Somerville Natl. Bank v. Hornblower
| Decision Date | 31 January 1936 |
| Citation | 293 Mass. 363 |
| Court | United States State Supreme Judicial Court of Massachusetts Supreme Court |
| Parties | SOMERVILLE NATIONAL BANK v. HENRY HORNBLOWER & others. HENRY HORNBLOWER & others v. THOMAS J. MCCARTHY & another. |
January 6, 1936.
Present: RUGG, C.
J., CROSBY, FIELD LUMMUS, & QUA, JJ.
Equity Jurisdiction, Equitable replevin, Retention for the assessment of damages. Equity Pleading and Practice Stipulation. Agency, Knowledge of agent. Bailment. Conversion. Damages, For tort.
In a suit under G.L. (Ter. Ed.) c. 214, Section 3 (1), for equitable replevin of a certificate of stock which the defendant had sold before the filing of the bill, the defendant's stipulation not to sell that certificate, and his holding another for an equal amount of the same stock did not enable the court to grant the equitable relief sought by the bill.
In a suit for equitable replevin of a certificate of stock believed by the plaintiff to be in the possession of the defendant, it appearing that the defendant had sold the stock before the filing of the bill, the court, though unable to grant equitable relief, properly retained the suit for assessment of damages for conversion.
A broker was bound by his clerk's knowledge that a certificate of stock had been received on condition to remit a certain amount to the delivering party.
One appropriating without right a certificate of stock of another converts it though he has in his possession and available for the owner another certificate for an equal amount of the same stock.
After delivery by mistake to a broker of a certificate of stock intended to be delivered to another and the broker's receipt of it on condition to remit a certain amount to the delivering party the broker's transfer of the certificate to himself and his refusal to pay such amount were a conversion of the certificate and the shares represented thereby for which damages properly were assessed at the value of the shares on the day of the wrongful transfer; the delivering party's negligence in making the wrong delivery was not a defence.
TWO BILLS IN EQUITY, filed in the Superior Court on November 29, 1929, and June 27, 1931, respectively.
The suits were heard by Weed, J., pursuant to whose order for decrees, final decrees were entered by Beaudreau, J. The defendants appealed in the first suit, and the plaintiffs and the defendant McCarthy appealed in the second suit.
L. Withington, (E.
O. Proctor with him,) for Hornblower and others.
K. A. Sanderson, (W.
A. Redding with him,) for Somerville National Bank.
G. I. Kellaher, (E.
P. Kelleher with him,) for McCarthy.
The defendants in the first case are stockbrokers doing business under the name of Hornblower and Weeks. Thomas J. McCarthy bought and sold securities through them on margin. He had borrowed money from the plaintiff bank, depositing securities as collateral. On October 24, 1929, during the panic in the stock market, McCarthy directed Hornblower and Weeks to sell two hundred Niagara Hudson Power warrants, which were held by the plaintiff bank as collateral, and they sold them for $1,109.60. McCarthy requested the plaintiff bank by letter to deliver these warrants to Hornblower and Weeks and to receive a check for $1,109.60 in reduction of its loan. On the same day, October 24, 1929, McCarthy directed another stockbroker called Bowen to sell certain shares of stock which were held by the plaintiff bank as collateral, and Bowen sold them for prices aggregating $11,968.83. McCarthy requested the plaintiff bank by letter to deliver the certificates for these shares to Bowen and to receive a check for $11,968.83 in reduction of its loan.
These two letters from McCarthy were received by the plaintiff bank on the morning of October 25, 1929. A clerk in its employ confused the deliveries requested. The warrants, which should have gone to Hornblower and Weeks, were delivered by messenger to Bowen, without the receipt of any check. Ultimately they were transmitted by Bowen to Hornblower and Weeks, who on November 6, 1929, sent the plaintiff bank a check for $1,109.60. The certificates of stock, which should have gone to Bowen, were presented on October 25, 1929, to the clerk at the stock window of Hornblower and Weeks, and were taken back to the plaintiff bank when the clerk said that he had no check for them. Even then, though the mistake was discovered, the instructions to the messenger were not corrected. The following Monday, October 28, 1929, the messenger presented the certificates again at the stock window of Hornblower and Weeks, and told the clerk in charge that he, the messenger, was to receive a check for $11,968.83 for them. The clerk looked at his checks, and said that he found no such check, but that he would take the certificates on receipt and send a check by mail. The messenger left the certificates, taking a receipt reciting that they were "received of Somerville National Bank a/c Thos. J. McCarthy." No check was ever sent.
