Commonwealth v. Hull

• Citation: 296 Mass. 327,5 N.E.2d 565
• Parties: COMMONWEALTH v. JOHN T. HULL.
• Decision Date: 02 January 1937
• Court: United States State Supreme Judicial Court of Massachusetts

296 Mass. 327

5 N.E.2d 565

COMMONWEALTH v. JOHN T. HULL.

Supreme Judicial Court of Massachusetts, Suffolk.

January 2, 1937

October 9, 1936.

Present: RUGG, C.

J., CROSBY, PIERCE FIELD, & LUMMUS, JJ.

Larceny. Stockbroker.

Practice, Criminal Motion for finding; Exceptions: what questions open Sentence. Contract, What constitutes. Words, "Carried in this account.

"

An appeal, with an assignment of error setting forth an exception to the denial of a motion for a finding of "not guilty" on an indictment heard without jury, raised the question whether the evidence warranted a finding of guilty.

A stockbroker employed by a firm, to whom a customer had delivered securities with instructions to sell them and to use the proceeds in purchasing certain other securities at specified prices, could be found guilty of larceny of the securities themselves if he sold them without intention to execute such power of sale but with intent to convert the securities to the use of his employer, and used the proceeds for his employer's general purposes; the mere fact that the employee did not benefit as an individual was no defence.

An account of a customer with a stockbroker cannot, by will of the broker alone, be made a margin account subjecting securities of the customer held by the broker to use as his own; consent of the customer is necessary for the creation of such an account.

The mere fact that, in statements sent by a stockbroker to his customer setting forth an account as to the broker's performance of a contract previously made, whereby he was to sell certain securities delivered to him and to purchase others at a specified price, there was included a notice in substance that the broker had a right to use for his own purposes the securities "carried in" the account, gave the broker no such right as to the securities purchased by him and in his possession during the performance of the specified transactions.

On a margin account, prior to payment by the customer, the stockbroker could pledge the customer's stock for his own debt, and his rightful act in so doing was not converted into larceny by his subsequent inability to deliver the stock upon payment or tender.

A general sentence upon findings of guilty upon four counts of an indictment was reversed upon this court's setting aside the findings on two of the counts, where it did not appear that the sentence would have been as large had the defendant been convicted only on the two courts upon which the convictions were affirmed, even though the general sentence did not exceed the maximum which could have been imposed under any one count upon which the defendant properly was convicted.

INDICTMENT, found and returned on July 3, 1935. The indictment was heard in the Superior Court without a jury by Sheehan,

J. The defendant was found guilty on four counts and filed an appeal with assignments of error.

J. C. Johnston, (S.

Harmon with him,) for the defendant.

H. P. Fielding, Assistant Attorney General, for the Commonwealth.

LUMMUS, J. The defendant was indicted in seven counts for larceny. Upon waiver of trial by jury (G.L. [Ter. Ed.] c. 263, Section 6) he was tried by a judge who ordered that the trial be subject to the procedure established by G.L. (Ter. Ed.) c. 278, Sections 33A-33G, as properly appears in the summary of the record prepared by the clerk under Section 33C. Commonwealth v. Robinson, 295 Mass. 471 , 472. The judge found the defendant guilty on the first, third, fourth and sixth counts, and not guilty on the others. The case comes here on appeal, with a summary of the record and a transcript of the evidence.

The defendant presented, as to each count upon which a finding of guilty was subsequently made, a motion "that the court make a finding of `not guilty' on" said count. This was a motion, not for a ruling of law, but for a general finding upon law and fact. Had it been granted, the Commonwealth, if it had had any right of appeal, could not have contended that the judge had ruled that a finding for the defendant was required as matter of law. Castano v. Leone, 278 Mass. 429 . Ashapa v. Reed, 280 Mass. 514 . See also Pearson v. O'Connell, 291 Mass. 527 , and cases cited at page 529; Keefe v. McCarthy, 294 Mass. 567 , 570. But the denial of such a motion has been held equivalent to a ruling that the evidence warranted a finding against the defendant. New Bedford Cotton Waste Co. v. Eugen C. Andres Co. 258 Mass. 13 , 16. Ashapa v. Reed, 280 Mass. 514 , 516. Menici v. Orton Crane & Shovel Co. 285 Mass. 499 , 501. Mosher v. Hayes, 288 Mass. 58 . Woodman v. Haynes, 289 Mass. 114 , 118. Geraci v. A. G. Tomasello & Son., Inc. 293 Mass. 552 , 554. See also Moss v. Grove Hall Savings Bank, 290 Mass. 520; Leshefsky v. American Employers' Ins. Co. 293 Mass. 164 . The ignoring of the motion was equivalent to a denial. John Hetherington & Sons, Ltd. v. William Firth Co. 210 Mass. 8 , 17, 18. It follows that the defendant's exception to the denial of these motions raised the question whether the evidence warranted a finding against him on the several counts upon which he was found guilty.

