Leuzinger v. Merrill Lynch, Pierce, Fenner & Smith, Inc., s. 51034
| Citation | 396 S.W.2d 570 |
| Decision Date | 08 November 1965 |
| Docket Number | 51168,Nos. 51034,s. 51034 |
| Court | United States State Supreme Court of Missouri |
| Parties | Leta M. LEUZINGER, Appellant, v. MERRILL LYNCH, PIERCE, FENNER & SMITH, INC., a corporation, Defendant, and North Kansas City State Bank, Respondent. Leta M. LEUZINGER, Appellant, v. MERRILL LYNCH, PIERCE, FENNER & SMITH, INC., a corporation, Respondent, and North Kansas City State Bank, Defendant. |
Robert B. Langworthy, John R. Cleary, Kansas City, for appellant, Linde, Thomson, VanDyke, Fairchild & Langworthy, Kansas City, of counsel.
Darrell L. Havener, Robert C. Canfield, Kansas City, for respondent. Merrill Lynch, Pierce, Fenner & Smith, Inc., Watson, Ess, Marshall & Enggas, Kansas City, of counsel.
Wm. Coleman Branton, Kent E. Whittaker, Kansas City, for respondent, North Kansas City State Bank, Brewer, Myers & Branton, Kansas City, of counsel.
HOUSER, Commissioner.
Action by Leta M. Leuzinger against a brokerage firm (hereinafter 'Merrill Lynch') and a bank to recover $29,562.82 for breach of defendants' obligations as brokers and bankers. Merrill Lynch filed a motion for summary judgment, which was sustained as to that defendant. The bank filed a motion to dismiss, which was sustained as to the bank. Separate appeals were taken to this court by plaintiff. The two appeals were consolidated for hearing, and will be decided in one opinion.
These are the conceded, undisputed facts: Plaintiff is the wife of W. C. Leuzinger. Early in July, 1959 plaintiff made a telephone call to an account executive of Merrill Lynch. After identifying herself plaintiff stated that another employee of Merrill Lynch had previously conferred with her and her husband, and that she wanted to open a securities account with the brokerage firm. Asked what type of account, plaintiff said that she wanted to open an accounted where securities can be purchased, paid for in cash, sold, and the proceeds credited to the account. Plaintiff instructed the account executive to put the account in the name of her and her husband as joint tenants. The executive mailed to plaintiff's home address the firm's regular and customary 'Joint Account with Right of Survivorship Cash Transactions' form, to be signed by both plaintiff and her husband, dated, and returned so that the account could be opened. Several days later the new account card, bearing the signatures of W. C. Leuzinger and Leta M. Leuzinger, dated July 9, 1959, was returned to the offfice of Merrill Lynch. It is reproduced as follows:
'Dear Sirs:
'With respect to our joint account with right of survivorship we confirm that:
'1. In all matters pertaining to the account you may act upon orders and instructions from either of us.
'2. Upon the death of either of us, all securities, funds and property in the account shall be the sole property of the survivor.
'3. The foregoing shall also extend to your successors, by merger, consolidation or otherwise, and assigns.
(Signed W. C. Leuzinger
(Signed) Leta M. Leuzinger
'Date July 9, 1959'
Plaintiff instructed the executive by telephone to purchase certain securities for the joint account, which instructions were carried out. In that transaction Mr. Leuzinger gave no instructions or directions. From July 8, 1959 through December 10, 1962 Merrill Lynch handled approximately one hundred transactions for the joint account. With the exception of two transactions which took place shortly after the account was opened, in which plaintiff gave the instructions, all of these transactions were undertaken pursuant to instructions from W. C. Leuzinger. On December 10, 1962 Merrill Lynch held certain securities, the property of W. C. Leuzinger and plaintiff, in said account. On that day, without any written or unwritten request or authorization by plaintiff, but upon request of W. C. Leuzinger, Merrill Lynch sold all of the securities in the joint account, reduced the same to cash, and received and held for the account of W. C. Leuzinger and plaintiff the sum of $59,125.65. On and prior to December 10, 1962 a checking account, standing in the joint names of plaintiff and W. C. Leuzinger, was maintained at the defendant bank. On request by W. C. Leuzinger Merrill Lynch disbursed the entire proceeds of the joint brokerage account by its check for $59,125.65 made payable to 'North Kansas City State Bank for account of W. C. Leuzinger and Leta M. Leuzinger' and delivered the check to W. C. Leuzinger, without the written or unwritten authority or consent of plaintiff. W. C. Leuzinger presented the check to the bank and requested that it be deposited in the joint checking account. The bank accepted the check for deposit to the joint checking account, the bank endorsing the check as follows:
"Credited to the account of THE WITHIN NAMED PAYEE Absence of endorsement guaranteed KANSAS CITY STATE BANK North Kansas City, Missouri"
Upon the crediting of the proceeds of the check to the joint checking account W. C. Leuzinger, without the written or unwritten authorization or consent of plaintiff, immediately thereafter withdrew from the account the entire proceeds of the check in the sum of $59,125.65, and appropriated the same to his own use.
