153 Pa. 197 | Pa. | 1893
Lead Opinion
Opinion by
This suit was brought by Ryman, plaintiff, against Gerlach & Harjes, defendants, to recover the market value of certain bonds
Plaintiff is a resident of Wilkes-Barre, Pa., defendants are stockbrokers in Philadelphia. Henry Bodmer, who, although not a party of record, was an active party in the transactions resulting in this litigation, is a stockbroker with an office at Wilkes-Barre. Bodmer and defendants were correspondents in the stockbroking business; they executed his orders for the purchase and sale of stocks on both the Philadelphia and New York stock exchanges ; when the rules of either exchange did not forbid, they divided commissions; when they did, Bodmer charged the customer an additional percentage for his compensation. There was a private wire between the two offices, and over this quotations were received by Bodmer, and orders sent by him to Gerlach & Harjes.
On the 81st of May, 1889, Ryman, through Bodmer, ordered the purchase of 100 shares Texas Pacific Railroad stock; it was bought for him by defendants, the certificates made out in his —Ryman’s—name, transmitted to Bodmer and by him delivered to Ryman, who then delivered his check for the price, two thousand one hundred and sixty-eight dollars and seventy-five cents (12,168.75), payable to the order of Gerlach & Harjes, to Bodmer, who transmitted it to them. This check included the commissions of both brokers, and the money was received •on it by defendants.
Some time after this transaction Ryman purchased, through the same parties, in precisely the same way, 100 shares of N. Y., Susquehanna & Western Railroad stock. After the delivery of this last stock, in November, 1890, Ryman wanted to buy Atchison, Topeka & Santa Fe stocks; he proposed to Bodmer that a purchase he made of the Atchison stock, to be carried for him until the following 1st of January by Bodmer, he to secure Bodmer by a deposit, as collateral, of the 200 shares of the stocks first bought, Ryman to pay for the stock so purchased on January 1st, and lift the collateral. This was satisfactory to Bodmer, and agreed to by him; at the time the agreement was had, it was understood between them that the order was to be executed through Gerlach & Harjes; Ryman asked Bodmer if they transacted a legitimate business; Bod
So far as appears from the evidence the Texas Pacific, New York, Susquehanna & Western, and the Atchison stock and bonds remained in possession of Gerlach & Harjes at Philadelphia up to 30th of December, 1889, when they failed in business, and these stocks, without notice to either Bodmer or Ryman, were sold by defendants or their receiver, and the proceeds credited to Bodmer, with whom alone they had any account. It appeared as a fact at the trial, that not only Ryman’s stocks, but those of all others who did business through Bodmer, were entered on the books of defendants as Bodmer’s, and treated as his by them. Ryman, after the failure of Gerlach & Harjes, wrote to them inquiring about his securities, but received no answer; in April following he came to Philadelphia and saw Harjes, one of the partners, and offered to pay for the Atchison stock and bonds and take up the collateral, but Harjes said the account was kept with Bodmer alone, and without his authority he would have no communication with Ryman in regard to the matter.
We have stated the facts as alleged by Ryman; some of them are denied by defendants, but there was evidence tending to establish them, and from which the jury might have found them. As the court below peremptorily directed a verdict for defendants, we are bound, in passing on the assignments of error, to treat these alleged facts, of which there was evidence, as if found by the jury.
Assuming the facts to be as plaintiff alleges, would they, if submitted to the jury, have warranted them in finding that defendants, when they sold these stocks and appropriated the proceeds to the credit of Bodmer, knew they were the property of Ryman?
If Ryman be believed, he was in fact the owner, although credited on defendants’ books to Bodmer; if Bodmer had refused to deliver them on January 1st, on payment or offer to
As to the Atchison securities, there had never been an actual delivery; they were purchased on the order of Bodmer by defendants on the deposit of the other 200 shares.
If Bodmer had placed these stocks to his individual account with other than these defendants, with a party having no such business relations with him, and no such connection with the transaction by which Ryman became the owner of the 200 shares, the presumption would be a fair one that the holders were innocent purchasers, or at most were accountable to Bodmer alone. But all the peculiar circumstances here, with the positive testimony of Ryman and Bodmer, must be considered. Bodmer, a broker in Wilkes-Barre, solicits for and directs orders to Gerlaeh & Harjes, who are members of the stock exchange; defendants knew Bodmer was not buying and selling stocks for himself, but for customers; they knew they, by order of Bodmer, had purchased these 200 shares for Ryman, for they had them issued to him and received his check for them; when the certificates came back with the blank transfer on them, signed by Ryman, it was not for purpose of immediate sale, for they held them. Why was the transfer executed, and the stock delivered to Bodmer ? Ryman testifies that it was done that they might be held as collateral security in a purchase of Atchison stocks, which were to be carried for him until January 1st. Bodmer, not being a member of the stock exchange, had his orders executed through defendants; he testifies in substance that this order, as accepted by him from Ryman, was transmitted to defendants to be carried out. If all this be true, then they knew the 200 shares belonged to Ryman, and they held them and any purchases made on them as a security, subject to the same liabilities as Bodmer.
