Bennett v. Holland Furnace Co., 53.

• Citation: 116 F.2d 218
• Decision Date: 16 December 1940
• Docket Number: No. 53.,53.
• Parties: BENNETT v. HOLLAND FURNACE CO.
• Court: U.S. Court of Appeals — Second Circuit

116 F.2d 218 (1940)

BENNETT v. HOLLAND FURNACE CO.

No. 53.

Circuit Court of Appeals, Second Circuit.

December 16, 1940.

Hamilton Hicks, of New York City, for plaintiff.

Wiman & Braham, of New York City (William S. O'Connor and Joseph G. Wiman, both of New York City, of counsel), for defendant.

Before SWAN, CHASE, and CLARK, Circuit Judges.

CHASE, Circuit Judge.

This suit, originally brought in the New York Supreme Court, County of Westchester, was removed to the District Court for the Southern District of New York and there tried to a jury. A verdict for the plaintiff was set aside on motion and a new trial granted. At the retrial, the plaintiff moved to dismiss the defendant's counterclaim. The motion was granted and defendant did not appeal. At the close of all the evidence, the defendant moved to dismiss the complaint upon the ground that no jury question was presented. This motion was granted and a final judgment for the defendant was entered. The plaintiff has appealed.

The action was brought to recover for an alleged conversion of stock in the defendant corporation which was purchased and sold under the following circumstances:

On February 19, 1931, when the plaintiff was employed by the defendant as assistant sales manager at its office in Holland, Mich., the defendant made a written offer to all its employees to the effect that it would buy at the market and hold for any employee, at the purchase price plus brokerage charges incurred, two shares of Holland Furnace Company stock for "every share of our stock now owned by you which you will assign to us". Any employee accepting the offer was given the right to pay for the stock in three annual installments of one-third of the price beginning June 1, 1932. Interest on the unpaid balance was to be paid the defendant at the rate of six per cent per annum to be deducted quarterly out of dividends on the stock and the remainder of such dividends was to be credited on the employee's debt. Title to stock deposited with the defendant and title to stock purchased by the defendant was to be in the Holland Furnace Company until the stock had been fully paid for, or had been sold, and if an employee for whom stock had been purchased was in default after any payment became due the defendant had the right to sell "all of the stock held by us in your behalf" at the market; to apply the proceeds toward the payment of the employee's debt; and was bound to account to the employee for any surplus.

The plaintiff, on February 26, 1931, gave the defendant a written application for the purchase of 535 shares of such stock under the plan above outlined and then transferred to the defendant 301 shares of the stock which he then owned to be held as collateral security. On March 10, 1931, the defendant acknowledged its acceptance of the plaintiff's application and advised him that the stock he ordered had been purchased for $16,665.25.

The plaintiff paid the installment due on June 1, 1932, but failed to pay the one which became due of June 1, 1933, and thereafter continued in default. The alleged conversion of the stock occurred when the defendant, on July 9, 1935, sold the stock, in the open market but without notice to the plaintiff, for $8,818.26 and applied the proceeds to the plaintiff's indebtedness. That left a book balance on the transaction of $1,455.71 due to the defendant.

On July 15, 1935, the plaintiff, unaware that the stock had been sold, wrote the defendant for a statement of the account saying that he had noticed that the price was going up and that "I wish to ask your advice as to how high the stock is likely to go during the next few months". The defendant replied on July 17, 1935, that it was unable to state how high the stock would go and further, "In regards to your account, we recently sold your stock and applied the proceeds to your account. 800 shares were sold at 10¾ and 36 shares at 10 5/8. The proceeds from the sale of this stock did not entirely pay the interest when computed to the date the stock was sold. Due to the fact that your account was large and the interest was accumulating without any payments received thereon, we had to dispose of your collateral when it practically reached the balancing point." On September 10, 1935, the plaintiff wrote the defendant as follows: "Sometime ago you advised that you had sold my Holland Furnace stock and applied the proceeds against my indebtedness to the Company, thereby wiping out such indebtedness. For my records, will you please advise to whom you sold this stock, giving me the certificate numbers, the date sold, and the price on each share". The defendant replied on September 14, 1935, that the 836 shares of stock had been sold on July 12, 1935, through brokers named, for $8,818.26 but did not give the certificate numbers. A statement of the account was enclosed which was balanced by an entry showing the remainder of the debt assumed by the defendant. Further correspondence, the last of which was about the middle of February, 1937, had to do with information concerning the purchase and sale of the stock which the plaintiff desired for income tax purposes. After that the parties had no communication with each other until this suit was brought on July 24, 1937.

The defendant made a mistake in reporting the date of its sale of the stock as July 12, 1935, as it actually sold it three days before. The plaintiff did not know this until this case first...