Ryman v. Gerlach

Opinion by Me. Justice Dean, This suit was brought by Ryman, plaintiff, against Gerlach & Harjes, defendants, to recover the market value of certain bonds — 202 — and stock, which plaintiff averred belonged to him, and defendants wrongfully converted to their use. The statement is in trover. Plaintiff is a resident of Wilkes-Barre, Pa., defendants are stockbrokers in Philadelphia. Henry Bodmer, who, although not a party of record, was an active party in the transactions resulting in this litigation, is a stockbroker with an office at Wilkes-Barre. Bodmer and defendants were correspondents in the stockbroking business; they executed his orders for the purchase and sale of stocks on both the Philadelphia and New York stock exchanges ; when the rules of either exchange did not forbid, they divided commissions; when they did, Bodmer charged the customer an additional percentage for his compensation. There was a private wire between the two offices, and over this quotations were received by Bodmer, and orders sent by him to Gerlach & Harjes. On the 81st of May, 1889, Ryman, through Bodmer, ordered the purchase of 100 shares Texas Pacific Railroad stock; it was bought for him by defendants, the certificates made out in his —Ryman’s—name, transmitted to Bodmer and by him delivered to Ryman, who then delivered his check for the price, two thousand one hundred and sixty-eight dollars and seventy-five cents (12,168.75), payable to the order of Gerlach & Harjes, to Bodmer, who transmitted it to them. This check included the commissions of both brokers, and the money was received •on it by defendants. Some time after this transaction Ryman purchased, through the same parties, in precisely the same way, 100 shares of N. Y., Susquehanna & Western Railroad stock. After the delivery of this last stock, in November, 1890, Ryman wanted to buy Atchison, Topeka & Santa Fe stocks; he proposed to Bodmer that a purchase he made of the Atchison stock, to be carried for him until the following 1st of January by Bodmer, he to secure Bodmer by a deposit, as collateral, of the 200 shares of the stocks first bought, Ryman to pay for the stock so purchased on January 1st, and lift the collateral. This was satisfactory to Bodmer, and agreed to by him; at the time the agreement was had, it was understood between them that the order was to be executed through Gerlach & Harjes; Ryman asked Bodmer if they transacted a legitimate business; Bod — 203 — mer assured him they did no other kind of business. Under this arrangement a purchase of 50 shares of Atchison stock was made, and ten thousand dollars ($10,000) of Atchison income bonds; there were some sales and purchases of the last named securities to get them, according to Hyman’s testimony, at a lower price, but, he avers, always for actual delivery and not as a wagering transaction. So far as appears from the evidence the Texas Pacific, New York, Susquehanna & Western, and the Atchison stock and bonds remained in possession of Gerlach & Harjes at Philadelphia up to 30th of December, 1889, when they failed in business, and these stocks, without notice to either Bodmer or Ryman, were sold by defendants or their receiver, and the proceeds credited to Bodmer, with whom alone they had any account. It appeared as a fact at the trial, that not only Ryman’s stocks, but those of all others who did business through Bodmer, were entered on the books of defendants as Bodmer’s, and treated as his by them. Ryman, after the failure of Gerlach & Harjes, wrote to them inquiring about his securities, but received no answer; in April following he came to Philadelphia and saw Harjes, one of the partners, and offered to pay for the Atchison stock and bonds and take up the collateral, but Harjes said the account was kept with Bodmer alone, and without his authority he would have no communication with Ryman in regard to the matter. We have stated the facts as alleged by Ryman; some of them are denied by defendants, but there was evidence tending to establish them, and from which the jury might have found them. As the court below peremptorily directed a verdict for defendants, we are bound, in passing on the assignments of error, to treat these alleged facts, of which there was evidence, as if found by the jury. Assuming the facts to be as plaintiff alleges, would they, if submitted to the jury, have warranted them in finding that defendants, when they sold these stocks and appropriated the proceeds to the credit of Bodmer, knew they were the property of Ryman? If Ryman be believed, he was in fact the owner, although credited on defendants’ books to Bodmer; if Bodmer had refused to deliver them on January 1st, on payment or offer to — 204 — pay, as he had agreed to do, Ryman could certainly have sustained a suit against him. But Bodmer had mixed them with other securities of other customers, and deposited the whole with defendants to his individual credit; on the two hundred