181 F. 955 | 2d Cir. | 1910
For some time prior to April 24, 1908, the firm of T. A. McIntyre & Co. had been engaged in the general brokerage business in the city of New York. On that day the petition in bankruptcy was filed against the firm and the individual members thereof, and receivers were appointed. Adjudication fol
On March 4, 1908, the Metropolitan Trust Company made a loan to the firm of $200,000, receiving as collateral therefor certain certified checks, bonds, and certificates of stock indorsed so as to pass by delivery. It was agreed between them that substitutions might from time to time be made in the securities pledged. After bankruptcy, and on April 21th, the trust company applied the certified checks toward the payment of the loan, and thereafter from time to time proceeded to sell some of the pledged securities, until on May 6th it had realized enough to repay the principal and interest of the loan. It then held a cash balance of $832.16 and the following securities, which it had not found it necessary to sell, viz.: 300 shares International Power Company, common; 200 shares American Can Company, preferred; 18 shares Pullman Company; and 66 shares United States Steel, preferred.
On May 26th an order was made directing the trust company to turn over this cash balance and these securities to the receivers, which was done, and receivers or trustees have ever since held possession of them. The order further directed all persons making claim to any of the stock, bonds, and securities to file their claims with the referee in bankruptcy, to whom as special master was referred the determination of all rights, titles, and interests in and to any and all of the said certificates of stock or the proceeds thereof, and the special master was directed to “adjust, determine, and adjudicate the rights, titles, interests, equities, claims, and liens in and to any of the certificates of stock or the proceeds thereof, pledged,” etc.
Appeal of Pippey.
On March 14, 1908, Pippey, being then the owner of certificate No. 10,277 for 18 shares of Pullman Company common stock standing in his name, indorsed a transfer in blank on the certificate and delivered the same to McIntyre & Co. as security for transactions thereafter to be had between them, no authority to repledge the stock being given to McIntyre & Co. Transactions were had, some stock was bought and sold, and on April 9th all pending transactions were closed out by the sale of 100 shares Union Pacific, and the firm owed to Pippey about $500. On April 23d McIntyre & Co. pledged Pippey’s Pullman stock with the trust company as a substituted collateral security for the loan of $200,000. On April 25th Pippey applied to the receivers for the return of his certificate, and was informed that it was in the possession of the trust company. On April 30th he demanded it from the trust company, and directed them not to sell the same. By May 6th the company had liquidated its claim of $200,000 out of the securities sold, and still held Pippey’s certificate for 18 shares of Pullman Company. On May 16th he again demanded return of the stock, and, that being refused, brought a replevin action against the trust company in the Supreme Court of the state to recover said stock. The order directing the trust company to turn over the certificate to the receivers and enjoining Pippey from prosecuting his replevin suit was made on May 26th.
Instead of directing the trustees to return his stock to Pippey, the court has ordered it to be sold and the proceeds put into a fund with the proceeds of the 300 shares. International Power Company and the 200 shares American Can Company and the $832.16 surplus realized by the trust company from the securities which it sold to repay the $200,000 loan. In this fund Pippey is to share with others whose stock was improperly pledged by the brokers with the trust company and sold by it. The amount coming to him would be less than his stock. This is practically applying the principle of general average to the situation. The pledge is treated as a common adventure, the securities sold as a sacrifice for the common benefit, to which all in
The only authorities cited in support of the proposition contended for are Chamberlain v. Greenleaf, 4 Abb. N. C. (N. Y.) 185; Gould v. Central Trust Co., 6 Abb. N. C. (N. Y.) 381; Whitlock v. Seaboard Bank, 29 Misc. Rep. 84, 60 N. Y. Supp. 611. The first of these had no application to the facts of this case. The other two are Special Term decisions, which have been held by the Appellate Division not to control when property stolen from its real owner is found unsold in the possession of the assignee of the thief. Tompkins v. Morton Trust Co., 91 App. Div. 285, 86 N. Y. Supp. 520.
So much of the order as relates to Pippey’s stock is reversed, and cause remanded, with instructions to direct the trustee to return his stock to him, or, if it has been sold, fi> turn the proceeds over to him.
Appeal of Mary H. Hudson.
Mrs. Hudson is the owner of the “200 shares American Can Company, preferred/’ which was not sold by the trust company, and was identified and demanded by the appellant. The facts differ from those in Pippey’s Case in an important particular. Mrs. Hudson did not deposit her stock with McIntyre & Co. as security for transactions on her account. She loaned it to the firm for use in its business; it being agreed between them that the stock “was to continue the property of Mrs. Hudson, and to remain in her name on the books of the respective companies, and the dividends are to be paid to her.” She brought no replevin suit. The original certificates remained with the trust company until after it had repaid itself by the sale of other securities, and were then turned over to the trustee. At the time of the bankruptcy, her stock was worth $10,350. At the time the order now under review was made it was worth $16,750. The order required the stock to be sold, and the whole amount paid into the fund, but liquidated Mrs. Hudson’s claim against the fund at $10,350 only, on which basis she is to share and contribute.
The stock could have been “used by the firm in its business,” at the same time continuing her property, only in the way in which McIntyre & Co. used it, viz., as collateral to loans which the firm effected. It cannot, therefore, be treated as “stolen stock,” as in Pippey’s Case, although, having survived all the risks to which her contract with the firm exposed it and been fully identified, it remained her stock, subject to such liens and obligations as have accrued against it with her consent. It should therefore contribute with the other securities similarly situated, sold and unsold, to the payment of the loans to secure which it was rightfully pledged. But when it has responded to that obligation it remains her property, and she is entitled to have it
We see no reason to disturb the finding of the District Court as to disbursements charged against this particular fund.
The order is reversed as to Pippey and Hudson, and cause remanded, with instructions to take further action in conformity with this opinion.