203 Mass. 108 | Mass. | 1909
Dane, Smith and Company, stockbrokers, hereinafter called the firm, having become insolvent, made an assignment to the defendant Dodge, and he is now engaged in turning their assets into money for the benefit of their creditors who have assented to the assignment. The several plaintiffs in these suits claim on equitable grounds that they are entitled to certain of those assets by reason of the character of their dealings with the firm. The settlement of the questions involved makes it necessary to consider the rights of each plaintiff against Dodge, as the representative of the general creditors of the firm.
1. The plaintiff Furber was an employee of the firm. On January 10, 1908, he gave the firm an order to sell for him twenty shares of a copper stock, and they sold fifteen of these shares for $757.50. On January 13, he gave them a certificate
Upon these facts, Furber contends that this balance of more than $4,000 is affected with a trust in his favor to the extent of the $755.63 due to him. He contends that when the proceeds of his stock were received by the firm, he became entitled thereto, and that since he has been able to trace these proceeds into the account and into the balance remaining on deposit at the time of the firm’s failure, he has shown a trust attaching ip his favor'to that balance. Cole v. Bates, 186 Mass. 584. National Bank v. Insurance Co. 104 U. S. 54, 68. In re Hallett’s Estate, 13 Ch. D. 696. It would be difficult to deny this contention if1 it appeared that the firm stood in a fiduciary relation to him as to the proceeds of his stock, and that none of the other parties had equities superior to and countervailing his. But we are of opinion that it is not necessary to consider these very interesting questions; for there is one circumstance which is fatal to his claim.
The check which he received from the firm on January 13 was not presented by him for payment until January 15. It would have been paid if it had been presented during banking
But he contends that this defense is not open here, for the reason that it is stated in the agreed facts that this check “ was duly presented ” for payment. If these words stood alone, they would show that the presentment was made not only in due manner, but in due season. Commonwealth v. Chase, 127 Mass. 7, 13. But in connection with these words the dates both of the receipt of the check and of its presentment for payment are carefully stated, and the whole of the firm’s account with the Merchants Bank on January 14 is shown in detail. We think it manifest that the words “duly presented” were intended to indicate only that the presentment was made in proper manner, with proper indorsement upon the check and when the bank was open for business, and not to bind the parties to an agreement that the presentment was in due season. Many of the facts agreed with reference to this check otherwise could have no bearing upon any question in the case. The meaning of the word “ duly ” was restricted in a like manner in Boston v. Mount Washington, 139 Mass. 15, 16; Lunenberg v. Shirley, 132 Mass. 498, 501. And it must be remembered that this defense was expressly set up in the answer of Dodge.
It follows that Furber cannot maintain his bill.
2. In the second case, Raymond and Howe seek to recover one hundred shares of the United Shoe Machinery Corporation now in the hands of the Boston Penny Savings Bank, and two hundred other shares of the same stock now in the hands of the American Trust Company. In August, 1907, the insolvent firm had bought, and was carrying on a margin certain shares of stock for Raymond, and held other shares of stock as collateral on a margin therefor. On August 15, 1907, they called on him for additional margin, and he borrowed from Howe the one hundred shares first in question, Howe indorsing the certificate in blank, and deposited them with the firm as additional margin or collateral security. The firm then pledged this certificate to
In the meantime, on October 21,1907, upon a call of the firm for yet more margin, Raymond borrowed from Howe and deposited with the firm two hundred more shares of the Shoe Machinery stock, also represented by certificates standing in the name of Howe and indorsed by him in blank. The firm pledged these shares and others with the American Trust Company as security for a note. Immediately after the firm’s failure, Raymond and Howe gave to the trust company a notice and request substantially like that given to the savings bank as aforesaid. The trust company sold its other collateral, and applied the proceeds in part payment of its note. It still holds the two hundred shares of Shoe Machinery stock and the balance of the firm’s deposit account, amounting, as before stated, to more than $4,600. The Shoe Machinery stock is worth considerably more than the amount remaining due to the trust company. The balance of the deposit account is nearly sufficient to pay that amount.
