Court Opinion

ID: 9650584
Source: CourtListenerOpinion
Date Created: 2023-08-23 15:45:12.860925+00
Date Added: 2024-06-11T18:12:23.907729
License: Public Domain

On Petition for Rehearing.
PER CURIAM.
In our original opinion we; said that the damages to be recovered by the bankrupt estate were “the highest intermediate value of the stock between the time of the conversion and a reasonable time after the. owner had received notice of it.” In the briefs then before us there was no discussion of the authorities bearing upon the proper measure of damages. The rule which we adopted was thought to be required by the decision of the Supreme Court in Galigher v. Jones, 129 U. S. 193, 9 S. Ct. 335, 32 L. Ed. 658. It is true that the rule stated in our opinion is in -accord with the language of the opinion in the Galigher Case, but a further consideration of that decision leads us to the conclusion that the language is not applicable to a situation where stock-of a customer converted by a broker reached a higher price before the customer received notice, than it did within a reasonable time afterwards. In the Galigher Case a broker, on November 27 and 29, 1878, wrongfully sold 600 shares of “Challenge” stock belonging to a customer at $1.25. per share. In December the stock reached the price of $2 per share; in January $3.10; and in February $5.50. The customer was allowed to recover upon the basis of the price in January on the ground that he had then had a, reasonable time after receiving notice of the sale within which to replace his stock. Apparently the stock was steadily rising and there was no time prior to notice of the sale when it was quoted at a higher figure than the January price. The court held that it was not enough to allow the customer the value of his stock at the time of conversion, and Justice Bradley, who wrote the opinion, said (129 U. S. at page 200, 9 S. Ct. 335, 337, 32 L. Ed. 658): “The effect would be to give to the broker the control of the stock, subject only to nominal damages. The real injury sustained by the principal consists not merely in the assumption of control over the stock, but in the sale of it at an unfavorable time, and for an unfavorable price.”
In accordance with this view, the customer was allowed the highest value reached by the stock between notice of the wrongful conversion and a reasonable time thereafter. The Supreme Court referred to, and expressly adopted, the New York rule, citing Baker v. Drake, 53 N. Y. 211,13 Am. Rep. 507; Gruman v. Smith, 81 N. Y. 25; Colt v. Owens, 90 N. Y. 368; and Wright v. Bank of the Metropolis, 110 N. Y. 237, 18 N. E. 79, 1 L. R. A. 289, 6 Am. St. Rep. 356.
In Baker v. Drake the broker had wrongfully sold out his customer. The trial court, following Markham v. Jaudon, 41 N. Y. 235, had instructed the jury that the customer was entitled to recover the difference between the amount for which the stock was sold and the highest market value which it reached at any time between such sale and the date of trial. But the New York Court of Appeals expressly overruled Markham v. Jaudqn, and said that “the advance in the market price of the stock from the time of the sale up to a reasonable time to replace it, after * * * notice of the sale, would afford a complete indemnity.” In Baker v. Drake there was not, as in the ease at bar, a period prior to notice of the unlawful sale within which the stock reached a figure higher than at the time of conversion or than at any time subsequent to notice. Therefore, when Judge Rapallo said (53 N. Y. at page 217) that the *341“advance in the market price of the stock from the time of the sale up to a reasonable time to replace it, after the plaintiff received notice of the sale, would afford a complete indemnity,” the statement was entirely accurate as applied to the facts in Baker v. Drake. But as a statement of a general rule it was not accurate and was not followed in the subsequent New York cases. In Gruman v. Smith, 81 N. Y. 25, the Court of Appeals in stating the rule of damages said that the customer was entitled to a reasonable' time after notice of the sale within which to replace the stock and “if in the meantime it had advanced in price * * * would have been entitled to the difference.” Likewise in Wright v. Bank of Metropolis, 110 N. Y. 237, at page 249, 18 N. E. 79, 84, 1 L. R. A. 289, 6 Am. St. Rep. 356, the same court said that the customer was entitled “to the highest price reached within a .reasonable time after the plaintiff has learned of the conversion of his stock within which ho could go in the market and repurchase it.”
