Broderick v. Adamson

• Decision Date: 03 March 1936
• Citation: 200 N.E. 811,270 N.Y. 260
• Parties: BRODERICK, Superintendent of Banks, v. ADAMSON (Greif) et al.
• Court: New York Court of Appeals Court of Appeals

270 N.Y. 260

200 N.E. 811

BRODERICK, Superintendent of Banks,

v.ADAMSON (Greif) et al.

Court of Appeals of New York.

March 3, 1936.

Action by Joseph A. Broderick, as Superintendent of Banks of the State of New York, against Robert Adamson and Wilfrid Greif, wherein Howard S. Hoit and others were impleaded. From judgment of Appellate Division (244 App.Div. 707, 279 N.Y.S. 732) which affirmed judgment of Special Term (148 Misc. 353, 265 N.Y.S. 804) entered against defendants, defendant Greif appeals from so much of judgment as dismissed his cross-claim against parties impleaded.

Judgments so far as appealed from reversed, and judgment directed for defendant Grief, as against parties impleaded.Appeal from Supreme Court. Appellate Division, First Department.

Hugh S. Williamson and Charles A. Howard, Jr., both of New York City, for appellant.

Louis Schneider and Kevie Jaffe, both of New York City, for respondent.

LEHMAN, Judge.

On December 11, 1930, the Bank of United States failed to open, and the Superintendent of Banks took possession of its business and assets. At that time the defendant Wilfrid Greif was the owner of record of 300 shares of the stock of the bank, represented by three certificates. In the action subsequently brought by the Superintendent of Banks to enforce the statutory liability of the stockholders of the bank, judgment was entered against the defendant Greif. He does not upon this appeal challenge the validity of that judgment in favor of the bank. In the answer he interposed in the action he asserted a claim in accordance with the provisions of section 264 of the Civil Practice Act against the members of the firm of Hoit, Rose & Troster, and the appeal relates only to the dismissal of that claim.

The three certificates representing the stock of which the defendant Greif was the record owner had been deposited, prior to December 10, 1930, with a firm of stockbrokers in the name of Blanche Greif, the defendant's wife. On that day the defendant gave an order to the broker for the sale of 300 shares of stock of the Bank of United States for the account of his wife. Pursuant to that order the brokers sold 100 shares to W. C. Orton & Co., and 200 shares to the firm of Hoit, Rose & Troster, dealers in securities, who at that time were trading actively in stock of the Bank of United States. On the following day the brokers delivered one certificate of the stock standing in the name of the defendant to Orton & Co. and two certificates for the aggregate of 200 shares to Hoit, Rose & Troster. The defendant Greif now contends that upon the delivery of the stock to the purchasers, they became obligated to indemnify him against any liability arising from his record ownershipof the stock from the time that he sold the stock. The statutory liability attached to record ownership of the stock at the moment when the Superintendent of Banks took possession of the business or assets of the bank. Duty of indemnity can arise only from beneficial ownership of the stock at the same moment. The problem presented is whether at that moment Hoit, Rose & Troster were the beneficial owners of the stock.

The brokers who sold 200 shares of stock acted as agents in the sale. The principal then became obligated to deliver on the following day 200 shares of stock. He was not under any obligation to deliver the specific stock which he then owned. He might, if he chose, deliver other shares which he might acquire in the interval. Thus until delivery the seller did not part with the beneficial interest in any specific shares of stock and the buyer acquired no beneficial interest in any specific shares of stock. None the less, the buyer was entitled to receive from the seller the stipulated number of shares, together with the right to any benefits accruing upon such shares from the time when the contract of purchase and sale was made. Currie v. White, 45 N.Y. 822. By delivery of certificates for the 200 shares of stock standing in the name of the defendant Greif, Hoit, Rose & Troster acquired the right also to any benefit which might have accrued upon those shares in the interval between sale and delivery. They also thereby became subject to the correlative duty of indemnifying the seller against any burden of liability which might have accrued against him as owner of record of the stock during the same interval. In that interval the statutory liability had accrued. Here it is immaterial whether or not specific shares of stock were appropriated to the contract of sale by the seller before that liability accrued. The obligation of indemnity rests upon equitable principles.If, at the time of the contract of sale, title to specified shares of stock had passed to the buyer, then there could be no doubt that the buyer immediately would have become the beneficial owner of the stock and subject to the burden of liability accruing upon the stock thereafter so long as he remained such beneficial owner of the stock. The same equitable principles apply where the buyer becomes entitled to delivery of a stipulated number of shares, with the benefits attached to such shares. Again benefit and burden are correlative. When delivery of specific stock is made with the benefits of ownership of such stock from the date of contract of sale, the burden of indemnity is as broad as the benefit received and attaches to the...