Raymond and Howe contend that they are entitled to have the securities held by the trust company marshalled, the amount of the balance of the deposit account applied to the payment of what remains due to the trust company, and the two hundred shares of stock exonerated to that extent. The defendant Dodge denies that these plaintiffs are entitled to that relief, and by a
It is of some importance that Raymond is, and at the date of the failure was, in any event a creditor and not a debtor of the firm. They have as against him no right to retain his property which was held merely as collateral security; of course they can have no such right against Howe, the real owner of that property. But if these stocks were delivered by Raymond to the firm wholly as margin upon the stocks which they were carrying for him, with the full right to use them as margin and not merely as collateral security for any indebtedness of Raymond that either then existed or afterwards might come into existence, a different question would be presented. It is necessary to see what the real contract between the firm and Raymond was. The agreed facts state that on August 15, 1907, the firm requested Raymond “ to pay them a further sum of money as margin or else to deposit with them as margin additional securities,” and that thereupon he “ delivered ” to them the second lot of two hundred shares. This would indicate that in each case the stock was given purely as margin, to be dealt with as such, and not merely as collateral security for any indebtedness that might arise out of the transaction. Moreover, in each of the statements rendered by the firm to Raymond after their receipt of these shares, was contained the statement: “ It is understood and agreed that all securities carried in this account or deposited to secure the same may be carried in our general loans and may be sold or bought at public or private sale without notice, when such sale or purchase is deemed necessary by us for our protection.” No distinction is made here between the stocks carried by the firm for Raymond and those deposited by him as margin; the firm is to have the same liberty of action as to each. And upon the evidence at the hearing it must be found that the custom of brokers in Boston is to treat stocks deposited as margin exactly like stocks bought upon margin. Whether or not stocks bought on margin are to be treated as
Accordingly we cannot say that the pledges made by the firm of these shares were unlawful. But it does not follow that after payment of the debts for which they were pledged, and while they can still be followed in specie, they should go to the firm or to the firm’s assignee. After all the charges properly to be made against them have been satisfied, the firm’s special property in them no longer exists, and they should be returned to the general owner, if their identity has been preserved. Neither the firm nor Dodge their assignee had the right to say that the other collateral security held by the savings bank should not first be applied to the payment of the firm’s note. It follows, subject to the claims of the other parties which have not yet been considered, that the one hundred shares in the hands of the savings bank should be delivered to Raymond and Howe.
As to the two hundred shares in the possession of the trust company, it must be determined whether that company has any
There is no doubt that under ordinary circumstances a bank has the right to apply the deposit of an insolvent debtor toward the payment of its claims against him. Wiley v. Bunker Hill National Bank, 183 Mass. 495, 497. Clark v. Northampton National Bank, 160 Mass. 26. Wood v. Boylston National Bank, 129 Mass. 358, 359, 360. Demmon v. Boylston Bank, 5 Cush. 194. This right of detention, or banker’s lien, as it is sometimes called, attaches upon the securities and money of the customer deposited, in the usual course of business for advances which are supposed to have been made upon their credit. National Bank v. Insurance Co. 104 U. S. 54, 71. But the right to detain for the general balance of account may be controlled by any special agreement which shows that it was not intended by the parties, nor does it exist where the circumstances or the particular modes of dealing are inconsistent with its existence. Neponset Bank v. Leland, 5 Met. 259. Reynes v. Dumont, 130 U. S. 354, 391. Securities pledged to the bank to secure a specified demand cannot be held for other demands though against the same debtor. Hathaway v. Fall River National Bank, 131 Mass. 14. Brown v. New Bedford Institution for Savings, 137 Mass. 262. Accordingly the right of a bank to apply the deposit of its debtor to the payment of his matured indebtedness has been denied if that indebtedness is fully protected by other collateral security. McKean v. German American Savings Bank, 118 Cal. 334, 340. Farmers’ National Bank v. McFerran, 11 Ky. Law Rep. 183. Bolles, Modern Law of Banking, 749. Zane, Banks & Banking, 230, 231. And see the cases there cited. In our opinion, this is the proper rule.
