251 F. 420 | D. Mass. | 1918
The facts essential to the consideration of the questions of law upon which the case turns are not in dispute and are as follows:
The bankrupts were stockbrokers in Boston. They made a common-law assignment on April 21, 1914, and were adjudicated bankrupt on an involuntary petition filed May 22, 1914. The various claimants (in whose behalf the present petition is presented by a receiver appointed by the state court to act in their interests) were customers of the bankrupts, buying and selling through them on margin. As collateral security for tlieir several accounts, each deposited with the bankrupts various stocks and bonds. The bankrupts, before their failure, pledged these stocks and bonds, with other securities of their own, to the Boston Penny Savings Bank on a note made by them to that bank for $125,000. The total collateral so pledged aggregated about $130,000 in value, of which about $106,000 belonged to the bankrupts, and about $24,000 to these claimants. The loan was closed out by the bank after the failure, and resulted in a surplus of collateral, amounting to about $17,000, partly in cash and partly in securities, which were later turned over by the bank to the trustees in bankruptcy, and constitute the fund here in controversy. The securities so turned back happened to be those which had belonged to the bankrupts; all the securities originally owned by the claimants were sold and applied on the note. At the time when the claimant’s securities were pledged by the brokers, and at all times thereafter, as I understand, the balance of each claimaut’s account was in his favor, so that the brokers had no actual claim against the collateral.
In Furber v. Dane, 203 Mass. 108, 89 N. E. 227, the customer, as here, deposited with the broker securities as collateral for a trading account, and they were pledged by the broker, with other securities belonging to him, as collateral upon a loan by a hank to him. Before the loan was closed out, the bank was notified by the customer that he owned certain of the collateral, and it was requested not to resort to that collateral until the other collateral iiad been exhausted. The result was, in that case, that the surplus collateral was composed in part of securities which had belonged to the customer. It was held that he was entitled to them as against the general creditors.
“After all'the charges properly to he made against them [the securities] 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.” Sheldon, J., supra.
This being so, upon familiar principles of subrogation and marshaling of assets, the claimants, as between them and the brokers, would be entitled to the balance here in question. Baker v. Davis, 211 Mass. 429, 441, 97 N. E. 1094, 37 L. R. A. (N. S.) 944; Hutchinson v. Le Roy, 8 Am. Bankr. Rep. 20 (C. C. A. 1st Cir.); Id., 113 Fed. 202; Prairie Bank v. U. S., 164 U. S. 227, 232, 17 Sup. Ct. 142, 41 L. Ed. 412; Ex parte Alston, L. R. 4 Ch. App. 168; In re Leavitt & Grant, 215 Fed. 901, 132 C. C. A. 139.
It is true that in Furber v. Dane the customer gave notice to the bank, and his securities were retained by it in specie; but without those facts the decision would, I think, have been the same. To emphasize notice in cases of this character is to penalize the ordinary customer, and to give the advantage to those who happen to be so connected with stock transactions as to get early knowledge of the failure and know what must be done to protect their interests. In McBride v. Potter-Lovell Co., 169 Mass. 7, at page 9, 47 N. E. 242, 61 Am. St. Rep. 265, the demand by one of the security owners for the return of its security was said by the court to be “immaterial,” and the demandant was accorded no priority over those who made no such demands.
It follows that the order of the referee, adjudging the fund to be the property of the petitioner, was right, and should be affirmed.
So ordered.