Carlisle v. Norris

Citation109 N.E. 564,215 N.Y. 400
PartiesCARLISLE, v. NORRIS, et al.
Decision Date13 July 1915
CourtNew York Court of Appeals

215 N.Y. 400
109 N.E. 564

NORRIS, et al.

Court of Appeals of New York.

July 13, 1915.

Appeal from Supreme Court, Appellate Division, Second Department.

Action by Jay F. Carlisle against Alfred L. Norris and others. From an order and judgment of the Appellate Division (157 App.Div. 313, 142 N.Y.Supp. 393) reversing a judgment for plaintiff, and directing judgment for defendants, plaintiff appeals. Order and judgment affirmed.

William N. Dykman, of Brooklyn, for appellant.

Harold Otis, of New York City, for respondents.


[1] This action was brought to recover a substantial sum of money on the theory that the defendants had sold 200 shares of stock belonging to the plaintiff, and had received the proceeds thereof to and for his benefit, and had then refused to pay the same over upon demand. The plaintiff recovered judgment at the Trial Term, but the Appellate Division reversed this judgment and directed judgment upon the entire case for the defendants. The latter, therefore, in order to sustain this disposition of the case must establish that there was no evidence which presented a question of fact in favor of plaintiff and that the defendants were entitled to an order of nonsuit or to the direction of a verdict in their favor. Middleton v. Whitridge, 213 N.Y. 499, 108 N.E. 192. The important and underlying question in the case is whether 200 shares of stock, which were wrongfully hypothecated by a certain individual, were so pledged by him acting as the representative of the defendants, so that they were chargeable with the proceeds which were realized, or by him acting as an agent of the plaintiff, and the facts presenting this question will first be stated; the following ones being established by evidence which either is not or cannot successfully be challenged on this appeal.

[2][3] The defendants are the survivors of a firm which, under the name of James H. Oliphant & Co., had its principal place of business in New York City and transacted the business of bankers and brokers. The plaintiff also was a broker who executed orders on the floor of the Stock Exchange for other brokers, was a specialist in certain stocks, and transacted a large “in and out” business on his own account. He had his headquarters in the office of the defendants, and they carried stocks for him on a margin and “cleared” his stock transactions. Their relations extended over a considerable period and were extensive in their character, and plaintiff had the right to, and about once a month did, examine their books for the purpose of testing the accuracy of his accounts kept therein. One Brouwer was an employee of the defendants and intrusted with extensive powers, but he did not have the charge of making loans for them, did not deliver or receive securities to and from their customers, and did not have charge of the defendants' securities, including those held for customers. Brouwer also was intrusted by the plaintiff with extensive authority as his agent. Amongst other things he had the key to the safe deposit box containing his securities, and he was given blank “fly” powers, which were stock transfers executed by the plaintiff in blank, and which on being attached to a certificate of stock operated as a transfer thereof; for a long period, including the times involved in this action, he delivered to and received from defendants all of plaintiff's securities which were pledged with the latter; he made deposits for him, indorsing his checks for that purpose, and he was intrusted with checks signed by the plaintiff in blank to be used for the latter's benefit. The plaintiff himself testified in substance that he intrusted Brouwer with such powers in his behalf as were confided to no other person. Brouwer in the end proved a criminal and misappropriated 200 shares of American Tobacco preferred stock belonging to the plaintiff.

Plaintiff has in his account, which was being carried by defendants, several hundred shares of the preferred stock of the American Tobacco Company. All of this concededly has been accounted for save 200 shares, and only 400 shares are involved in the consideration of the question whether said 200 shares have been accounted for. For several months prior to June 26, 1906, the defendants thus held as margin 200 shares of this American Tobacco stock, preferred, represented respectively by certificates Nos. A9371 and A9372, and these shares had been by the defendants in turn, with unquestioned right, pledged as security for a loan made by them with the National City Bank. June 28, 1906, Brouwer hypothecated these shares with a broker as security for a personal loan of upwards of $17,000, which was paid by a broker's check, payable to the order of defendants, and by Brouwer deposited to the credit of the latter in their bank as payment on an account had by one Bird with the defendants, and in which account Brouwer was interested and it is to recover these proceeds thus paid to defendants that this action is brought, on the theory that Brouwer was acting as their agent in disposing of the plaintiff's stock, and that, therefore, he is entitled to recover such proceeds. Some time subsequently defendants had a settlement with plaintiff in which they accounted by means of different certificates for 200 shares of American Tobacco preferred stock on account of the 200 shares which had originally been pledged with them and by them with the bank as above stated, and it may be assumed that on the evidence thus far summarized and showing such settlement defendants would be entitled to a dismissal of the complaint so far as concerns plaintiff's theory of recovery now under discussion. When they accounted for the number of shares pledged with them they discharged their obligations, even though they did not return the identical certificates which had been pledged. Stewart v. Drake, 46 N.Y. 449.

[4][5] But evidence was given which plaintiff says tended to establish that 200 additional shares of this same stock belonging to him were delivered to defendants and by them substituted for other stock held by the bank, and that it was this latter stock which the former accounted for, thus leaving the original 200 shares misappropriated by Brouwer to be accounted for. The testimony on this subject is as follows:

One Graham was defendant's cashier, and as such he had the custody of their securities during business hours, looked after loans made by them with the banks, and delivered and received securities to and from customers. He gave evidence which was corroborated by entries in defendants' books to the effect that on May 2, 1906, while the National City Bank held the original 200 shares of Tobacco stock pledged by plaintiff with defendants and by the latter with the bank, Brouwer, acting in behalf of plaintiff, delivered to him as additional margins for plaintiff's accounts with defendants 200 shares of American Tobacco stock, preferred, represented respectively by certificates Nos. A9473 and A9564, for 100 shares each, and that on June 26th following Brouwer obtained back from defendants through him said last certificates, on the ground that there was an excessive amount of margin pledged for plaintiff's account. This was two days before Brouwer converted the original 200 shares pledged with the bank and represented by certificates A9371 and A9372, and in addition to showing Brouwer in possession of these last described certificates when he fraudulently hypothecated them the evidence shows that when defendants paid their loan at the bank and received back their securities there were delivered to them the certificates which Graham had delivered to Brouwer June 26th. The defendants' argument, of course, is that for some reason and in some mammer Brouwer had exchanged at the bank the certificates which had been delivered to him as plaintiff's agent by defendants in June for the shares which had originally been pledged with the bank, and that, therefore, he had possession of the latter as plaintiff's agent when he converted them.

Plaintiff needed part of the evidence given by Graham in order to establish his case. As already stated, defendants had established as a defense to his claim to recover the proceeds received from the pledge of his stocks originally held by them represented by certificates A9371 and A9372 and pledged with the bank, when they showed that they had accounted for these shares in specie or through other certificates of like amount and...

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