The employees of Hornblower and Weeks were working under great pressure on that day. The clerk at the stock window noted on his record merely that the certificates had been received for the account of McCarthy. They were credited on his margin account, and were put in course of transfer, according to custom, into the name of Hornblower and Weeks. The new certificates received were indorsed by Hornblower and Weeks and used as "street" certificates. As such they passed to other persons before November 16, 1929. On November 1, 1929, the error in delivery having been discovered, the messenger of the plaintiff bank went to the stock window of Hornblower and Weeks and asked a return of the certificates as having been delivered by mistake. After some discussion, he was told on November 4, 1929, that Hornblower and Weeks intended to hold them as security for McCarthy's margin account.
The plaintiff bank, on November 29, 1929, brought the bill in the first case for the return of the securities delivered by mistake to Hornblower and Weeks. There was no demurrer. Nothing in the answer suggested as a defence that the certificates were not "so secreted or withheld that they cannot be replevied." G.L. (Ter. Ed.) c. 214, Section 3 (1). The answer declared merely that if the plaintiff bank "has stated any cause of action, such cause is one for damages at law." See Labagnara v. Kane Furniture Co. 289 Mass. 52, 56. Replevin, or equitable replevin, may be maintained for a certificate of stock. Bellows Falls Power Co. v. Commonwealth, 222 Mass. 51 , 58. See also G.L. (Ter. Ed.) c. 155, Section 33, which is not shown to be applicable to this case. Casto v. Wrenn, 255 Mass. 72 , 75. Neither did the answer suggest, what was the fact, that the certificates and the shares represented by them had been transferred before the bill was brought, so that specific redelivery was impossible. On the contrary, on December 6, 1929, Hornblower and Weeks stipulated by counsel that they would not, without order of court or assent of the plaintiff, "sell, assign, transfer, dispose of or put out of their possession the shares of stock forming the subject matter of this bill in equity." The plaintiff bank, in taking this stipulation, was ignorant that the shares had already been transferred. Although Hornblower and Weeks, at all times on and after October 28, 1929, had in their possession enough shares of the kinds delivered to them by the plaintiff bank to restore the shares so delivered, it was not until about November 12, 1931, that they collected certificates for the kinds and amounts of shares so delivered, and segregated them to await the outcome of this case. When the plaintiff bank learned all the facts, it sought on January 8, 1935, and later at the trial, to amend its bill into an action at law for conversion, but its motions were denied.
The equitable relief prayed for could not be given, for when the bill was filed not only the certificates delivered to Hornblower and Weeks but also title to the shares represented thereby had passed beyond their control. Any equitable obligation with respect to those certificates and shares did not attach to other certificates and shares which they happened from time to time to have "on hand or in their control." Parsons v. Martin, 11 Gray, 111, 117. Lamb Knit-Goods Co v. Lamb, 119 Mich. 568, 570. It is true that, following not so much the analogy of a fiduciary depositing trust money in his own bank account (Worcester Bank & Trust Co. v. Nordblom, 285 Mass. 22 , 26) as the analogy of grain of various persons in a grain elevator (G.L. [Ter. Ed.] c. 105, Section 29; c. 106, Section 8 [2]; Williston, Sales [2d ed.] Section 154; compare Peoples National Bank v. Mulholland, 228 Mass. 152), a customer whose stock has been in the hands of a broker as security for a margin account or otherwise, may claim as his any such stock found among the assets when the broker becomes bankrupt. Duel v. Hollins, 241 U.S. 523, reversing In re Hollins, 219 F. 544, and affirming In re H. B. Hollins & Co. 212 F. 317. Sexton v. American Trust Co. 45 F. (2d) 372. Lavien v. Norman, 55 F. (2d) 91. Denton v. Gurnett & Co. 69 F. (2d) 750. In re Curtis & Sanger, 7 Fed. Sup. 738. Compare Stuart v. Sargent, 283 Mass. 536 . These cases do not hold that the owner of stock appropriated by another is required to accept in substitution other stock which may be on hand. Parsons v. Martin, 11 Gray, 111, 117. Perkins v. Perkins, 134 Mass. 441 , 444. They merely give, by a fiction, an extraordinary right of reclamation. The contention made by Hornblower and Weeks that "it was inequitable to award money damages to the bank when equitable relief was possible, and when the bank had had the benefit of a restraining order and stipulation and had thereby prevented the...
To continue reading
Request your trial