Edward Thomas v. Anna Taggart

• Decision Date: 06 April 1908
• Docket Number: No. 197,197
• Parties: EDWARD S. THOMAS, Lloyd M. Howell, and Ashbel P. Fitch, Trustees in Bankruptcy of Jacob Berry and Harold L. Bennet, individually and as Jacob Berry & Company, Petitioners, v. ANNA D. TAGGART et al
• Court: U.S. Supreme Court

209 U.S. 385

28 S.Ct. 519

52 L.Ed. 845

EDWARD S. THOMAS, Lloyd M. Howell, and Ashbel P. Fitch, Trustees in Bankruptcy of Jacob Berry and Harold L. Bennet, individually and as Jacob Berry & Company, Petitioners,

v ANNA D. TAGGART et al.

No. 197.

Argued January 17, 20, 1908.

Decided April 6, 1908.

Messrs. Abram I. Elkus and Carlisle J. Gleason for petitioners.

Messrs. Graham Sumner, George E. Hall, Thomas Thacher, Edwin M. Lawrence, and Hugo S. Mack for respondents.

Mr. Justice Day delivered the opinion of the court:

This case was argued and submitted with Richardson v. Shaw, No. 122, just decided [209 U. S. 365, 52 L. ed. ——, 28 Sup. Ct. Rep. 512]. To the extent which the case involves the same general questions as to the legal relations of stockbrokers and customers, we need not repeat the discussion had in Richardson v. Shaw, by which the conclusion was reached that, under the usual contract for a speculative purchase of stock, the customer is considered the pledgor and the broker the pledgee.

In this case it is necessary to notice certain specific features not arising in the case just referred to. The petitioners, Edward S. Thomas, Lloyd M. Howell, and Ashbel P. Fitch, are the trustees in bankruptcy of Jacob Berry and Harold L. Bennet, individually and as partners as Berry & Company. Several persons, among others Anna D. Taggart, Harris Filson, William C. Bowers, and George E. Hall, made claims to recover certain certificates of stock, as against the trustees in bankruptcy, or to have a lien on the funds, the proceeds of other stocks in the hands of the trustees. The claims were referred to a referee in bankruptcy, and, upon hearing, he found in favor of certain of the claimants, among others Mrs. Taggart, Filson, Hall, and Bowers. The report of the referee was confirmed by the district judge on October 4, 1905, and the trustees were directed to turn over certain certificates of stock and proceeds of other certificates to the claimants. Upon appeal, the order and judgment of the district court was affirmed by the circuit court of appeals for the second circuit (79 C. C. A. 124, 149 Fed. 176), and the case is now here upon a writ of certiorari.

From the findings of the referee it appears that certificates of stock were pledged with the Hanover National Bank by Berry & Company the day before the failure. This pledge was to secure a demand loan of $45,000. Subsequently the bank returned to the trustees all funds and stocks over and above its loans. It returned in cash $6,310.41 and certain shares of stock.

Taking up the several claims, we will first notice that of Anna D. Taggart. She claims two certiflcates for 83 shares of United States Steel stock, preferred, which were returned by the Hanover Bank unsold to the trustees in bankruptcy. The receipt given to Mrs. Taggart at the time of the deposit is in the words following:

Sep. 14, 1904.

Received from Anna D. Taggart 83 shs. U. S. Steel pfd. No. A30563-C15546. The same to be a general deposit, and this receipt is given and received with mutual understanding that Jacob Berry & Company may hold the same as margin and as a security for or apply the deposit in part payment of or on account of losses or any other transactions in the purchase or sale of stocks, bonds, securities, or commodities made by them for your account.

This receipt is given and received upon the further understanding and agreement in consideration of Jacob Berry & Company executing such orders for the purchase or sale of stocks, bonds, securities, or commodities as may be given to them in writing, orally, by telegraph or telephone; that the said Jacob Berry & Company may repledge, rehypothecate, or loan any or all of said stocks, bonds, securities, or commodities held by them on account thereof as margin or otherwise; may substitute similar stocks, bonds, securities, or commodities therefor, and that said Jacob Berry & Company may, without notice, upon the approximate exhaustion of margin, sell, or buy, as the case may be, any stocks, bonds, securities, or commodities bought and sold or held by them as collateral, or margin, or otherwise, and that, in case of contracts for future delivery, that said Jacob Berry & Company may close the same by purchase or sale, as the case may be, without notice, provided, however, that such purchases or sales may be made upon the Consolidated Stock & Petroleum Exchange of New York, the New York Stock Exchange, the Chicago Board of Trade, or in any other exchange in the city of New York where such stocks, bonds, securities, or commodities are dealt in.

No. A30563-33 shs.

No. C15546-50

'Geo. M. Davis, Mgr.

Across the face of this receipt was written, in ink, the words 'as collateral on account.' The question is, Mrs. Taggart not being indebted to the trustees, but having a balance due from the estate to her, did these shares of stock belong to the trustee in bankruptcy as part of the bankrupt's estate, or were they the property of the claimant, Mrs. Taggart? The learned court of appeals construed the receipt as consisting of two parts,—the first paragraph, relating to the shares of steel stock especially deposited, and the second, to the stocks, bonds, and securities or commodities purchased upon her account by the brokers, concerning which they were given the right to repledge, rehypothecate, or loan, and the right to substitute therefor similar stocks, bonds, and securities.

In the Richardson Case, supra, we have discussed the legal relation existing between customer and a broker who has the right to pledge and hypothecate securities purchased for the customer and substitute similar securities therefor, with the obligation to respond at all times to the demand of the customer for the redemption of the stocks, and we need not here repeat what is therein said.

We are of the opinion that the circuit court of appeals correctly construed this receipt. It was the evident purpose of the parties that the 83 shares of United States Steel stock, preferred, was to be held, as the receipt shows, as security for losses in purchase or sale of stocks, bonds, or securities on account of the customer, and the separate paragraph of the receipt, giving the right to repledge, etc., and substitute similar stocks, bonds, and securities, had reference to the stocks, securities, etc.,...