Colonial Trust Co. v. Central Trust Co.

243 Pa. 268 | Pa. | 1914

Lead Opinion

Opinion by

Mr. Justice Bbown,

The facts found by the court below were all properly found. Under the evidence, they could not have been different, and the very narrow question on these appeals is whether the Central Trust Company acted within its rights under Wood’s pledging agreement with it when it purchased the pledged securities on January 15, 1910. If it did so act, it became the absolute owner of the securities, accountable to no one for any profit it might subsequently realize on a resale of them, just as it could look to no one to reimburse it for any loss it might sustain : Plucker v. Teller, 174 Pa. 529. By resales of those securities, made in a few days, it realized $1,582.29 over and above Wood’s indebtedness to it. If it is the legal right of the appellee to keep that money, no proceeding in equity can give it to another. Legal rights are as safe in chancery as they are in a court of law, and however strong an appeal may be to the conscience of a chancellor for equitable relief, he is powerless to grant it if the one from whom it must come will be deprived of a legal right. Relief in such a case can come only as the conscience of the one vested with the legal right may prompt him to bestow it. In the case under consideration the learned chancellor below held, and was compelled to hold, that the Central Trust Company is but exercising a legal right in holding on to the money claimed by the complainants in the bill and cross bill, and this being so, equity can do nothing for either of them.

If the Central Trust Company was required to sell the securities at public sale, it would be well contended that such a sale was not held. .Counsel for appellee concede this to be true and say of the sale that it was a private one, “made in a semi-public way.” The authority given by the pledgor to the pledgee did not require a public sale of the pledged securities upon the failure of the pledgor to pay his obligations. The broad authority given was to sell “at public or private sale,” at the option of the appellee, on the nonperformance of the promise of Wood to pay, and such sale could be without demand, advertisement or notice, with the right in the appellee to become the purchaser and absolute owner of the securities, free of all claims and trusts. The terms of this contract could not be clearer, and as it was a lawful one, the pledgor and his trustee in bankruptcy are bound by it, and the pledgee, in the absence of fraud, had the right to become the absolute purchaser of the securities at a private sale: McManus v. Sweatman, 22 W. N. C. 54; Jeanes’s App., 116 Pa. 573; Hiscock v. Varick Bank of New York, 206 U. S. 28. Nothing done by the pledgee, from the time it took the securities from the pledgor until it sold them, bears the slightest taint of fraud, and that it was justified in selling them in the manner complained of by the appellants is made clear by the following facts found by the court below: “When the pledgee learned of the failure of the pledgor it made immediate investigation of the character of the securities in its hands, with a view to protection against loss. The market value of some of the pledged stocks was at times of little value; some were speculative and non-dividend paying, and at the time of the sale the market was on a decline, and had the sale, been délayed for-a month longer the pledgee would have, sustained a loss. The Westinghouse stocks were- of companies then in financial difficulties. There was no proof that the securities as a whole were worth, on the day of the sale,more than the amount of the pledgee’s claim.”

Under the terms of the note, the securities pledged for its payment might have been sold by the trust company at private sale,-without demand upon the maker to pay and without notice to him that such sale would be made. This, however, was not done, though the securities pledged by the adjudged bankrupt were held on a fluctuating and declining market. On January 14, 1910, demand was made upon the trustee in bankruptcy for payment, and, upon his refusal to pay, notice was given him that the collaterals would be sold. What was done by the appellee in selling them was lawfully done, and the title which it acquired was an absolute one. On this unanswerable legal proposition it has a right to stand when alleged equities are asserted against it.

• No distinction can be made between the claim of Clara J. Kirkland, the victim of Wood’s perfidy, and that of the complainant in the original bill. She executed the power of attorney in the usual form on the back of her stock certificate, without restriction or condition, and the appellee took it and held it as an innocent pledgee, without notice, divested of all claims that she might have upon it: Wood’s App., 92 Pa. 379; Gilbert v. Building Association, 184 Pa. 554; Cochran v. Fox Chase Bank, 209 Pa. 34; Shattuck v. American Cement Co., 205 Pa. 197; King v. National Bank, 227 Pa. 22. On the day this particular stock was sold and purchased by the appellee no surplus was realized from the sale of all of the securities to be accounted for to either of the two appellants.