The defendants offered no evidence. They may have been able to prove that the agreement of Ryman with Bodmer was
It is earnestly argued by appellees’ counsel, that the signing of the blank transfers on the certificates is an effectual protection to them against any claim on part of Ryman, and that if this court does not so hold, a new rule will be laid down; a rule compelling a stockbroker to demand from every other broker with whom he deals, proof that he is the actual owner of the stock he offers to sell, and that such a rule will so hamper and obstruct business as to practically suspend transactions in securities. We announce no such rule as the one deprecated nor any new rule; not a single case of the many cited by counsel for appellees lays down a different one from that adhered to here. Wood’s Ap., 92 Pa. 390, one of the latest cases, and one in which a more significant effect is given to the blank transfer of a certificate than in any of the other cases, holds that: “ If the owner of stock voluntarily gives certificates with blank assignments and power to make transfers to his brokers, who betray the confidence reposed in them, such owner must suffer the loss rather than innocent strangers, whose money the brokers were thereby enabled to obtain.” If this were a suit by Ryman against the purchaser of his stock at the sale of Gerlach & Harjes’ assets, Wood’s Appeal would be directly in point and rule the case in favor of defendant; but here the question is, is there competent evidence from which the jury may find that Gerlach & Harjes are not “ innocent strangers ? ” If they are not, if they knew the securities credited to Bodmer were in fact Ryman’s, then the sale of them without authority from either Bodmer or Ryman was a wrongful conversion for which they are answerable. Nor is there any reason, founded on the peculiar necessities of stock dealing, why brokers should not be held to the observance of the same rule of morals and
The appellant’s first and only assignment of error is sustained ; the judgment is reversed and a new venire is awarded
Dissenting Opinion
Dissenting opinion,
Feb. 6,1893:
This case appears to me clearly within the rule of Wood’s Appeal, 92 Pa. 379, where it was held that one who has con-„ ferred upon another, by a written transfer, all the indicia of ownership of property, is estopped from asserting title to it as against a third person who has in good faith purchased it for value from the apparent owner. The cases where this rule is not applicable are where the indicia of ownership are defective on their face, as in Leiper’s Ap., 108 Pa. 377, and Ellis’s Ap., 8 W. N. 538, or where the purchaser has notice that the apparent title is limited for specific purposes, and the real title is in another party, as in Foster v. Berg, 104 Pa. 324. Even Sheffield v. Bank, L. R. 13 Ap. 333, so much relied on by appellant, was a case of pledge for a loan to himself, by one who only held as pledgee for advances made by him, and the House of Lords rested the decision explicitly on the ground that the bank had sufficient notice of the limitation of the pledgor’s title to put it on inquiry. The general rule is conceded by Lord Watson (p. 343), “ appellant by his own acts had invested Mozley with an apparent dominion and authority which would have enabled him effectually to dispose of the securities to persons who had no occasion to suspect his limited title.” The case is entirely in accord with our own above cited.
A certificate of stock with a power of attorney to transfer, duly executed but in blank as to date and name of transferee, is in the position of merchandise prepared for market. That is the way sales and transfers of stock are usually made, and the presumable intent of executing the power to transfer, is to put the holder in position to complete a sale by delivery of the certificate and transfer of the stock. Such transfer carries prima facie a good title. The business of a stockbroker is to buy and sell stock, and when a certificate and power to trans
When therefore in the present case the defendants received the certificates from Bodmer, they were entitled to rest upon the apparent title of Bodmer to sell and transfer. All the indicia were complete. There is no evidence that defendants knew plaintiff at all or his relations with Bodmer, nor was it their business to inquire. As between Bodmer and defendants these were actual purchases and sales made on Bodmer’s order. He was the only party that they knew and it cannot be pretended that any one else would have been responsible to defendants on his orders. Whether his orders were on his own account, or were in pursuance of directions from customers of his, whether such customers bought to hold for investment, or to sell on an expected rise, whether they held the stocks full paid, or had pledged them for advances on their purchase, or on other subsequent operations, were all matters beyond the business connection of defendants with the transactions, which defendants were not shown to have known or to have been under any obligation to inquire about. There was no privity of contract between plaintiff and defendants, nor were the stocks ear-marked with any trust or with any evidence of plaintiff’s ownership of which defendants were bound to take notice. It is argued that plaintiff’s name appearing on the certificates, together with the fact that some at least of the stocks bought through defendants were paid for by Bodmer by plaintiff’s checks transmitted to defendants, was sufficient notice of plaintiff’s title to put defendants on inquiry. But if the fact that the certificates showed the title to have been in an executor was not enough to put the purchaser on inquiry, as was held in Wood’s Appeal, then a fortiori the mere fact that the certificate was in the name of a customer of the broker for whom the stocks had previously been bought, would not have that effect. The first stocks were bought, sent to Bodmer, and by him delivered to plaintiff. That was the end of that transaction. When after the lapse of months they came
Nor were the business arrangements between Bodmer and defendants shown to have been such as made them mutually agents of each other, so as to bring defendants into Bodmer’s relations with the plaintiff. Neither the furnishing of a telegraph wire nor the division of commissions was sufficient to constitute a joint business. The parties dealt with each other as principals, and Bodmer was nothing but a customer, who brought business to the defendants. That the latter in return furnished him with the facilities of a telegraph wire, and made him an allowance on their commissions, was nothing more than the allowance of discounts on prices, or other inducements which commercial houses very commonly offer to large and desirable buyers. I am of opinion that there was no evidence on which a verdict for plaintiff could have been supported and that the learned judge was right in directing it for defendants.
Concurrence Opinion
I concur in opinion with my Brother Mitchell.
