Westinghouse v. German National Bank
| Decision Date | 21 May 1900 |
| Docket Number | 48 |
| Citation | 46 A. 380,196 Pa. 249 |
| Parties | Westinghouse v. German National Bank |
| Court | Pennsylvania Supreme Court |
November 1, 1898, Argued; February 27, 1900, Reargued
Appeal, No. 48, Oct. T., 1898, by Joseph W. Craig, from decree of C.P. No. 2, Allegheny County, July T., 1897, No 828, on bill in equity in case of George Westinghouse v. The German National Bank of Pittsburg and Joseph W. Craig. Reversed.
Bill in equity to compel surrender of certificate of stock.
The facts are fully stated in the opinion of the Supreme Court.
The court below entered a decree that the 500 shares of stock mentioned in the bill were the property of George Westinghouse and ordered that the same should be delivered to him.
Error assigned was the decree of the court.
The decree of the court below is reversed at costs of appellee.
Edwin S. Craig, for appellant. -- The bank did not know of Westinghouse's ownership, and the bank was justified in making the loan upon the faith of the certificates and thereby became a pledgee of them, for value, with the rights of a bona fide purchaser thereof: Wood's App., 92 Pa 379; Dovey's App., 97 Pa. 153; Miller v Pollock, 99 Pa. 202; Penna. R. Co.'s App., 86 Pa. 80; Souder v. Columbia Nat. Bank, 156 Pa. 374; Burton's App., 93 Pa. 214; Gilbert v. Erie Bldg. Assn., 184 Pa. 554; McManus v. Laughlin, 186 Pa. 498.
Craig, even when only a guarantor, had parted with something of value to him, and had acquired an interest in the fuel gas stock, just the same as an innocent purchaser or pledgee for value, and with exactly the same rights: Dovey's App., 97 Pa. 153; Miller v. Pollock, 99 Pa. 202; Jones on Pledges (1st ed.), sec. 127; Bispham's Eq. (5th ed.) secs. 335, 337; Forest Oil Co.'s App., 118 Pa. 145; Kerns v. Swope, 2 Watts, 75; Jaques v. Weeks, 7 Watts, 261; Meals v. Brandon, 16 Pa. 220; Mulliken v. Graham, 72 Pa. 484.
Where one of two parties must suffer from the wrongful act of a third person, the party who clothes that third person with power to perpetrate the wrong must suffer rather than the innocent party who is deceived and imposed upon: Penna. R. Co.'s App., 86 Pa. 80; Garrard v. Haddan, 67 Pa. 82; Burton's App., 93 Pa. 214.
Craig having paid the debt for which the fuel gas stock was pledged is the lawful holder of that stock apart from the form of the note or notes which represent the debt: Jones v. N.Y. Guaranty, etc., Co., 101 U.S. 622; Shrewsbury Savings Institution's App., 94 Pa. 309; Read v. Doak, 22 U.S. Appeals, 669; Spencer v. Clarke, L.R. 9 Ch. Div. 137; Rice v. Rice, 2 Drewry, 73; Bispham's Eq. (5th ed.) sec. 40; Basset v. Nosworthy, 2 Leading Cases in Equity (White & Tudor), 1.
George B. Gordon, with him John Dalzell and William Scott, for appellee. -- On the undisputed testimony in this case, the Pittsburg Meter Company stock was pledged by Westinghouse with A.J. Lawrence & Company, as further collateral for moneys due. Clearly therefore Lawrence had no right to rehypothecate the stocks: Act of May 25, 1878, P.L. 155; Cook on Stockholders, sec. 471.
A subpledgee in order to hold the pledge discharged of the equities, must have advanced money upon the faith of the apparent ownership of the stocks by the original pledgee and not only without express notice of the fact that the person pledging to him is not the owner, but without being aware of any such circumstances as would suggest inquiry and the burden is upon him to prove affirmatively all the facts necessary to establish his right to hold the stock: Ashton's App., 73 Pa. 162; Petrie v. Clark, 11 S. & R. 388; Depeau v. Waddington, 6 Wharton, 220; Altoona Second Nat. Bank v. Dunn, 151 Pa. 232; Royer v. Keystone Nat. Bank, 83 Pa. 248; Kirkpatrick v. Muirhead, 16 Pa. 117; Ryman v. Gerlach, 153 Pa. 197; Leiper's App., 108 Pa. 377; Colonial Bank v. Cady, L.R. 15 Appeal Cases, 267; Fisher v. Brown, 104 Mass. 259; Williamson v. Brown, 15 N.Y. 354; Denny v. Lyon, 38 Pa. 98; Wood's App., 92 Pa. 390; Souder v. Columbia Nat. Bank, 156 Pa. 374; Merchants' Nat. Bank v. Livingston, 74 N.Y. 223; Gould v. Farmers' Loan and Trust Co., 23 Hun, 322; Jones on Pledges, 512; Cook on Stocks and Stockholders, sec. 473; Myers v. Merchants' Nat. Bank, 27 Abb. New Cases, 266; Gould v. Cent. Trust Co., 6 Abb. New Cases, 381.
Before GREEN, C.J., McCOLLUM, MITCHELL, DEAN, FELL, BROWN and MESTREZAT, JJ.
On December 10, 1890, George Westinghouse, the plaintiff, delivered to Sproul & Lawrence, bankers and brokers, doing business in Pittsburg, certificates for 500 shares of the capital stock of the Fuel Gas Company of the par value of $100 each; the stock was delivered to the brokers as collateral, for the protection of Westinghouse's account with the brokers, who largely purchased, carried and sold different stocks for him. On each certificate was the usual absolute transfer and written sale of the stock, with an irrevocable power of attorney authorizing the brokers to have the shares transferred to themselves on the books of the corporation and to have issued to themselves new certificates in their name; in about a month thereafter, they were transferred to the brokers, the old certificates being surrendered and new ones issued to them; then they pledged the new securities with the German National Bank as collateral for the payment of their demand note of $15,000. Before this loan, the brokers had borrowed from the same bank $10,000 on two other notes, making their indebtedness $25,000 altogether; for these last loans, they had pledged other securities as collateral.
Westinghouse sometime in August, 1894, and several times afterwards offered to pay to the brokers any balance due from him to them, on a redelivery of the Fuel Gas Company stock and other stock pledged by him; they always replied, in substance, that the stocks were not in their possession but had been repledged, and if given time they would get them. Lawrence at this time had become embarrassed financially, and afterwards assigned for the benefit of his creditors. Sproul withdrew from the firm in 1891, leaving Lawrence as successor in the business. The bank became importunate for repayment of its loans; Lawrence solicited financial aid from Craig, this appellant; he communicated with the bank, and learned that the brokers had repledged to the same bank 200 shares of stock of the "Craig Oil Company," which he had previously delivered to them for a special purpose. He was anxious to save his own stock, and it was agreed between him, the bank and Lawrence, the broker, that the latter should give to the bank two other notes, one in sum of $10,000, the other for $15,000; for the first, Lawrence was to pledge as collateral 300 shares of Westinghouse Machine Company; for the second, he was to pledge the Craig Oil Company stock and the 500 shares of Fuel Gas Company stock, and small blocks of other stocks; in addition, Craig was to guarantee payment in writing on the back of the note, which he did, the bank stipulating orally that it would be indulgent to Craig in exacting payment. Lawrence afterwards made payment to the amount of $5,000 to the bank, and received a small number of shares of other stocks because of the payment, but no part of the Oil Company or Fuel Gas Company stock. A large balance of the guaranteed note remaining unpaid, demand was made for payment on the guarantor, Craig; he...
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