296 Mass. 419 | Mass. | 1937
This is a suit in equity. It is before this court on an appeal by the defendant from an interlocutory decree of the Superior Court confirming the master’s report and overruling the defendant’s objections thereto, and from the final decree of said court determining the defendant’s indebtedness to the plaintiffs, requiring the indorsement by the defendant of certain stock certificates held by the plaintiffs, providing for the sale and crediting of the proceeds thereof, requiring the defendant to indorse and deliver to the plaintiffs certain shares of stock received by her as a stock dividend upon the shares of Coca Cola stock held by the plaintiffs, requiring the plaintiffs to sell said Coca Cola stock and credit the defendant with the proceeds thereof, providing for the issuance of execution, and dismissing the defendant’s answer in the nature of a cross bill.
The master’s report discloses in substance the following facts: The plaintiffs for many years have been engaged in business as stockbrokers at Boston, Massachusetts, under the name of Whitney and Elwell. In February, 1929, the defendant came to the office of the plaintiffs and had a talk with one Luce, employed by the plaintiffs as a “cus
From February 8, 1929, to October 15, 1929, the plaintiffs made a great many purchases and sales for the de
Each month the defendant received a statement of her account showing the transactions of the previous month, and showing the stocks which were being carried in her account. Those stocks included the stocks brought in on February 21, unless previously sold as hereinafter set forth. The defendant never objected to those stocks being carried in her account. After February 21, 1929, the plaintiffs from time to time sold upon the defendant’s order some of the defendant’s stocks represented by unindorsed certificates, and credited the proceeds, without objection by the defendant, on her margin account. The plaintiffs completed such sales by delivering to the buyers other stock in the hands of the plaintiffs. The plaintiffs did not discover until after the closing out of the defendant’s account that the various certificates were unindorsed.
On October 29 and October 30, 1929, the defendant’s account being undermargined and she having stated her inability to furnish' more margin, the plaintiffs sold out her securities. As to the unindorsed certificates which they still held, the plaintiffs, being unable to make delivery upon sales of those stocks, purchased other stock on their own stock account, or otherwise, and charged the defendant’s account.
The master found, so far as it was a question of fact, that the shares of unindorsed stock now in the hands of
This suit in equity was brought on February 4, 1930. Since the bringing of this suit the defendant has received cash dividends upon the unindorsed certificates amounting to $286.30, and on December 10, 1935, received a three hundred per cent stock dividend from the Coca Cola Company; that is, a stock dividend of nine shares of Coca Cola Company Stock upon three shares of Coca Cola Company stock represented by an unindorsed certificate held by the plaintiffs. On April 4, 1936, the plaintiffs made an unsuccessful demand on the defendant to turn over the stock dividend. The master found that the indebtedness of the defendant to the plaintiffs, including interest, was $4,858.61.
The defendant’s first objection to the master’s report relates to his finding that Luce and others in the plaintiffs’ office supposed that all the certificates deposited by the defendant had been indorsed by her. The defendant contends that such a finding is inconsistent with the finding that two of the plaintiffs’ employees knew at some time that the certificates were unindorsed. That was all that was found with reference to any knowledge of employees of the plaintiffs that the certificates were unindorsed. These findings cannot be said to be inconsistent and contradictory upon a material issue.
The defendant’s second objection is to a finding of the master setting forth the plaintiffs’ practice in making delivery of certificates after sales of stock. That finding was merely descriptive of the probable course of the plaintiffs’ business in a purely suppositional case, and must have been so considered by the master and the judge. The evidence is not reported, and it cannot be fairly said that the illustration was not warranted on the evidence.
The defendant’s third objection is similar to her first
Respecting the defendant’s appeal from the final decree, the findings of the master were to the effect that the unindorsed certificates of stock delivered by the defendant on February 21, 1929, were delivered as collateral security for her margin account. The final decree, as has already been set forth, ordered the defendant to indorse various certificates of stock now held by the plaintiffs, and also to indorse and deliver to the plaintiffs the nine shares of Coca Cola Company stock received by the defendant as a stock dividend upon the three shares of the stock of the same company held by the plaintiffs.
In the case at bar, in the absence of a finding that the stock involved is that of corporations organized under the laws of this Commonwealth or of another State whose laws are consistent with the uniform stock transfer act (G. L. [Ter. Ed.] c. 155, §§ 24-46), that act is not here applicable. Casto v. Wrenn, 255 Mass. 72, 75. As to the transaction with reference to the unindorsed stock deposited by the defendant with the plaintiffs, it may be inferred, from the master’s findings, that the intent of the parties was that that stock was to be used as collateral security for the defendant's margin account. The question, therefore, arises as to the effect of that transfer in the circumstances here appearing. Where the owner of stock, intending to make an absolute transfer, for lack of indorsement or because of some other defect in the mode of transfer, fails to transfer the legal title, it is held that by the transfer the equitable title goes over to the transferee. Sargent v. Essex Marine Railway, 9 Pick. 202, 204. Herbert v. Simson, 220 Mass. 480, 481, 483. The same result is reached under the uniform stock transfer act (G. L. [Ter. Ed.] c. 155, §§ 24-46), even though the provisions of that act relative to trans
So, where the intent of the parties was to effectuate a .transfer of stock as security for a margin account, if, for lack of indorsement, the full rights intended to be transferred do not pass, rights in the nature of an equitable mortgage, together with the right to require an indorsement, are transferred. Nesmith v. Washington Bank, 6 Pick. 324, 328. Boston Safe Deposit & Trust Co. v. Adams, 224 Mass. 442, 444. Leonard v. Boston Five Cents Savings Bank, 278 Mass. 36, 43. Good Fellows Associates, Inc. v. Silverman, 283 Mass. 173, 180. In the case at bar no rights of creditors or third parties are involved.
Under the above discussed principles, the plaintiffs are entitled to the indorsement of the unindorsed certificates delivered by the defendant to them. They are also entitled to dividends declared after the passage of the equitable rights to them if they would have been so entitled had the formal requirements to effectuate the intended transfer been complied with. Whatever may be the law in this Commonwealth as to the rights of a pledgee of stock to cash dividends, declared on stock held under the pledge (see Union Trust Co. v. Hasseltine, 200 Mass. 414, 417; but compare Palmer v. O’Bannon Corp. 253 Mass. 8, 18), it is clear that the plaintiffs were entitled to the stock dividend here involved. To allow one in the position of the defendant in the case at bar to retain the stock dividend in the circumstances here disclosed is to allow the pledgor, in effect, to depreciate the security which she delivered to the plaintiffs. Whetsel v. Forgey, 323 Mo. 681, 694. Peoples-Pittsburgh Trust Co. v. Saupp, 320 Penn. St. 138,
Interlocutory decree affirmed.
Final decree affirmed with costs.