The defendant was employed by Andrew Jensen, Jr., doing business as a stockbroker under the name of Andrew Jensen and Company, and was in charge of the stockbroking operations, while Jensen himself devoted his time to a branch of the business called industrial engineering. There was evidence that the defendant participated in and controlled all the acts upon which the findings of guilty were based. The facts hereinafter stated could have been found upon the evidence.

The first count, on which the defendant was found guilty of larceny of bonds of The Cambridge Visiting Nursing Association, a charitable corporation, alleged larceny of three bonds issued by the Shell Union Oil Company, five bonds issued by Armour & Company, one bond issued by the Louisville Gas and Electric Company, one bond issued by the Consolidated Gas Company of New York, one bond issued by the Detroit Edison Company, and one bond issued by the Pacific Telephone and Telegraph Company. On January 23, 1935, these securities were delivered to the defendant by Charles F. Toppan, the treasurer of the charitable corporation, with instructions to sell them and to use the proceeds towards the purchase at specified prices of five bonds issued by each of the following corporations; Pennsylvania Power and Light Company, Pennsylvania Railroad, National Steel Company, and Houston Light and Power Company. Within a few days after the delivery by Toppan to the defendant, he sold the bonds delivered for more than $12,500, and used the proceeds for the general purposes of Andrew Jensen and Company. He could readily have bought within a few days at the prices specified the twenty bonds which he had been ordered to buy. He did buy within a few days all but the Houston bonds, but he pledged at once all he bought to secure indebtedness of Andrew Jensen and Company, and in February, 1935, he sold them. He put the treasurer off from time to time by the false statement that he could not get delivery of the bonds bought. Finally, when tendered payment of the amount, somewhat more than $8,000, by which the price of the bonds to be bought exceeded the selling price of the bonds sold, he admitted that he did not have the bonds which he was to buy and could not make delivery. The charitable corporation got no part of the proceeds of the bonds sold.

It could be found that the defendant, though empowered to sell the securities, did not intend to execute the power when he sold them, but intended to convert them to the use of his employer, and did so. His conduct immediately after the sale was evidence of his intention in making the sale. The conversion could be found to be of the securities and not merely of the proceeds. Commonwealth v. Rubin, 165 Mass. 453 . In re Ennis, 187 F. 720, 722. The fact that the defendant did not benefit as an individual is no defence. Commonwealth v. Moore, 166 Mass. 513 . Commonwealth v. Snow, 284 Mass. 426, 436, 437.

The defendant relies upon the asserted right of a broker to treat as his own any securities "bought or held" on a margin account. Pizer v. Hunt, 253 Mass. 321 , 330. Crehan v. Megargel, 235 Mass. 279 , 282. Palley v. Worcester County National Bank, 290 Mass. 501 , 506. Gill v. Hornblower, 294 Mass. 26 , 29. Denton v. Gurnett & Co. 69 F.2d 750. 41 Am. L. R. 1265. He introduced expert testimony to show that whenever a broker gives credit, even for a day, at a time when he has any securities of his customer on hand, a margin account exists. But obviously that cannot be true, and, besides, expert testimony for the Commonwealth was sufficient basis for a finding that it is not true. A broker often buys stocks and bonds for a customer and advances the purchase money, without requiring any security other than his right, the nature of which need not be discussed, to sell the stocks and bonds bought if the customer fails to pay. Wood v. Hayes, 15 Gray, 375. Giddings v. Sears, 103 Mass. 311 . Covell v. Loud, 135 Mass. 41. Brown v. Rushton, 223 Mass. 80 . Bendslev v. Lovell, 235 Mass. 133 . Palley v. Worcester County National Bank, 290 Mass. 501 . Gill v. Hornblower, 294 Mass. 26 , 30. If the customer happens to have in the hands of the broker for sale or for other specified purposes other stocks or bonds, these cannot be held as a pledge for payment for the stocks and bonds purchased unless the customer so consents. Neither a margin account nor a pledge can be created by the will of the broker alone. What rights of set-off may exist after the liquidation of the stocks or bonds, is a different question. In this case the charitable corporation did not intend to engage in a margin transaction, and the...