Court Opinion

ID: 5503536
Source: CourtListenerOpinion
Date Created: 2022-01-10 03:04:27.528522+00
Date Added: 2024-06-11T08:33:59.830363
License: Public Domain

Patterson, J.,
(dissenting.) The appeal in this cause is from a judgment entered upon the verdict of a jury directed by the court at circuit. • On the trial it appeared that the plaintiff was the assignee of the administrator of one Samuel G. Jones, who in 1883 was the owner of 10 negotiable bonds issued by the city of Pensacola, in the state of Florida, and which bonds the said Jones in his lifetime had pledged to one Henry H. Walker as collateral security for a loan made by Walker thereon. While these bonds were thus in possession of Walker, they were delivered by him to the defendants’ firm-as margin for a speculative account Walker had with that firm in the purchase and sale of stocks and other securities. On the 1st of October. 1886, Walker was indebted to the defendants in a certain sum, and on the 30th of December, 1889, the plaintiff tendered to the defendants the sum which they alleged was due by Samuel G. Jones, deceased, to Walker, and demanded the return of the bonds and certain coupons connected with such bonds, and the defendants refused to accept the amount tendered, and interest, or to return or- deliver the bonds and coupons. The action was-brought for the alleged conversion of these bonds and coupons. The defendants in their answer admit the tender and demand. They deny the allegations respecting the ownership of the bonds by Samuel G. Jones, and the relations claimed to have existed between Samuel G. Jones and Henry H. Walker with respect to such bonds, and the amount of the alleged indebtedness of Jones to Walker. But they technically admit, by failing to deny, that the bonds, on or about the 1st day of October, 1886, were transferred or delivered by Walker to them as security, without the knowledge or consent of Jones, the owner thereof. They, however, set up affirmatively, as a distinct defense, that in the year 1882 the defendants, then being bankers and brokers in the city of Hew York, in the course of business advanced and loaned to-Henry H. Walker certain sums of. money, and received from him, to be held as collateral security for the repayment of sums so loaned, the bon.ds in question and other securities, and that they had no notice, knowledge, or information as to who was the lawful owner or holder thereof, and that, when they received notification that the bonds did not belong to the plaintiff, there was still a balance due from Walker on account of the loan made to him, and that there was still at the time that the answer was interposed an amount due them largely in excess of the aggregate market value of all tlie securities held by them, including said bonds. At the trial it appeared in evidence that the bonds in question were delivered by Walker to the defendants as margin on a general account Walker had with them, and upon which there was an apparent balance against him at the time of the delivery of the bonds in a very large sum, exceeding the value of all the securities they held as collateral, and that this speculative account was continued for several years after 1882, and that 'these bonds were continuously held during the whole currency of that account. The date of the deposit of these bonds becomes important in view of one of the questions arising upon the appeal. The learned justice at the trial permitted the defendants to show, notwithstanding the condition of the answer, that these bonds were not transferred and delivered to the defendants on or about the 1st day of October, 1886, but in the year 1882, and that they were held as margin on a general account extending from and before December, 1882, and continuing until the action was brought. It is claimed that, under the condition of the pleadings, it *739was error on the part of the learned judge to allow this evidence to be given, but it is quite apparent that on the rulings made the whole case was put before the jury on the affirmative defense set up in the answer, and that there was no surprise caused to the plaintiff, for the particular defense was plainly stated and indicated in the answer, and after ail the evidence was in an amendment was allowed to conform the answer to the proofs; and therefore we think that, there was no such error in the ruling of the court in this regard as would compel a reversal of the judgment on the ground claimed. The case of Fleischmann v. Stern, 90 N. Y. 110, we do not regard as controlling this under its special circumstances, and in view of what was done at the trial.
This brings us to the consideration of the'substantial question of law presented by the record. On the entire proof, the learned judge at circuit directed a verdict for the defendants, holding that they acquired a good title to the bonds as against Walker and the plaintiff, and that there was nothing to go to the jury under the issues as framed by the pleadings when conformed to the proofs. With reference to this aspect of the case, it is strenuously urged by the appellants that the defendants, under the pleadings and proofs, are not bona fide holders of the securities, the subject of this action. These are bonds virtually payable to bearer, and it is claimed by the appellant that their use in the particular transaction under consideration is controlled by the general principles of law relating to the diversion of negotiable paper, and that the defendants could acquire no other or different rights than would have been acquired by them had promissory notes been given them as collateral. We may assume, for the purposes of this appeal, that these bonds are to be treated as negotiable paper would be, and that a pledge of them as security for an antecedent debt of Walker to the defendants would not be valid as against the real owner, except to the extent of an advance actually made at the time of the deposit. But we do not consider, in view of the nature of the transaction had between the defendants and Walker respecting these bonds, that they were pledged for an antecedent indebtedness in the manner or under circumstances that would render applicable the rule respecting diverted paper. It fully appeared that there was a current, unadjusted account of Walker with the defendants, and that it was the ordinary account of a customer with his brokers, who bought and carried for him securities upon margin. There was no liquidated, fixed, or presently enforceable indebtedness at all. It was a transaction not completed, and by which the defendants were bound to carry the account until default was made by Walker in placing with the defendants such money or securities by way of margin as they were entitled to demand. They applied to him for more margin, and the result of his depositing the securities with them under such circumstances was precisely the same as if they had been originally deposited in the transactions, or for the account which they were carrying, and when this deposit was made the defendants bound themselves to the continuance of the account. They could not sell any of the stocks they had bought for Walker, and a consideration sufficient to support the pledge was furnished in their maintaining the account for him. We think the learned judge in the court below was entirely right in his characterization of these transactions as not being ordinary loans, and that “the plain object of the transaction was to secure the defendants, and to enable Walker to continue his speculative account without submitting to the loss which would result to him had his stocks been sold on a declining market for the want of a sufficient margin.” We must take into consideration the nature of the general account which existed between the defendants and Walker, and, so doing, it cannot in any just sense be said that these negotiable bonds were given as security for an antecedent debt, but they were furnished to be used as general security on transactions which, although they had originated before the bonds were thus given as security, nevertheless had *740not reached a point at which an enforceable indebtedness had accrued absolutely, but only one which would have accrued after selling the securities or stocks carried, had Walker failed to furnish money, or otherwise provide margin for the continuance of the account.
It is contended, however, further by the defendants that, even if they did assume the obligation to further carry Walker’s speculative account by receiving the bonds in suit, they were only holders for value to the extent of the liability which they actually incurred at that time by such obligation to hold the securities, and not for any liability arising out of their subsequent transactions. But here again we must have regard to the nature of the transactions had between the defendant's and Walker. The bonds in question were not pledged as collateral for any one particular item, but for the whole general account. That is distinctly testified to by Mr. Tilghman. It is true that Mr. Walker testified that they were given for no other purpose than as additional security for a loan which he then had with the firm, and upon which they held other securities as collateral. But it is apparent from the account and the transactions themselves that these particular bonds, with other securities, were intended to cover all the transactions that entered into the speculative account at the time they were given, and the pledge was- intended as security for whatever transactions might be had under that general account, and the advances made by the brokers on such subsequent transactions, and until they were notified of the real ownership, were on the faith of the pledge of such securities, and, under the peculiar and exceptional 'situation of the parties, such advances as were made from time to time until the notification referred to was given must be regarded as having been specifically made upon the faith of the pledge. On the whole evidence we are of opinion that the direction of the verdict was correct, and that the judgr ment should be affirmed, with costs.