But even if the bank could itself apply the amount of this deposit to the payment of its note, we feel bound to say that these plaintiffs have not the right to require it to avail itself of that privilege. It is settled in this Commonwealth, although a different rule has been adopted in some other States, that this right of a banker is not a lien or a right in the nature of a lien.
Accordingly we are of opinion that these plaintiffs cannot have the full relief which they seek as to the two hundred shares of stock. But for the reasons already stated as to the one hundred shares in the possession of the savings bank, they will be entitled, upon payment of the balance due upon the note held by the trust company, with interest and costs, and subject to the lawful claims, if any, of the other parties, to receive the two hundred shares. And one single decree is to be entered upon the bill of these plaintiffs and the cross-bill of the defendant Dodge. For the reasons already stated, we are of opinion that this decree, besides providing for the rights of Raymond and Howe as aforesaid, should order the American Trust Company to apply in the first instance the two hundred shares of stock to the payment of its note, and after the full payment of that note with interest and costs to pay to the defendant Dodge as assignee of the insolvent firm the amount of that firm’s deposit now in its hands.
3. We proceed to consider the claims made by the plaintiff De Cordova.
Before September 17, 1907, he had been buying and selling stocks on margin through, one Hines, who, not being a member
As against this plaintiff, the firm ought not to have pledged his stocks, and are now indebted to him in a large sum ®f money. But as concerns third parties and the other creditors of the firm it follows from what has been said that the firm had the right to pledge these stocks in the ordinary course of dealing. He had entrusted them to the firm as margin, which would give a full right to pledge or use them in the usual course of business, accounting to him for them. He had put into the hands of the firm the means of giving full title to all the stocks to any one who might take them either in pledge or by purchase, Third parties with no notice of the special instructions given by him to the firm would not be bound by the limitation which he had! sought to impose. The respective pledgees accordingly took a valid title to these stocks, and hada right to sell them and apply the proceeds to the payment of their notes. Doubtless, if the sales had not been made, this plaintiff could redeem his stocks by paying the debts for which they were pledged, or could have taken them without payment if those debts had been otherwise paid, either by the firm or by the sale of other security, as we have already seen can be done by Raymond and Howe. But this right depends upon the ability to trace the specific property or its proceeds. Lowe v. Jones, 192 Mass. 94. Little v. Chadwick, 151 Mass. 109. Portland & Harpswell Steamboat Co. v. Locke, 73 Maine, 370. Raymond and Howe, by reason of their diligence in notifying the savings bank and the trust company of what they claimed to be their rights, are able to do that; but this plaintiff, instead of giving similar notices, adopted the course of. suing the firm directly for their liability to him;
Nor has this plaintiff any right to share the benefit which Raymond and Howe have gained by their superior diligence. They elected to take one course, and now derive an advantage therefrom. His agent elected to take another course; and although he now may not be bound by that election, it yet remains true that he did not seasonably decide to adopt the remedy which they adopted from the beginning. If his attachment of the funds in the hands of the firm’s alleged trustees had turned out to be sufficient for his protection, as might have been the case, he would have had no motive for abandoning that remedy and seeking to avail himself of the means of redress resorted to by Raymond and Howe. The doctrine of McBride v. Potter-Lovell Co. 169 Mass. 7, is not applicable to the circumstances of this case. In our opinion, this plaintiff cannot maintain either of his bills, but must be content to rank as a general creditor of the insolvent firm.
4. The circumstances disclosed upon the bill brought by Fessenden do not differ in any material respect, so far as the questions of law are concerned, from those which already have been considered. It follows that his bill cannot be maintained.
¡So ordered.
This refers to an action at law in the-Superior Court brought for De Cordova, by his son in his absence, in which the Merchants National Bank and the American Trust Company were summoned as trustees.