O'Malley v. Putnam Safe Deposit Vaults, Inc.

• Decision Date: 01 March 1984
• Citation: 17 Mass.App.Ct. 332,458 N.E.2d 752
• Parties: , 39 A.L.R.4th 530 William O'MALLEY v. PUTNAM SAFE DEPOSIT VAULTS, INC.
• Court: Appeals Court of Massachusetts

Page 752

458 N.E.2d 752

17 Mass.App.Ct. 332, 39 A.L.R.4th 530

William O'MALLEY v. PUTNAM SAFE DEPOSIT VAULTS, INC.

Appeals Court of Massachusetts Essex.

Argued Sept. 13, 1983.

Decided Dec. 30, 1983.

Further Appellate Review Denied

March 1, 1984.

Neil Rossman, Boston, for plaintiff.

Anil Madan, Boston, (Marijane Diodati, Boston, with him), for defendant.

Before GRANT, KAPLAN and DREBEN, JJ.

DREBEN, Justice.

At the close of the plaintiff's case, the trial judge allowed a motion for a directed verdict for the defendant on all counts. The plaintiff (O'Malley) urges that the evidence, taken as it must be in the light most favorable to him, was sufficient to withstand a motion for a directed verdict under the legal test, namely, whether "anywhere in the evidence, from whatever source derived, any combination of circumstances could be found from which a reasonable inference could be drawn" in his favor. Poirier v. Plymouth, 374 Mass. 206, 212, 372 N.E.2d 212 (1978), quoting from Raunela v. Hertz Corp., 361 Mass. 341, 343, 280 N.E.2d 179 (1972). Kanavos v. Hancock Bank & Trust Co., 14 Mass.App. 326, 327, 439 N.E.2d 311 (1982). We hold that the plaintiff has not produced sufficient evidence on count one of his complaint, but we are constrained to reverse on counts two and three.

We review the evidence as colored appropriately in favor of the plaintiff. In July, 1979, O'Malley went to his safe deposit box at the defendant, Putnam Safe Deposit Vaults, Inc. (Vaults), and discovered that well over one hundred gold coins known as Krugerrands were missing. The coins had been converted by one Peter Caten, then a vice-president of Vaults.

The story begins in 1976, when Vaults was formed by officers of F.L. Putnam & Co. Caten, a director and vice-president of Vaults, was put in charge of its safe deposit box operation. It was his responsibility to "make sure that the vaults were operated in a safe and secure manner." Later the business was expanded, and Vaults undertook to buy and sell gold for customers of F.L. Putnam & Co. The latter's salesmen, including O'Malley, were told by Stephen Putnam, president of both Vaults and F.L. Putnam & Co., to make purchases and sales of gold through Vaults and to place their orders with Caten. O'Malley, a vice-president of F.L. Putnam & Co. and manager of its Schenectady, New York, office, knew Caten well, as both men had been sales representatives of F.L. Putnam & Co.

On a trip to Boston in January, 1978, O'Malley made the first of several gold coin purchases, in the form of Krugerrands, for his own account through Caten. At the same time he rented a safe deposit box from Vaults to hold the coins which, Caten informed him, would be delivered in about thirty days. O'Malley signed a card for the box, labeled "Rental Contract," and received two keys to his box. Caten, however, suggested that he, Caten, keep one of the keys so that he would be able to put the coins in the box when they were delivered. Caten told O'Malley it was "customary" for him to keep a key if a customer wanted coins delivered to his box. In addition to the special key for O'Malley's box, Caten had access to the general pass key which was needed before an individual key could be used to gain access to any given safe deposit box.

The price O'Malley paid in January, 1978, for the gold coins was $182 per Krugerrand. O'Malley gave Caten $18,600 in cash; the excess over $18,200 was to cover the commissions and the box rental fee.

At the time of his first gold purchase, O'Malley, as well as F.L. Putnam & Co., Stephen Putnam and others, were defendants in a lawsuit brought by a customer of F.L. Putnam & Co. Stephen Putnam had suggested to O'Malley that it would be prudent to conceal his assets while the suit was pending. Accordingly, O'Malley kept some of his assets in cash and wanted the purchase of Krugerrands to be kept secret, even from the Putnams. He informed Caten of his intent, and Caten indicated that a numbered or anonymous box could be arranged by Vaults.

Approximately three months later (April, 1978), O'Malley returned to Boston, went to his box, counted the coins, and then placed an order for twenty additional Krugerrands. At that time Caten sought permission to borrow some of O'Malley's coins to make what O'Malley described as a "quick delivery" ¹ to customers of Vaults. O'Malley agreed to give the "idea a try" if Caten would do it with a limited number of coins, i.e., ten to twenty, and if he would keep a careful record of each borrowing and return of coins. Caten also offered to share the profits with O'Malley, an offer which O'Malley rejected. ² On a visit to his box in May, 1978, O'Malley discovered that it contained Mexican pesos (of the same value) instead of Krugerrands. Upset, he rescinded Caten's authority to borrow and obtained assurances that the Krugerrands would be returned. O'Malley, however, left the key with Caten and made additional purchases of coins in June and August of 1978.

