How have the courts interpreted a direct purchase of shares from a stockholder of record by one desiring and intending to become himself the owner of the company?

Webster v. Upton, 91 U. S. 71. That appears to have been a case of the direct purchase of shares from a stockholder of record by one desiring and intending to become himself the owner. In such a case, where the purchase might be reasonably deemed one for investment, it may be, as the court declared, that there is implied authority in the vendor to make the transfer on the books of the company, but no such implication can attend the dealing of broker with broker. Each knows that the other is merely a middleman or agent for third persons, for that is their customary and constant attitude. The broker buying neither knows nor cares who the real seller will prove to be, and the broker selling neither knows nor cares who is to be the real buyer. Each understands that the other is only the intermediate channel or agency of transfer, and an absolute ownership on either side would seldom be suspected. To say of such a case that the broker selling is authorized by implication to treat the broker buying not merely in some but in all respects as the ultimate owner, by making a transfer to him on the corporate books, instead of sending certificates assigned in blank after the customary method, would be to introduce into the broker's business an element of incalculable danger. It would be ruinous to the stock exchanges and perilous to their dealers. Who would loan money upon stock collateral or carry stocks for customers upon a margin if the broker vendor could at once, on a mere order to buy, make the broker vendee a stockholder, and load upon him ruinous responsibilities? If the latter is so at the mercy of the former, there might be purchases for investment, but none except at enormous peril for that vast volume of transactions which proceed without and do not contemplate such transfers. The whole course of the broker's business, as disclosed by the evidence, forbids the existence of any such implied authority. The defendants, therefore, were put upon the books of the company as shareholders, without their knowledge, authority, or consent, and contrary to their purpose and intention. The act was not theirs, and could only become theirs by a subsequent ratification; and hence it was that we said before, and now repeat, that the question involved is not one of entoppel, but solely and only one of ratification.