Paine v. St. Paul Union Stockyards Co.

• Decision Date: 02 October 1928
• Docket Number: No. 7653.,7653.
• Citation: 28 F.2d 463
• Parties: PAINE et al. v. ST. PAUL UNION STOCKYARDS CO.
• Court: U.S. Court of Appeals — Eighth Circuit

28 F.2d 463 (1928)

PAINE et al. v. ST. PAUL UNION STOCKYARDS CO.

No. 7653.

Circuit Court of Appeals, Eighth Circuit.

October 2, 1928.

Thomas D. O'Brien and Edward S. Stringer, both of St. Paul, Minn. (Alexander E. Horn, of St. Paul, Minn., and Sullivan & Cromwell, of New York City, on the brief), for plaintiffs in error.

D. L. Grannis, of South St. Paul, Minn. (Frank L. Horton, of Chicago, Ill., on the brief), for defendant in error.

Before VAN VALKENBURGH, Circuit Judge, and REEVES and OTIS, District Judges.

OTIS, District Judge.

Plaintiffs in error will be referred to herein as defendants and the defendant in error as plaintiff in accordance with their designations in the District Court.

Plaintiff is a Minnesota corporation. Defendants are copartners engaged in Minnesota and elsewhere in the business of buying and selling stocks and bonds and other securities on commission. For the plaintiff one James M. Lindsay, in 1923 and prior thereto, was treasurer and as such had sole access to a safety deposit box containing securities belonging to plaintiff. Without authority and with criminal intent on his part he abstracted from this box United States government bonds belonging to the plaintiff of the par value of $48,000. The bonds were payable to bearer, and were not registered. Representing to the defendants that these bonds were his, Lindsay deposited them with the defendants as collateral security for the purchase price of various stocks and bonds which he directed defendants to buy for him. Subsequently the state of his account with defendants was such that he caused them to sell the bonds and to credit him with the proceeds. That they did. Later the theft committed by Lindsay was discovered by plaintiff, and thereafter this action was instituted to recover from the defendants the value of the bonds that they had sold and that on the theory that they had been taken and converted by the defendants to their own use to the plaintiff's damage. Of five causes of action stated in the plaintiff's petition, this was the first. Reference need not be made to the others, beyond saying that, as to the second and third causes of action, they were dismissed by the court, and as to the fourth and fifth causes of action judgment was for the defendants.

The case was tried to a jury, but at the close of all of the testimony both the plaintiffs and defendant filed motions for directed verdicts, whereupon the case rightly was taken from the jury by the court and the issues of fact and law determined by the court. Beuttell v. Magone, 157 U. S. 154, 157, 15 S. Ct. 566, 39 L. Ed. 654; Anderson v. Messenger (C. C. A.) 158 F. 250, 253; Swift & Co. v. Columbia Ry., Gas & Electric Co. (C. C. A.) 17 F.(2d) 46, 49, 51 A. L. R. 983. Among other findings of fact made by the court were the following:

That previous to the 15th day of February, 1922, and at such time the plaintiff was the owner of and entitled to the immediate possession of negotiable United States government bonds of the par value of $48,000 and of the actual value on the said 15th day of February, 1922, of $47,024.02.

That before the said 15th day of February, 1922, said United States government bonds were stolen from the plaintiff by one James M. Lindsay.

That previous to the 15th day of February, 1922, defendants received said United States government bonds from the said Lindsay and on said date converted the said United States government bonds to their own use, all to plaintiff's damage in the amount of $47,024.02, no part of which has been paid.

That the said United States government bonds were received by defendants from the said James M. Lindsay under circumstances of a suspicious nature, but not so suspicious as to show in themselves that defendants acted in bad faith. That defendants dealt with the bonds in good faith.

That said United States government bonds were delivered to defendants by said James M. Lindsay as collateral security for the purchase price of stocks and bonds which he ordered purchased by defendants on margin, and he understood that said purchases were to be real and actual, and did not consent to do business in any other way.

That the stocks and bonds so ordered by Lindsay were not in fact purchased for or delivered to Lindsay by defendants.

That defendants did not give value for the said United States government bonds.

The principal controversy revolves about the two last-mentioned findings of fact and the legal conclusion resting thereon.