Caten called O'Malley in April, 1979, and told him he had borrowed one hundred coins. O'Malley directed Caten to return the coins forthwith, reminding Caten that he was no longer authorized to borrow coins. Caten promised to redeliver the gold, but when O'Malley came to Boston in July, 1979, Caten disclosed that there were no Krugerrands in the box and that he, Caten, had converted them. The next day, with legal advice, O'Malley drafted an agreement for repayment by Caten. That agreement, signed by O'Malley as well as Caten, acknowledged that Caten, without authorization, borrowed Krugerrands to facilitate deliveries to customers of Essex Trading Company. ³

O'Malley, although questioned in July, 1979, by David Putnam (brother of Stephen Putnam and a director of Vaults), did not disclose his loss. It was not until the fall of 1979 that O'Malley informed the Putnam brothers of his problems with Caten and sought to charge Vaults with Caten's defalcation.

O'Malley's complaint against Vaults was in three counts. Originally, Caten was named as a defendant, but he admitted liability, and a judgment, not involved in this appeal, was entered against him.

1. The first count, alleging a breach of contract, claimed that O'Malley had entered into an agreement with Vaults to purchase 178 Krugerrands and that only forty-five had been delivered; that Vaults had refused to deliver the coins and, therefore, failed to meet its obligations under the agreement. On appeal, O'Malley, recognizing that the evidence showed that the gold coins had, in fact, been purchased and delivered to O'Malley's safe deposit box, argues that Caten, as the agent of Vaults, made a new agreement with him for the borrowing of coins. Caten, he urges, could be found to have had actual or apparent authority to make this additional arrangement to borrow O'Malley's coins for "quick deliveries" to customers of Vaults.

The difficulty with this argument is two-fold. First, O'Malley did not make this contention known to the trial judge at the time of the hearing on the defendant's motion for a directed verdict. See Marcil v. John Deere Indus. Equip. Co., 9 Mass.App. 625, 629, 403 N.E.2d 430 (1980). Even if the allegations of the complaint might be said to encompass these claims and even if the evidence could be found to support them, O'Malley cannot raise these characterizations of count one for the first time in this court. Id. ⁴ See Roto-Lith Ltd. v. F.P. Bartlett & Co., 297 F.2d 497, 500 (1st Cir.1962).

Moreover, the plaintiff failed in his burden of showing that the borrowing arrangement which resulted in the conversion, was a transaction regular on its face with Caten appearing to be acting in the ordinary course of the business confided to him. See Foster v. Essex Bank, 17 Mass. 479, 510-513 (1821); Haskell v. Starbird, 152 Mass. 117, 120-121, 142 N.E. 695 (1890); New England Acceptance Corp. v. American Manufacturers Mut. Ins. Co., 4 Mass.App. 172, 180, 344 N.E.2d 208 (1976), Id., 373 Mass. 594, 368 N.E.2d 1385 (1977); Restatement (Second) of Agency § 261 & comment a (1958). ⁵ Although both O'Malley and Caten testified that the borrowing was to enable Vaults to service its customers, that fact, even if true, is insufficient to show Caten's actual or apparent authority. Cf. Kelly v. Citizens Fin. Co. of Lowell, Inc., 306 Mass. 531, 533, 28 N.E.2d 1005 (1940). O'Malley acknowledged that Caten's offer to share profits with O'Malley for letting Caten borrow the coins was improper. ⁶ This admission may be construed as a recognition by O'Malley that the borrowing itself was suspect. Even if not, O'Malley's erroneous belief is insufficient to charge Vaults. Not only was there no evidence suggesting that Caten's borrowing was known to, or acquiesced in by, his superiors, but there was no showing that borrowing gold from one customer to deliver to another was within the usual responsibility of a person in Caten's position or that such practice could be viewed as reasonably necessary to his authorized duties. See James F. Monaghan, Inc. v. Lowenstein & Sons, 290 Mass. 331, 333, 195 N.E. 101 (1935). Kelly v. Citizens Fin. Co. of Lowell, Inc., 306 Mass. at 533, 28 N.E.2d 1005. Without such evidence no inference of actual or apparent authority can properly be drawn. Compare Kanavos v. Hancock Bank & Trust Co., 14 Mass.App. at 331-333, 439 N.E.2d 311. Accordingly, we conclude the trial judge did not err in directing a verdict on the first count.

2. The remaining two counts allege negligence and the breach of a contract other than the contracts specified in count one. In count two, O'Malley claimed that Vaults negligently failed to supervise its employees whose misconduct caused his loss. In count three, he alleged that, in violation of the terms of its rental agreement, Vaults removed gold coins from O'Malley's safe deposit box. ⁷ (In count one he had alleged breach of the contract to deliver gold, or breach of the borrowing arrangement.)

Although ...