262 F. 607 | D.C. Cir. | 1919
Associate Justice. Appellant, plaintiff below, brought a suit in equity in the Supreme Court of the District of Columbia to recover the value of certain stock purchased for him by defendant firm of Lewis Johnson & Co.
Lewis Johnson & Co. were a copartnership, conducting a banking and stock brokerage business in the city of Washington from 1858 until November, 1914, when it went into bankruptcy. At the time of the transaction here involved, the partners constituting the firm were defendants Mearas and Williams and one John W. Henry. Plaintiff was a customer of the bank, and on March 28, 1912, had on deposit therein the sum of $21,890.40, together with certain securities bought on his account and held for him. On that date he directed the firm to purchase for him 200 shares of the capital stock of the Amalgamated Copper Company. The stock was purchased through Post & Flagg, brokers, the firm’s New York correspondent, at $80 per share. On the same day, Johnson & Co. notified plaintiff of the purchase, and on the following day debited plaintiff’s account with $16,000,. the purchase price, plus $25 commission.
No demand for delivery of the stock was ever made by plaintiff. The record evidence, on which there is no dispute, disclosed that from the date of the purchase until the failure of the firm, about 2 years and 8 months, the stock was carried on the books of the firm to the credit of plaintiff, and periodical statements were furnished plaintiff, showing the credit to his account of successive quarterly dividends accruing upon the stock. It also appears that Johnson & Co. never had actual possession of the stock, but that it was held by Post & Flagg to the credit of Johnson & Co. Until May 31, 1912, or about 2 months after the purchase, Johnson & Co. had to its credit with Post & Flagg 200 shares of the Amalgamated Copper Company’s stock, but after that date it was short at least 400 shares, and so continued until the date of the bankruptcy.
Plaintiff, in his bill, averred at length the circumstances of the purchase of the stock and the leaving of the stock with Johnson & Co.
At the conclusion of the hearing, the trial court dismissed the bill with the following statement:
“In this case no accounting is sought and under the proofs the facts show a simple bailment. While the bill prayed for a discovery, the answers of the defendant revealed no facts other than those which were within the knowledge of the complainant. I am of the opinion that the remedy at law is plain, adequate, and complete, and that the bill should be dismissed without prejudice to an action at law.”
“The broker acts in a threefold relation: First, in purchasing the stock ho is an agent; then in advancing money for the purchase he becomes a creditor; and, finally, in holding the stock to secure the advance made, he becomes a pledgee of it. It does not matter that the actual possession of the stock was never in the customer. The form of delivery of the stock to the customer, and a redelivery by him to the.broker, would have constituted a strict formal pledge. But this delivery and redelivery would leave the parties in precisely the same situation- they are in when, waiving this formality, the broker retains the certificates as security for advances.”
“A delivery of goods in trust, upon a contract, express or implied, that the trust shall be faithfully executed on the part of the bailee.” 2 Bl. Comm. 451.
“The next point is whether the relations between the contending parties were of a fiduciary character. Assuming the relations of bailor and bailee to have existed, the question naturally arises whether a fiduciary responsibility was imposed thereby. That the transactions of principal and agent, bailor and bailee, and pledgor and pledgee are not cognizable in equity, is clear, unless accompanied by facts and circumstances from which it may be presumed that the intendment of the parties was to create a trust, or where the obligations imposed arose out of confidential relations.”
“In the case of a special deposit, the bank assumes merely the charge or custody of property, without authority to use it, and the depositor is entitled to receive back the identical money or thing deposited. In such case, the right of property remains in the depositor, and if the deposit is of money, the bank may not mingle it with its own funds. The relation created is that of bailor and bailee, and not that of debtor and creditor.” 3 R. C. L. 522.
“It is objected to this view of the relation of customer and broker that the broker was not obliged to return the very stocks pledged, but might substitute other certificates for those received by him, and that this is inconsistent with ownership on the part of the customer, and shows a proprietary interest of the broker in the shares; but this contention loses sight of the-fact that the certificate of shares of stock is not the property itself — it is but the evidence of property in the shares. The certificate, as the term implies, but certifies the ownership of the property and rights in the corporation represented by the number of shares named. A certificate of the same number of shares, although printed upon different paper and bearing a different number, represents precisely the same kind and value of property as does another certificate for a like number of shares of stock in the same corporation. It is a misconception of the nature of the certificate to say that a return of a different certificate, or the right to substitute one certificate for another, is a material change in the property right held by the broker for the customer.”
