293 Mass. 363 | Mass. | 1936
The defendants in the first case are stockbrokers doing business under the name of Hornblower and Weeks. Thomas J. McCarthy bought and sold securities through them on margin. He had borrowed money from the plaintiff bank, depositing securities as collateral. On October 24, 1929, during the panic in the stock market, McCarthy directed Hornblower and Weeks to sell two hundred Niagara Hudson Power warrants, which were held by the plaintiff bank as collateral, and they sold them for $1,109.60. McCarthy requested the plaintiff bank by let-, ter to deliver these warrants to Hornblower and Weeks and to receive a check for $1,109.60 in reduction of its loan. On the same day, October 24, 1929, McCarthy directed another stockbroker called Bowen to sell certain shares of stock which were held by the plaintiff bank as collateral, and Bowen sold them for prices aggregating $11,968.83. 'McCarthy requested the plaintiff bank by letter to deliver the certificates for these shares to Bowen and to receive a check for $11,968.83 in reduction of its loan.
These two letters from McCarthy were received by the plaintiff bank on the morning of October 25, 1929.' A clerk in its employ confused the deliveries requested. The warrants, which should have gone to Hornblower and Weeks, were delivered by messenger to Bowen, without the receipt of any check. Ultimately they were transmitted by Bowen to Hornblower and Weeks, who on November 6, 1929, sent the plaintiff bank a check for $1,109.60. The certificates of stock, which should have gone to Bowen, were presented on October 25, 1929, to the clerk at the stock window of Hornblower and Weeks, and were taken back to the plaintiff bank when the clerk said that he had no check for them. Even then, though the mistake was discovered, the instructions to the messenger were not corrected. The following Monday, October 28, 1929, the messenger presented
The employees of Hornblower and Weeks were working under great pressure on that day. The clerk at the stock window noted on his record merely that the certificates had been received for the account of McCarthy. They were credited on his margin account, and were put in course of transfer, according to custom, into the name of Hornblower and Weeks. The new certificates received were indorsed by Hornblower and Weeks and used as "street" certificates. As such they passed to other persons before November 16, 1929. On November 1, 1929, the error in delivery having been discovered, the messenger of the plaintiff bank went to the stock window of Hornblower and Weeks and asked a return of the certificates as having been delivered by mistake. After some discussion, he was told on November 4, 1929, that Hornblower and Weeks intended to hold them as security for McCarthy’s margin account.
The plaintiff bank, on November 29, 1929, brought the bill in the first case for the return of the securities delivered by mistake to Hornblower and Weeks. There was no demurrer. Nothing in the answer suggested as a defence that the certificates were not "so secreted or withheld that they cannot be replevied." G. L. (Ter. Ed.) c. 214, § 3 (1). The answer declared merely that if the plaintiff bank "has stated any cause of action, such cause is one for damages at law." See Labagnara v. Kane Furniture Co. 289 Mass. 52, 56. Replevin, or equitable replevin, may be maintained for a certificate of stock. Bellows Falls Power Co. v. Commonwealth, 222 Mass. 51, 58. See also G. L. (Ter. Ed.) c. 155, § 33, which is not shown to be applicable to
The equitable relief prayed for could not be given, for when the bill was filed not only the certificates delivered to Hornblower and Weeks but also title to the shares represented thereby had passed beyond their control. Any equitable obligation with respect to those certificates and shares did not attach to other certificates and shares which they happened from time to time to have “on hand or in their control.” Parsons v. Martin, 11 Gray, 111, 117. Lamb Knit-Goods Co. v. Lamb, 119 Mich. 568, 570. It is true that, following not so much the analogy of a fiduciary depositing trust money in his own bank account (Worcester Bank & Trust Co. v. Nordblom, 285 Mass. 22, 26) as the analogy of grain of various persons in a grain elevator (G. L. [Ter. Ed.] c. 105, § 29; c. 106, § 8 [2]; Williston, Sales [2d ed.] § 154; compare Peoples National Bank v. Mulholland, 228 Mass. 152), a customer whose stock has been in the hands of a broker as security for a margin account or otherwise, may claim as his any such stock
The inability of the court to give the specific equitable relief prayed for, does not prevent an award of damages instead. A plaintiff who, on the facts known to him, had a case for equitable relief, which however had already become impossible when the bill was filed because of some occurrence of which he was excusably ignorant, may have the bill retained for an award of damages. Milkman v. Ordway, 106 Mass. 232, 253 et seq. Stewart v. Joyce, 201 Mass. 301, 311. Rosen v. Mayer, 224 Mass. 494, 495.