Plaintiff's petition admitted that the brokerage account was maintained in the names of W. C. Leuzinger and Leta M. Leuzinger 'as joint tenants with rights of survivorship, and not as tenants in common.' The theory of the petition as against Merrill Lynch was that the brokerage firm breached and violated the terms of its agreement with plaintiff by disbursing funds out of the joint brokerage account by check which was not specifically drawn so as to require the personal endorsement of plaintiff and by delivering the check to W. C. Leuzinger without the consent or approval of plaintiff. Plaintiff pleaded that the written agreement required Merrill Lynch to draw checks so as to require her personal endorsement, and to deliver any such check jointly to plaintiff and W. C. Leuzinger, or upon the joint order of both of them, and that by delivering the check to W. C. Leuzinger as it did, with knowledge that plaintiff had a joint interest in the proceeds, Merrill Lynch made it possible for W. C. Leuzinger to divert the entire amount of the proceeds to his own use, and deprive plaintiff of her interest therein, and thus Merrill Lynch 'in legal effect converted to its own use the said $59,125.65.'
Plaintiff's petition pleaded as against the bank that the bank breached its obligations to plaintiff and acted without authority in depositing the proceeds of the check to the joint checking account without the personal endorsement of plaintiff thereon, and in thereafter paying the net proceeds of the check to W. C. Leuzinger without the written consent or authorization of plaintiff. Plaintiff charged the bank with conversion by negotiating and transferring to W. C. Leuzinger the proceeds of the check as it did, without plaintiff's endorsement and approval, by 'wrongfully' enabling W. C. Leuzinger to divert the entire amount of the proceeds of the check to his own use and deprive plaintiff of her interest therein.
Defendants' answers admitted the facts pleaded, but denied the legal consequences plaintiff attributed to them.
On the appeal from summary judgment for Merrill Lynch:
Plaintiff's sole point: Error in sustaining the motion for summary judgment; that the pleadings and affidavits on file did not sustain Merrill Lynch's burden of showing that it was entitled to summary judgment as a matter of law; that on the contrary they clearly establish that Merrill Lynch was not entitled to judgment.
Plaintiff's argument runs in this wise: The securities and the proceeds resulting from their sale were held by the Leuzingers 'as joint tenants or tenants by the entirety.' Each had an interest in the whole, a fact which was known to Merrill Lynch. While Merrill Lynch had the right to act upon the order of plaintiff's husband to sell the securities, the agreement authorizing Merrill Lynch to act upon orders and instructions from either husband or wife did not entitle Merrill Lynch to distribute jointly owned proceeds as it did, without plaintiff's knowledge, acquiescence and consent. When Merrill Lynch received the proceeds of the sale of the securities it held them in a fiduciary capacity, and owed to plaintiff the duty, as a trustee of the proceeds, to keep plaintiff fully informed of all facts pertinent to the transaction. Since the account was maintained in the joint names of plaintiff and her husband 'it would have been consistent and correct' for Merrill Lynch to issue its check payable to plaintiff and her husband. Instead, Merrill Lynch made the check for the whole of the proceeds of the sale payable to the bank in a manner which 'it knew, or must be said to have known, could result in the deprivation of plaintiff's property'; that thus and thereby Merrill Lynch 'breached its agreement'; 'exercised unauthorized acts' of dominion over the funds and 'wrongfully misappropriated' or 'caused and allowed another to misappropriate the proceeds,' and consequently Merrill Lynch is liable to plaintiff for breach of its fiduciary duty.
In support of her thesis plaintiff cites 12 C.J.S. Brokers Sec. 27 and Martin v. Hieken, Mo.App., 340 S.W.2d 161, for the general rule that the relationship of broker to his customer is fiduciary and confidential in character; that the broker's obligations are as exacting as those imposed upon a trustee, and include the duty of keeping the customer fully informed of all facts pertinent to the transaction; Feltz v. Pavlik, Mo.App., 257 S.W.2d 214, for the proposition that one joint tenant cannot...
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