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HENRY v. AUCHINCLOSS

April 17, 1961

Sarah E. HENRY, Plaintiff,
v.
AUCHINCLOSS, PARKER & REDPATH, Defendants



The opinion of the court was delivered by: HOLTZOFF

This is an action for the conversion of certain securities owned by the plaintiff. The matter is now before the Court on a motion for a directed verdict made by the defendants at the close of the entire case.

The plaintiff in this action, Sarah E. Henry, is an estimable elderly lady one hundred years old. The defendants are members of a stock brokerage and investment firm. The plaintiff contends that certain securities belonging to her were wrongfully delivered to the defendants by one of her sons, and that the defendants wrongfully sold those securities. The defense is that the son was clothed with indicia of apparent or ostensible authority, on which the defendants had a right to rely, that they relied upon them in good faith and sold the securities by the direction of the son and remitted the proceeds to the plaintiff.

 There are certain facts that are in dispute and the Court will not refer to them because on such a motion as that presented here the facts must be considered most favorably from the standpoint of the plaintiff. The undisputed facts, however, are sufficient to warrant the Court in directing a verdict in favor of the defendants, without regard to the other contested issues.

 The salient facts in this case are as follows. The plaintiff was the owner of certain securities. She had been in the habit of depending on her son, William Henry, to transact business for her and to handle some of her money matters for her. In 1954 William Henry died. A younger son, Ralph, who had been living in California, immediately came to Washington, moved into his mother's house and took up the task of handling some of his mother's affairs.

 On February 3, 1955 the son arranged to open an account in his mother's name with the defendants' stock brokerage house. The application for opening the account was signed by the plaintiff personally and the application stated that the client's bank was the Union Trust Company.

 On November 28, 1955 the plaintiff and her son opened a joint checking account in the Union Trust Company. The signature card in the bank's files was signed both by the plaintiff personally and by the son. Subsequently, on April 14, 1958 the son, Ralph D. Henry, designated his son, that is, the plaintiff's grandson, Ralph S. Henry, as an attorney in fact to sign checks on the account.

 In the year 1958, the son from time to time delivered stock certificates belonging to his mother and purporting to have been endorsed in her name, to the defendants with instructions to sell the stock. These certificates had been kept in the safe deposit box to which reference has been made. The defendants sold the certificates, as instructed by the son, from time to time, and made out checks for the proceeds of the sales to the order of the plaintiff, Sarah E. Henry. The endorsements on these checks show that they were deposited either to the account of Sarah E. Henry, or to the joint account heretofore mentioned in the Union Trust Company. The son and grandson drew checks against the joint account for their own purposes.

 The foregoing constitute the salient facts on which the rights of the parties depend. This brings us to a consideration of the applicable principles of law.

 What is known as apparent authority of an agent or ostensible authority or agency by estoppel, as it is variously called, has been very aptly defined in the Second Edition of the Restatement of the Law on Agency. In Section 27, Chapter 3, it is stated that:

 'Apparent authority to do an act is created as to a third person by written or spoken words or any other conduct of the principal which, reasonably interpreted, causes the third person to believe that the principal consents to have the act done on his behalf by the person purporting to act for him.'

 And, again, the Restatement states:

 'For apparent authority there is the basic requirement that the principal be responsible for the information which comes to the mind of the third person, similar to the requirement for the creation of authority that the principal be responsible for the information which comes to the agent. Thus, either the principal must intend to cause the third person to believe that the agent is authorized to act for him, or he should realize that his conduct is likely to create such belief.'

 The Supreme Court has approved this doctrine and has applied it in Bronson's Executor v. Chappell, 12 Wall. 681, 683, 20 ...


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