The plaintiff bank is entitled to damages. Hornblower and Weeks are bound by the knowledge of their clerk at the stock window that the securities .were put in their custody only on condition that a cheek for $11,968.83 should be returned for them, and that otherwise delivery was not to be effective. Stetson Press, Inc. v. Bunsen Oil Burner Corp. 285 Mass. 291, 293. There was no intention to pass title upon credit. When Hornblower and Weeks appropriated the certificates and the shares represented thereby, and repudiated the condition upon which custody had been obtained, they were guilty of conversion. First National Bank of Cairo v. Crocker, 111 Mass. 163. New York Central Railroad v. Freedman, 240 Mass. 200, 208. Laverty v. Snethen, 68 N. Y. 522. The present case is governed by Parsons v. Martin, 11 Gray, 111, where a broker, entrusted by the plaintiff with shares of stock for sale, used part of them to make delivery upon another transaction, and transferred the rest into his own name for convenience in future selling for the plaintiff. This was held a conversion of the entire stock, although the broker had an equal amount of similar stock which he intended to substitute, and later offered to substitute, for the plaintiff’s stock. The court said (page 117), “The misappropriation had already taken place, the wrong had been done, and the right to an adequate remedy had already accrued. • The shares which the plaintiff had owned could no longer be identified; and there was no pretence therefore that they could ever be restored to him. He was not bound to
The defendants contend that shares of stock are fungible (Richardson v. Shaw, 209 U. S. 365, 378, 379), and that as they had enough at all times to restore what had been taken, no wrong was done. The conclusion does not follow. Fay v. Gray, 124 Mass. 500. Hornblower and Weeks never recognized the right of the plaintiff bank to any stock. Even in the case of property as completely fungible as money, one has no right to appropriate to his own use bills or coin put into his custody for a specific purpose, merely because somewhere among his assets he has an equal sum. Kent v. Bornstein, 12 Allen, 342. Royce, Allen & Co. v. Oakes, 20 R. I. 252. Anderson v. Foresman, Wright (Ohio) 598. Darling v. Younker, 37 Ohio St. 487, 492. Ulmer v. Ulmer, 2 Nott & M’Cord (S. C.) 489. Rumery v. Brooks, 205 App. Div. (N. Y.) 283. See also Parker State Bank v. Pennington, 9 Fed. Rep. (2d) 966, 969.
Cases where a broker, who has sold shares for a customer and has delivered other similar shares to the purchaser, has been held entitled to retain the shares subsequently received from the customer, have no application. Stuart v. Sargent, 283 Mass. 536, 538. In re A. O. Brown & Co. 189 Fed. Rep. 432, 436. Neither is this a case of an innocent appropriation of the property of another, under a reasonable misapprehension, induced by that other, as to the ownership, as in Hills v. Snell, 104 Mass. 173. See also Robinson v. Bird, 158 Mass. 357; New York Central Railroad v. Freedman, 240 Mass. 200, 208; Am. Law Inst. Restatement: Torts, § 244.
Undoubtedly the plaintiff bank was negligent, but that
Affirmed, with costs.
The second case is a bill in equity, brought by Hornblower and Weeks on June 27, 1931, against the bank and McCarthy, alleging that Hornblower and Weeks have in their possession shares of the kinds and amounts delivered to them by the bank, which shares “are the property of the defendant McCarthy, and were delivered to the plaintiffs by the defendant Somerville National Bank and are held by them as security for the indebtedness of said McCarthy to them.” As has been shown, this allegation was untrue; the shares delivered by the bank had been transferred long before, and at the time the bill was filed no shares had been segregated in their place. The bill seeks to determine the title to the shares, and the amount of indebtedness of the defendant McCarthy, and to apply the shares in satisfaction of the indebtedness. McCarthy filed a counterclaim, seeking damages for alleged misconduct with reference to shares of the stock of National Shawmut Bank, not involved in the first case. The final decree established the indebtedness of McCarthy to Hornblower and Weeks, awarded him a less sum upon his counterclaim, ordered him to pay the balance, and dismissed the bill as against the bank with costs. McCarthy waives his appeal. Hornblower and Weeks argue only against the dismissal of the bill as to the bank. What has been said is enough to show that this decree also should be affirmed.
Ordered accordingly.
