Wright v. Blank

Citation20 F.2d 591
Decision Date01 July 1927
Docket NumberNo. 5049.,5049.
PartiesWRIGHT v. BLANK. In re LAUZIER-WOLCOTT & CO.
CourtU.S. Court of Appeals — Ninth Circuit

W. I. Wright, of Butte, Mont., in pro. per.

Fred J. Furman, Thomas J. Walker, and William Meyer, all of Butte, Mont., for appellee.

Before GILBERT, RUDKIN, and DIETRICH, Circuit Judges.

DIETRICH, Circuit Judge.

Lauzier-Wolcott & Co., copartners, were stockbrokers with principal offices at Butte, Mont. Not being members of the New York Stock Exchange, they transacted most of their business through A. A. Houseman & Co., a member of the Exchange. As found by the referee, they operated in a manner very similar to that explained at length in the opinion of the court in the case of Skiff v. Stoddard, 63 Conn. 216, 26 A. 874, 28 A. 104, 21 L. R. A. 102. On June 4, 1925, they posted a notice on their door that they were unable to meet their obligations, and thereafter they did not again open for business. Seven days later, both as a firm and as individuals, they were adjudged involuntary bankrupts. The matter was referred, and in due time Herman Blank was elected and qualified as trustee.

The appellant, W. I. Wright, was one of their numerous customers, and, being what is known as a margin trader, he kept on deposit with them, as is the custom, securities to protect them against loss. These securities, together with those of their other customers, they in turn hypothecated with Houseman & Co. as collateral for their obligations to that concern. At the close of business on June 3, 1925, they were indebted to Houseman & Co. in the net amount of $1,203,645.22, for which Houseman & Co. held collateral so deposited of the value of $1,454,123.72. Of this, collateral securities to the value of $6,769.31 were the property of the bankrupt, and the balance consisted of securities either belonging absolutely to their customers or purchased for them on margin. On June 4 and 5, 1925, upon being advised that Lauzier-Wolcott & Co. had closed their doors, Houseman & Co. sold sufficient of the collateral in their possession to liquidate the account, and thereafter turned over to the trustee a credit balance of $1,495.11 in cash, negotiable securities valued at $228,551.25, and nonnegotiable stocks, the value of which the record fails to disclose. Among the securities thus delivered to the trustee were certain items belonging to the appellant, all of which have been turned over to him by the trustee and are not now in dispute. The securities sold included United States Liberty Bonds of the face value of $1,050, which appellant owned outright, and which he had deposited with the bankrupts to cover his speculative account, and 200 shares of Northern Pacific stock, which the bankrupts had purchased for him upon margin. For this stock they had paid $12,520, and on account thereof appellant owed them a balance of $11,543.20.

It seems that immediately upon the adjudication in bankruptcy many petitions were filed by claimants of specific securities, or the proceeds of securities, which had come into the possession of the bankrupts, and which were either then in their possession or had been hypothecated as collateral with banks and brokers to secure their obligations. In numerous cases, where the rights of claimants seemed clear, the referee directed that their securities be delivered to them without hearing; but in other cases rights were so involved and uncertain that upon the petition of the trustee a hearing was ordered upon notice to all customers, substantially in the manner approved in the Whitehouse Case (C. C. A.) 293 F. 287. To this order and the notices pursuant thereto, 93 claimants responded; appellant being one of them. After a hearing in this so-called omnibus proceeding, the referee entered an order defining the rights of the several claimants, which was apparently acceptable to all parties other than this appellant. In general, the referee held that all claimants should be grouped in two classes. In class A he put those whose securities had been delivered to the bankrupts simply for safe-keeping, or for sale and transfer, or had been purchased outright and fully paid for by the claimants, but had not yet been delivered to them, and in class B all those whose securities had been deposited as collateral on margin or trading accounts, or had been purchased by the bankrupts for claimants upon the ordinary cash margin. He held that the equities of members of class A were superior to those of class B, and directed that the former be first satisfied, and that the latter share pro rata in any remaining funds.

While appellant's original claim or petition covered the Liberty Bonds above described and now in question, the evidence adduced disclosed the fact that they had never come into the possession of the trustee, but had been sold by Houseman & Co. with other securities on June 4th, and for that reason the referee dismissed the claim, in so far as it related to them, "without prejudice to any further rights of said W. I. Wright to file a preferred claim for the proceeds thereof."

Accordingly, on January 30, 1926, by leave of court, appellant filed a petition to have such preference adjudicated, and a hearing was had, which resulted in an...

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1 cases
  • Adair v. Reorganization Inv. Co., 11974.
    • United States
    • U.S. Court of Appeals — Eighth Circuit
    • February 24, 1942
    ...equal to the sum for which the stock was pledged to it. Provost v. United States, 269 U.S. 443, 46 S.Ct. 152, 70 L.Ed. 352; Wright v. Blank, 9 Cir., 20 F.2d 591, 592. But the shares could not properly be pledged for a greater amount than the pledgee's loan without the authority or consent o......

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