Bank of Montgomery v. Reese

• Court: Pennsylvania Supreme Court
• Writing for the Court: Lewis
• Citation: Bank of Montgomery v. Reese, 26 Pa. 143 (Pa. 1856)
• Decision Date: 01 January 1856
• Parties: Bank of Montgomery versus Reese.

26 Pa. 143

Bank of Montgomery versus Reese.

Supreme Court of Pennsylvania.

ERROR to the Common Pleas of Montgomery county.

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Boyd and Chain, for plaintiff in error.

Williams, for defendant in error.

The judgment of the court was delivered by LEWIS, C. J.

Morgan L. Reese, as one of the stockholders of the bank of Montgomery, was entitled to a portion of the unsold capital stock. His right was as valid as that of a tenant in common of real estate to his purpart on a partition. The corporation was a trustee for the stockholders, but in disregard of the duties of the trust, in distributing this stock it deprived Mr. Reese of the number of shares to which he was entitled. He has established his right in this action. The court advised the jury to allow him the highest price of the stock between the time of conversion and the day of trial, less the par value, which he would have been bound to pay had the stock been assigned to him. The par value was $50. The value, as it existed at the time of the trial, according to one witness, was $73.75. The plaintiff was entitled to 10 shares, and the jury found a verdict in his favour for $237.50. The stock has been yielding a dividend of from 9 to 10 per cent, but no compensation for these dividends was allowed, except that the plaintiff was not charged interest on the par value, in adjusting the difference between that and the highest price which the stock had reached at the time of trial. The bank now complains of the measure of damages.

The paramount rule in assessing damages is that every person unjustly deprived of his rights should at least be fully compensated for the injury he sustained. Where articles have a determinate value and are unlimited in production, the general rule is to give their value, at the time the owner was deprived of them, with interest to the time of the verdict. This rule has been adopted because of its convenience, and because it in general answers the objects of the law, which is to compensate for the injury. In relation to such articles, the supply usually keeps pace with the demand, and the fluctuations in the value is so inconsiderable as to justify the courts in disregarding them, for the sake of convenience and uniformity. In these cases the reason why the value at the time of conversion, with interest, generally reaches the justice of the case, is that when the owner is deprived of the articles, he may purchase others at that price. But it is manifest that this would not remunerate him, where the article could not be obtained elsewhere, or where from restrictions on its production, or other causes, its price is necessarily subject to very considerable fluctuations. The stock in a bank, with a capital limited by law to a certain amount, is an article of this description. If the bank be favourably located, and well managed, the demand for its stock will increase rapidly, while, on the other hand, the supply is restricted by law. A great increase in the price must be the necessary result. In such a case the value at the time of conversion might be an insult instead of a compensation for a wrongful deprivation. Such a rule would hold out temptations to acts of wrongful conversion by making them profitable to the wrongdoer. If a bank, or any other trustee, might deprive the cestui que trust of his stock, without answering for the rise in the value, the beneficial owner would be deprived of the very advantage which he had in view when he made the investment. It is plain therefore, that the ordinary measure of damages, for the conversion or refusal to deliver chattels of determinate value and unlimited production, will not reach the justice of the case when applied to the conversion of bank stock. On principle there is a distinction, and that distinction is well sustained by abundant authority. See Payne v. Burke, cited in note 2 East 213; Shepherd v. Johnson, 2 East 211; McArthurs v. Seaforth, 2 Taunton 257; Harrison v. Harrison, 1 Car. & Payne 412; Greening v. Wilkinson, 1 Car. & Payne 625; Cortelyon v. Lansing, 2 Caines Cases in Error 216; Hart v. Ten Eyck, 2 John Ch. Rep. 117; 1 Saunders Pl. & Ev. 377, 677; 3 Phillips Ev. 103; 3 Starkie's Ev. 1624; West v. Beach, 3 Cowen 83; Clark v. Pinney, 7 Cowen 681. In 3 Starkie's Ev. 1624, it is said that the plaintiff may elect to claim the highest price as it existed at any time between the breach and the trial. In Hart v. Ten Eyck, 2 John. Ch. 117, Chancellor Kent recognised the justice of the rule which allowed the value of the stock at the day of the trial, if the market price of it had risen in the meantime. The other cases cited, sustain the same doctrine. In Harrison v. Harrison, 1 Car. & Payne 412, Chief Justice BEST remarked with great truth, "that justice is not done if you do not place the plaintiff in the same situation in which he would have been if the stock had been replaced at the stipulated time. We cannot act on the possibility of his not keeping it there. All we can say is you have effectually prevented him from doing so." In Vaughan v. Woods, 1 Mylne & Keene 403, it was held that the lender of stock, on a bond given for its replacement, has an equity to be placed in the same situation as if the stock had remained in his name, and that he was consequently entitled to the replacement of the original stock, increased by the amount of a bonus which had been declared and paid in stock, and to dividends in the mean time, as well upon the bonus, as upon the original stock, 1 Mylne & Keene 403. An attempt has been made, in some of the cases, to distinguish between the rights of a plaintiff who has paid the consideration for the stock and one whose payment has been offered and refused. The only difference which that circumstance can make is that...