In Mayer v. Monzo, 221 N. Y. 442,117 N. E. 918, 950, Hiscock, C. J., reiterated the same rule, saying that “a person whose stocks have been converted is entitled to a reasonable time after notice of the conversion within which to determine whether he will purchase other stocks in the place thereof, and * * * may use as a basis for his claim of damages resulting from the conversion the highest prices which have prevailed during such reasonable period.”
It may he that in none of the New York eases we have cited the- question whether the measure of damages was the highest priee between the date of conversion and a reasonable time after tlie customer received notice, or the highest price within a reasonable time after notice, was necessarily involved. But the priee within a reasonable time after notice has been stated by the Court of Appeals as the proper measure of damages and has been generally regarded as the New York rule (39 Harv. Law Rev. at page 124) except in cases whore it is less than the value at the date of conversion. McIntyre v. Whitney, 139 App. Div. 557, 124 N. Y. S. 234, affirmed 201 N. Y. 526, 94 N. E. 1096. In other words, under the New York rule the measure of damages for conversion applicable in this situation is the market value of the stock at tlie time of the unauthorized hypothecation, or the market value within a reasonable time after notice of the hypothecation, -whichever amount is the higher. Indeed, this is the very measure of damages proposed by the counsel for the appellees at the original argument as appears at page 18 of their brief.
In Burnham v. Lawson, 118 App. Div. 389, 103 N. Y. S. 482, 484, the precise- question before us was decided by the New York Appellate Division, First Department, which reversed the trial court for allowing a plaintiff “to pick out the highest market price * * * at any time between the day of sale, and a reasonable length of time after receiving notice; whereas, the proper rule, as stated by the court in Wright v. Bank of the Metropolis, 110 N. Y. 237, 249, 18 N. E. 79, 1 L. R. A. 289, 6 Am. St. Rep. 356, is that 'the plaintiff is entitled to the highest price reached within a reasonable time after the plaintiff has learned of the conversion of the stock within which he could go into the market and repurchase it.’ ”
In McKinley v. Williams, 74 F. 94, the Circuit Court of Appeals for the Eighth Circuit allowed a principal the highest value which his stock reached between the date of conversion and a reasonable time after the owner had received notice, although the highest intermediate value was reached prior to notice of the agent’s wrongful acts. But that decision, wo think, was based on a too literal reading of the language of the Supreme Court in Galigher v. Jones, 129 U. S. 193, 9 S. Ct. 335, 32 L. Ed. 658; and an interpretation of Wright v. Bank of Metropolis, 110 N. Y. 237,18 N. E. 79, 1 L. R. A. 289, 6 Am. St. Rep. 356, with which we cannot concur. A person whose property is converted may reeove-r at least its value at the- time- of conversion. McIntyre v. Whitney, 139 App. Div. 557, 124 N. Y. S. 234, affirmed 201 N. Y. 526, 94 N. E. 1096; Hunt v. Boston, 183 Mass. 303, 67 N. E. 244. But where the property consists of fluctuating securities like stocks which have advanced in price since the date of notice of the conversion, this measure of damages is inadequate because insufficient to restore the owner to the position he would have been in but for the conversion. He should therefore he given a reasonable opportunity after he- has received notice of the conversion to purchase similar securities in the market. If such securities sold for a higher price between the date of the conversion and the time when he received notice of the wrong than they did during a reasonable-time after such notice, he ought not to recover this higher priee for, if he had desired to dispose of them in that interval, he would have learned of the conversion. Inasmuch as ho has shown no desire to realize any value *342which his securities reached prior to notice of the conversion, he is given complete indemnity and put in the same position that he would have been in except for the conversion if he is allowed the market value of the stock at the time of the unauthorized hypothecation or the highest price between the date when he received notice of the conversion and a reasonable time within which he might have replaced his stocks after he learned of the wrong, whichever may be higher.
Our original opinion should be modified' by allowing, as damages for the conversion, the market value of the stock at the time of the unauthorized hypothecation or the highest intermediate value of the -stock between notice of the conversion and a reasonable time thereafter whichever may be higher.