“To this we cannot assent. The liability which he assumed as a member ot the old firm when the stock was first placed with it continued until the stock was accounted for to its owners, or he was released therefrom. Blew v. Wyatt, 5 Car. & P. 397; Daniel v. Cross, 3 Ves. Jr. 277; Bernard v. Torrance (Md.) 5 Gill & J. 383; Easton v. Wostenholm, 137 Fed. 524, 70 C. C. A. 108; Neal v. M. E. Smith & Co., 116 Fed. 20, 54 C. C. A. 226. It was not accounted for, and we have found he was not released; therefore he was liable for it, either as of the date of the first or the second hypothecation. Appellee could have selected one or the other.”
“The practice in said court shall be according to the established course ot ■equity and procedure and the rules established by the said Supreme Court of the District not inconsistent with law.”
This brings us to the consideration of section 274a of the federal Judicial Code (38 Stat. 956 [Comp. St. § 1251a]), which is as follows:
“That in case any of said courts shall find that a suit at law should have boon brought in equity or a suit in equity should have been brought at law, the court shall order any amendments to the pleadings which may be necessary to conform them to the jumper practice. Any party to the suit shall have the right, at any stage of the cause, to amend his pleadings so as to obviate the objection that his suit was not brought on the right side of the court. The cause shall proceed and be determined upon such amended pleadings. All testimony taken before such amendment, if preserved, shall stand as testimony in the cause with like effect as if the pleadings had been originally in the amended form.”
Rule 76 of the Supreme Court of the District of Columbia, adopted April 25, 1919, is as follows:
“If at any time it appear that a suit commenced in equity should have been brought as an action on the law side of the court, or that a suit at law should have been brought in equity, it shall be transferred to the law or equity side of the court, as the case may be, and be there proceeded with, with only such alteration in the pleadings as shall be essential.’'
This rule is in conformity with section 274a, supra. The statute seems to more particularly define the course of procedure in the District Courts of the United States where the same judge simultaneously holds both an equity and a law court. The rule, however, merely conforms the' procedure defined in the statute to the custom of the Supreme Court of the District of Columbia in holding the equity and law courts in separate divisions and presided over by different judges.
We come now to the procedure which should have been adopted in the court below. It will be observed that, under the statute:
“Any party to tbe suit shall have the right, at any stage of the cause, to amend his pleadings so as to obviate the objection that his suit was not brought on the right side of the court.”
This, in effect, forbids the dismissal of a bill in equity on the ground of an adequate remedy at law, or the sustaining -of a demurrer at law on the ground that the remedy is in equity. When either of these conditions arise, it is the duty of the trial judge, either upon motion of counsel or upon hfs own motion, to order a recasting of the pleadings and the transfer of the cause to the proper side of the court. In Collins v. Bradley Co. (D. C.) 227 Fed. 199, 201, the court, considering the broadening effect of section 274a upon equity rule 22 of the Supreme Court of the United States, said:
“The equity rule and the statute have swept away entirely any and all technical objection whatsoever. While the Constitution preserves the right to a jury trial in every action at law, the practice as to raising the objection is revolutionized. Defendant’s motion to dismiss may be taken as a motion to transfer the case to the law side, if the remedy at law is adequate.”
We are in accord with this practical construction of the intent of Congress to establish a simple, speedy, and inexpensive means of according justice, and at the same time closing the door against the bar of the statute of limitations which, under the former practice, frequently furnished an available avenue of escape for the party justly liable, thereby resulting in a miscarriage of justice.
Rule 76 had not been adopted when the decree in this case was entered, and therefore is not applicable here. Section 274a was enacted after the original bill was filed, but it was in force when the decree here appealed from was entered, and applies directly to this action. Collins v. Bradley Co., supra. The court, therefore, erred in dis
The decree is reversed, with the costs of this appeal to be equally divided between the appellant and appellees, and the cause is remanded for further proceedings not inconsistent with this opinion.
Reversed and remanded.