The testimony clearly established that the bonds were stolen from the plaintiff by Lindsay; that they were delivered by him to the defendants as his own property and in good faith so received from him by the defendants. There is no question but that the plaintiff is not entitled to recover from the defendants if they gave Lindsay value for the bonds received from him. There is no question that, if the defendants purchased the stocks and bonds ordered by Lindsay and in connection with which order the bonds were deposited as collateral security, then the defendants did give value. As to whether they gave value, the burden of proof was on them. Minnesota Uniform Negotiable Instrument Act, Laws of Minn. 1913, c. 272, §§ 59, 55, 51; Crittenden v. Widrevitz (C. C. A.) 272 F. 871, 872.

Upon this issue the testimony of Lindsay was:

"Q. Have you any recollection as to the total market value of the securities held by Paine-Webber on your account, and which had been purchased by them on your account in November, 1920?

"Mr. Grannis: We object to the question on the ground that it assumes something not in evidence. He assumes that the stock was purchased. There is no evidence here that this stock was purchased for Mr. Lindsay. He said he didn't receive, and that question assumes that there was stock purchased.

"The Court: Overruled.

* * * * * * * * *

"A. Oh, I assume it was around fifty or sixty or seventy-five thousand dollars.

* * * * * * * * *

"Q. Do you mean at that time the securities which Paine, Webber & Co. were carrying for you were, at the market value, about equal to your indebtedness to Paine, Webber? A. I guess that would be it.

* * * * * * * * *

"Q. On the 15th of February, 1922, have you any independent recollection as to the market value of the securities then held by Paine, Webber & Co. and which they had purchased upon your account? A. No, I can't say with any degree of accuracy. It is only a matter of memory.

* * * * * * * * *

"The Court: They sent you a statement of your account from time to time?

"The Witness: I got a notice of each individual transaction, and at the end of every month I got a summary of the whole.

"The Court: You say in February, 1922, you think your debit balance was something like $48,000?

"The Witness: I believe that was the amount.

"The Court: That is, you owed them on all accounts that amount?

"The Witness: Yes, sir.

"The Court: And they held stocks which represented part of that indebtedness?

"The Witness: Yes, sir; I believe the amount was $45,000, my debit balance.

"The Court: $45,000?

"The Witness: Yes.

"The Court: For that they had in part at least the stocks?

"The Witness: The stocks and bonds, about $48,000.

"The Court: Stocks and bonds about $48,000?

"The Witness: Yes, sir.

"The Court: So that if you had closed out on that day you would have had about $3,000 coming to you?

"The Witness: That is right.

"The Court: But they had in addition to that these bonds which they held as collateral?

"The Witness: No, sir; the Liberty bonds was the $48,000 that I referred to.

"The Court: Well, did they not hold any of the stocks or bonds which you had purchased and for which this indebtedness was contracted?

"The Witness: I don't think I had any at that time; I think I had pretty near sold them all out; the only thing I had in the account at that time was the $48,000, the Liberty bonds deposited as collateral, the debit balance around $45,000.

"The Court: If your memory is right, they held nothing of yours, and nothing which had been bought for you, except these $48,000 of Liberty bonds which had been deposited as collateral?

"The Witness: That is all. Possibly there might have been one or two small lots of stock unsold.

"The Court: At that time you directed them to sell these $48,000 of Liberty bonds?

"The Witness: Yes, sir.

* * * * * * * * *

"The Court: You have said that in one or two instances only that you did actually have possession of stocks or bonds which the defendant bought for you?

"The Witness: Yes, sir.

* * * * * * * * *

"The Court: You did not actually know whether they had made the purchases or not?

"The Witness: No; but I believed they did. I wouldn't see them anyway.

"The Court: That is, in the regular course of business you wouldn't see them?

"The Witness: No, sir."

Upon the same issue the testimony of the local manager for the defendants, one Samuel E. Byrne, was:

"Q. What was done by Paine, Webber & Co. with reference to his order to purchase 50 shares of Swift's stock? A. We transmitted it to our Chicago office.

"Q. State whether or not the stock was purchased? A. The stock was purchased."

To this testimony plaintiff objected and moved that it be stricken out on the ground that the witness, being at St. Paul, could not have personal knowledge of whether stocks were purchased at Chicago or elsewhere. The objection and motion were overruled. Byrne further testified:

"Q. Now you say that the stock was purchased upon the Chicago market? A. Yes, sir.

"Q. Why do you say that? A. Well, he transmitted the order to Chicago, and Chicago reported the purchase to us.

"Mr. Grannis: I move to strike out the answer.

* * * * * * * * *

"The Court: For the present let the motion be denied.

"Q. Are you entirely familiar with the method of transacting business by Paine, Webber & Co.? A. Yes, sir.

"Q. How long have you been with that company? A. Nearly 27 years.

"Q. State whether or not that company operates...