shares deposited there was a transfer in blank on the certificates. While this would not affect his right against Bodmer, it did estop him from asserting his claim as against purchasers without notice. As to the Atchison securities, there had never been an actual delivery; they were purchased on the order of Bodmer by defendants on the deposit of the other 200 shares. If Bodmer had placed these stocks to his individual account with other than these defendants, with a party having no such business relations with him, and no such connection with the transaction by which Ryman became the owner of the 200 shares, the presumption would be a fair one that the holders were innocent purchasers, or at most were accountable to Bodmer alone. But all the peculiar circumstances here, with the positive testimony of Ryman and Bodmer, must be considered. Bodmer, a broker in Wilkes-Barre, solicits for and directs orders to Gerlaeh & Harjes, who are members of the stock exchange; defendants knew Bodmer was not buying and selling stocks for himself, but for customers; they knew they, by order of Bodmer, had purchased these 200 shares for Ryman, for they had them issued to him and received his check for them; when the certificates came back with the blank transfer on them, signed by Ryman, it was not for purpose of immediate sale, for they held them. Why was the transfer executed, and the stock delivered to Bodmer ? Ryman testifies that it was done that they might be held as collateral security in a purchase of Atchison stocks, which were to be carried for him until January 1st. Bodmer, not being a member of the stock exchange, had his orders executed through defendants; he testifies in substance that this order, as accepted by him from Ryman, was transmitted to defendants to be carried out. If all this be true, then they knew the 200 shares belonged to Ryman, and they held them and any purchases made on them as a security, subject to the same liabilities as Bodmer. The defendants offered no evidence. They may have been able to prove that the agreement of Ryman with Bodmer was — 205 — not communicated to them; the letters or telegrams between them and Bodmer in reference to this transaction, when they were put in possession of Ryman’s stocks, would probably show just what knowledge they had. If their side of the case had been heard, this evidence of plaintiff might have had but little significance. But as the case appeared at the trial, we think the evidence ought to have been submitted to the jury to find whether defendants knew the stocks in dispute were in fact Ryman’s. If they did know, then their conversion of them was wrongful, and plaintiff ought to have had a verdict. It is earnestly argued by appellees’ counsel, that the signing of the blank transfers on the certificates is an effectual protection to them against any claim on part of Ryman, and that if this court does not so hold, a new rule will be laid down; a rule compelling a stockbroker to demand from every other broker with whom he deals, proof that he is the actual owner of the stock he offers to sell, and that such a rule will so hamper and obstruct business as to practically suspend transactions in securities. We announce no such rule as the one deprecated nor any new rule; not a single case of the many cited by counsel for appellees lays down a different one from that adhered to here. Wood’s Ap., 92 Pa. 390, one of the latest cases, and one in which a more significant effect is given to the blank transfer of a certificate than in any of the other cases, holds that: “ If the owner of stock voluntarily gives certificates with blank assignments and power to make transfers to his brokers, who betray the confidence reposed in them, such owner must suffer the loss rather than innocent strangers, whose money the brokers were thereby enabled to obtain.” If this were a suit by Ryman against the purchaser of his stock at the sale of Gerlach & Harjes’ assets, Wood’s Appeal would be directly in point and rule the case in favor of defendant; but here the question is, is there competent evidence from which the jury may find that Gerlach & Harjes are not “ innocent strangers ? ” If they are not, if they knew the securities credited to Bodmer were in fact Ryman’s, then the sale of them without authority from either Bodmer or Ryman was a wrongful conversion for which they are answerable. Nor is there any reason, founded on the peculiar necessities of stock dealing, why brokers should not be held to the observance of the same rule of morals and — 206 — law as men engaged in other avocations. The rule as we have stated it, seeks only to do this; and if thereby the business of wrongfully appropriating one man’s property for the benefit of another be hampered, obstructed, or wholly prevented, then the law accomplishes its very purposes. The appellant’s first and only assignment of error is sustained ; the judgment is reversed and a new venire is awarded