate and provide against the possibility of their criminal acts. Breaches of trust and confidence unfortunately are not infrequent. But honesty is nevertheless, we believe, the general rule of human conduct, and one may indulge in this faith in human nature and trust those who have proved themselves worthy of it without subjecting himself to a charge of negligence if it should turn out that they afterwards yielded to temptation and used their position to the injury of others. "It is one thing to say that a man shall be amenable for such immediate consequences of his acts as a reasonable man might foresee and dread and, therefore, shun. But it is another and very different proposition to maintain that a man shall forfeit his property because he has done an act which will not be perilous unless others are guilty of misconduct which that act does not cause." (WILLIAMS, J., Ex parte Swan, 7 C.B.[N.S.] 447. See, also, BRAMWELL, L.J., Baxendale v. Bennett, L.R. [3 Q.B.D.] 530.)

The fact that in the particular instance the defendant did not observe the by-law, and issued the new certificate without the actual cancellation of the surrendered certificates, was not, we think, as to the plaintiff, actionable negligence. It may be admitted that a business corporation is bound to exercise reasonable care in respect to the transfer of its shares. The defendant had adopted the usual precautions, and its by-laws required that transfers should be made only on the surrender and cancellation of outstanding certificates. The certificates on their face carried an assurance by the company that the shares represented had not been transferred on the books of the company, while the original certificates were outstanding. There was no representation on the face of the certificates that surrendered shares would be actually canceled by the company. The company, however, had by the by-law provided that this should be done, and it is said, and it is undoubtedly true, that this regulation was in conformity to the usual practice of stock corporations. By-laws are primarily for the protection of the corporation enacting them and its stockholders. The regulation that transfers shall only be made on the books on surrender of the outstanding certificates is essential as well for the protection of the company as the dealers in the stock. The regulation for actual cancellation of surrendered certificates is a still farther protection. But can it be justly said that this latter regulation was so obligatory on the company that a single departure therefrom under special and peculiar circumstances, which gave an opportunity for Jurgens' crime, was, as to the plaintiff, actionable negligence? We think it was not. To constitute actionable negligence there must not only be a violation of duty owing by one to another or to the public, but the injury must be the natural consequence of the alleged negligent act or one which might reasonably have been anticipated. PARKE, B., in the Bank of Ireland v. Trustees of Evans' Charities (5 H.L. Cas. 389), where it was claimed a corporation was bound by the fraudulent affixing by its secretary of the seal of the corporation in his custody, to a power of attorney to transfer its funds in the Bank of Ireland, states the true ground of actionable negligence in such a case. Speaking for the judges he says: "They are all of opinion that the negligence which would deprive the corporation of their right to insist that the transfer was invalid, must be negligence in or immediately connected with the transfer itself." BLACKBURN, J., in Swan v. N.B. Australasian Co. (2 H. C. 181), states the principle with even greater perspicuity. He says: "The neglect must be in the transaction itself, and be the proximate cause of leading the party into the mistake; and also, as I think, that it must be the neglect of some duty that is owing to the person led into that belief, or, what comes to the same thing, to the general public, of whom the person is one, and not merely neglect of what would be prudent in respect to the party himself, or even of some duty owing to third persons, with whom those seeking to set up the estoppel are not privy."

The claim that the injury to the plaintiff was occasioned by the omission of the defendant to exercise proper supervision over the conduct of Jurgens has, we think, no force. There was an interval of about three weeks between the time when the certificates were surrendered to the company and their abstraction and transfer by Jurgens. If during this period the officers of the defendant had examined the contents of the safe, it might have been ascertained that the certificates were uncanceled. An examination after that time would not have benefited the plaintiff, at least there is no evidence that a discovery of the fraud after it had been accomplished would have changed his position. The transfers of stock on the books of the company were comparatively infrequent. The president had reason to suppose that Jurgens would obey his directions and cancel the certificates, and the omission to inquire whether he had done so, during the period mentioned, is, as we think, quite insufficient to support the charge of negligence.

Finally, if the company had been the owner of some of its own shares, or if it had owned shares in other corporations which had been deposited in its safe for safe keeping, and they had been stolen and sold by Jurgens to the plaintiff, there can be no doubt that the company could reclaim them, and the loss would fall upon him. It is difficult to see how he could acquire a better right to the surrendered certificates or charge the company with damages resulting from Jurgens' crime.

Having reached the conclusion that there was no actionable negligence on the part of the defendant, it is unnecessary to consider the other questions argued at the bar.

The judgment below should be reversed and a new trial ordered, with costs in all the courts to abide the event.

All concur.

Judgment reversed.