National Surety Corp. v. List

• Decision Date: 03 April 1941
• Citation: 33 N.E.2d 255,308 Mass. 539
• Parties: NATIONAL SURETY CORPORATION v. ALBERT A. LIST.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

308 Mass. 539

33 N.E.2d 255

NATIONAL SURETY CORPORATION v. ALBERT A. LIST.

Supreme Judicial Court of Massachusetts, Suffolk.

April 3, 1941

January 8, 1941.

Present: FIELD, C.

J., DONAHUE LUMMUS, COX, & RONAN, JJ.

Bills and Notes What constitutes negotiable instrument, Holder in due course Municipal bond. Municipal Corporations, Bonds.

A municipal bond negotiable in form and payable to bearer was subject to the negotiable instruments law, G. L. (Ter. Ed.) c. 107.

One who took a stolen negotiable bearer bond in pledge as collateral security for a preexisting debt was a holder for value under G. L. (Ter.

Ed.) c. 107 Section 48, and on warranted findings that he took it in good faith and without knowledge that it had been stolen or knowledge of facts which put him on inquiry, he was a holder in due course not accountable respecting the bond to an assignee of the person from whom it had been stolen.

BILL IN EQUITY, filed in the Superior Court on June 28, 1939. The suit was heard by F. T. Hammond, J.

K. C. Tiffin, for the plaintiff.

I. S. Levin, (E.

A. Macy with him,) for the defendant.

COX, J. On February 10, 1936, six State of Louisiana, Jefferson Davis Parish bonds, payable to bearer, were stolen from their owner. The plaintiff paid the owner for its loss and took an assignment of its interest and title, by virtue of which this suit was brought to require the defendant to deliver the bonds to it and to determine the plaintiff's damage resulting from the defendant's failure to deliver them upon demand. The suit was tried by a judge of the Superior Court, by whose order the testimony was reported. He also filed a statement of findings and order for decree. A final decree dismissing the bill with costs was entered, from which the plaintiff appealed. In the circumstances, it is not for this court to disturb the findings of the trial judge unless they are plainly wrong. White Tower Management Corp. v Taglino, 302 Mass. 453 , 454, and cases cited.

No question is raised but that the stolen bonds, payable to bearer, were negotiable. The judge found that, beginning in August, 1936, the defendant lent money to one Lydon and to a corporation, hereinafter referred to as the company, of which Lydon was the president. There was evidence that Lydon owned all of the stock of that company. The judge also found that the company was registered by the department of public utilities and was engaged in the business of stockbroker in Boston. On February 27, 1937, the total amount due the defendant on the various loans was $5,430, for which amount the company gave the defendant a note dated February 23, 1937, secured by various bonds and shares of stock. This note bore the guaranty of Lydon as an individual. Thereafter, the defendant made further advances and received some payments, so that the total amount due him on May 22, 1937, was $8,650. On May 21, 1937, the registration of the company, at its request, was cancelled by the department, and, on May 22, Lydon informed the defendant that he could not meet the requirements necessary to enable the company to continue in business and that he was doing business as an individual and not as a corporation. He asked the defendant if he would accept his individual note for the sum then due. The latter consented, and Lydon gave him a demand note for the amount due signed by him individually and secured by a pledge of various shares of stocks and bonds, among which were the six bonds in question. When this note was given, the note of the company dated February 23, and another note dated May 4, were not cancelled or discharged, but were retained by the defendant. Three of the bonds in question had been deposited with the defendant and expressly listed as collateral security for the note of May 4, which was indorsed by Lydon. The other three bonds were not listed as collateral in any of the notes put in evidence prior to the note dated May 22, but the judge found that at some time between February 23 and May 6 they replaced other collateral.

It was not until September 3, 1937, that the defendant learned that some of the securities that Lydon had pledged had been stolen. Lydon continued to make payments to the defendant upon his indebtedness until November 19, 1938. On January 25, 1939 the plaintiff made a demand upon the defendant for the bonds in question, and on February 27, 1939, the latter sold them to his wife...