Pratt v. Higginson

• Decision Date: 25 May 1918
• Citation: 119 N.E. 661,230 Mass. 256
• Parties: PRATT v. HIGGINSON et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

230 Mass. 256

119 N.E. 661

PRATT

v.HIGGINSON et al.

Supreme Judicial Court of Massachusetts, Norfolk.

May 25, 1918.

Report from Superior Court, Norfolk County; Franklin T. Hammond, Judge.

Action of tort by Helen W. Pratt against Henry L. Higginson and others for the conversion of bonds purloined from plaintiff and delivered to defendants for sale. On report to the Supreme Judicial Court. Judgment ordered for defendants.

George W. Abele, of Boston, for plaintiff.

Ropes, Gray, Boyden & Perkins, of Boston (A. A. Schaefer, of Boston, of counsel), for defendants.

BRALEY, J.

The plaintiff, the owner of a 4 per cent. coupon bond of the United States of the par value of $1,000 payable to bearer, and of a 4 per cent. convertible gold bond of the American Telegraph & Telephone Company of the par value of $1,000 payable to the Old Colony Trust Company, trustee, or to bearer, deposited the bonds in a safe deposit box from which they were purloined by one Bassett, who passed them over to one Small for the purpose of having them sold. The bonds were delivered by Small to the defendants, a firm of bankers and brokers, by whom they were sold in the ordinary course of business, and after deducting the customary commission, and the stamp tax, remitted the balance to Small, who after taking out his compensation paid the remainder to Bassett. The plaintiff upon discovery notified the defendants of the theft, and then brought this action to recover the value of the bonds. It is agreed by the parties that neither the defendants nor their employés at the time of the transaction had any knowledge that Small was not the rightful owner, or lawfully in possession of the securities.

[1][2] The question for decision therefore is whether the defendants who received and sold the bonds and accounted for the proceeds to the apparent owner, without notice of any infirmity in the title, or of any circumstances which should have put them upon inquiry, can be held responsible in damages by the true owner for conversion. The defendants undoubtedly exercised dominion over the bonds by converting them into money. If the property had consisted of chattels or non-negotiable documents of which certificates of stock are an example, the plaintiff's title would not have been divested by a sale even to a purchaser for value and in good faith. Scollans v. Rollins, 173 Mass. 275, 278, 53 N. E. 863,73 Am. St. Rep. 284, and cases there collected. But to this rule there is a well-recognized exception where the property consists of negotiable securities. Heckle v. Lurvey, 101 Mass. 344, 345,3 Am. Rep. 366;Spooner v. Holmes, 102 Mass. 503, 507,3 Am. Rep. 491;O'Herron v. Gray, 168 Mass. 573, 575, 576, 47 N. E. 429,40 L. R. A. 498, 60 Am. St. Rep. 411. It is settled by Spooner v. Holmes that an action for the conversion of interest coupons of United States bonds payable to bearer cannot be maintained by the owner from whom they were stolen where the defendant in good faith received them as an agent in exchange, and without gross negligence from a party to the theft, and paid the proceeds to his employer, receiving no benefit himself, and without any notice from the plaintiff. The grounds of the decision are that being negotiable promises for the payment of money, issued by the government, payable to bearer, the title passed by delivery and the coupons were ‘subject to the same rules as bank bills or other negotiable instruments payable in money to bearer.’ The rule also applies to coupons attached to state and town bonds for different installments of interest when severed from the bonds. Hartman v. Greenhow, 102 U. S. 672, 26 L. Ed. 271;Koshkonong v. Burton, 104 U. S. 668, 26 L. Ed. 886. See 10 Cyc. p. 1172, note 42. If the coupons are negotiable promises to pay, the bond itself is in the same classification. Gibson v. Lenhart, 101 Pa. 522. As said by Mr. Justice Field in Clark v. Iowa City, 20 Wall. 583, 22 L. Ed. 427, ‘Coupons, when severed from the bonds to which they were originally attached, are in legal effect equivalent to separate bonds for the different installments of interest.’

The plaintiff in avoidance presses the argument that because the defendants received compensation they cannot escape résponsibility. If profit is derived, this fact may have an important hearing, and in some cases may be found to be decisive of the recipient's good faith. Allen v. Puritan Trust Co., 211 Mass. 409, 97 N. E. 916, L. R. A. 1915C, 518. But the true test is not whether compensation is received for the act which works the conversion, or whether it was gratuitous. It is whether the transaction was entered upon in ignorance of the bearer's want of title, or any...