Appeals dismissed and decree affirmed at the costs of appellants. . .

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Dissenting Opinion

Dis&enting Opinion by

Mr. Justice Stewart ;

- Thdugh the trust company was an innocent holder of the Certificate for twenty-five shares of stock in the Crucible Steel Company, the stock was nevertheless, except as distinguished by legal technicality, stolen property; and this fact was brought to the knowledge of the trust company before it undertook to convert the stock. The trust company held this stock along with a variety of other stocks as collateral to the debt owed it by John A. Wood, Jr., from whom it received the certificate. Under such circumstances, with the fact brought home to it that the Crucible Steel stock had been embezzled, that it was not the property of Wood who pledged it, but was the property of Mrs. Kirkland, did any duty attach to the trust company, as affecting the rights of the owner of the stock? I am not questioning the right of the trust company to use this stock for its own protection against loss on the loan, to Wood, and to exhaust it if necessary to that end. What I assert is that common honesty, to say nothing of decorous regard for the right of another who had been fraudulently imposed upon and defrauded, ought to have suggested to the trust company a moral obligation it was under to confine the fraudulent pledge it received to simple indemnification; that any attempt on its part to derive more would be but an effort to reap benefit or advantage from embezzlement perpetrated by another. On the same morning the trust company was notified of the embezzlement of this stock, in the office of its secretary, it auctioned off to itself, in one lot, all the stock that Wood had pledged, including the stock of Mrs. Kirkland, for a sum equal to the indebtedness of Wood to the bank. It immediately placed all of the stock that it had thus come to own, in the hands of a broker and sold it, with the result, that it realized, over and above the payment of Wood’s indebtedness, the sum of $1,500.00 profit. This profit represents the value of Mrs. Kirkland’s stock. The transaction, however it may be. regarded with respect to the stock honestly pledged by Wood, takes on a very different aspect when we come to consider Mrs. Kirkland’s relation to it. Hers was the stock, subject to the right of the trust company to indemnity thereout. The trust company knew it was Mrs. Kirkland’s. When it auctioned off the stock that had been pledged to it, it knew that included in the lot was the stock that had been virtually stolen from Mrs. Kirkland. It was bound by every moral and equitable consideration to distinguish the stolen stock from the others, and sell it only as the other stock proved insufficient for its indemnification. The subsequent conduct of the trust company in throwing the stock on the public market on the same day of its auction sale to itself, is to my mind persuasive evidence that the auction sale, made in the way it was, was intended as a transaction whereby the trust company might reap advantage from the stock over and above simple protection. Why the trust company sold to itself the stock in bulk rather than by the usual method, which it the same day adopted when it sold the stock as its own, is without other explanation. The maxim sic utere tuo ut alienum non laedas has a legal meaning apt to be obscured by a too literal translation of its terms. In its legal signification it means: so use your own property as not to injure the rights of another. Broom’s Legal Maxims, Sec. 328. The trust company had- a right to use this particular stock for its indemnity; but only in case it was required for that purpose. Whether it would be required could only be determined upon the sale of the other securities which it held, the ownership of which was not in dispute. It was the bounden duty of the trust company, because of the circumstances we have adverted to, notwithstanding the contract with Wood admitted of its doing what it did, to sell this stock in the usual way on the general market, and sell Mrs. Kirkland’s stock only in case the other Stocks did not realize sufficient to indemnify the company. By the sale of the stock to itself the trust company did not become an innocent purchaser for value: it bought with full notice of the fact that the stock belonged to Mrs. Kirkland, and therefore her rights remained just what they were before. With her ownership admitted or established, equity, with respect to this stock, would have regarded her as but surety for Wood to that extent, and for her protection would have enjoined a sale of it until it had been made to appear that its conversion was required for the full indemnity of the trust company. Such being my view of the case, I would sustain Mrs. Kirkland’s appeal.'