Jenkins v. Continental Trust Co.

⁴¹⁷ Pattison, J., delivered the opinion of the Oourt. This ease was heard by Judge Ulman, sitting as a jury, in the Superior Court of Baltimore City, and a verdict was rendered and judgment entered thereon in favor of the defendant, the Continental Trust Company, the appellee in this court, upon the following agreed statement of facts: “1. That the plaintiff, Spalding L. Jenkins, is a resident of Baltimore City, and the defendant, The Continental Trust Company, is a corporation duly authorized under the laws of Maryland to conduct the business of a Trust Company in Baltimore City, and that the defendant was authorized to make demand loans secured hy collateral and regularly engaged in the making of such loans in the course of ordinary business, and had for the period of some years prior to the time herein referred to been accustomed to make such loans to the brokerage firm of Archer, Harvey & Company, which firm was on the 23rd day of June, 1921, indebted to tbe defendant on various loans secured by collateral. “2. That the pleadings and former stipulation filed herein he withdrawn and the case be stated and submitted to the Oourt for its opinion on the law as follows: “(a) That the plaintiff, Spalding L. Jenkins, since about the year 1903 or 1904, maintained a trading account with the stock brokerage firm of Archer, Harvey & Company, doing business in Baltimore City.

That on tbe 21st day of June, 1921, if tbe instructions of the plaintiff had been complied with, ho was carrying with Archer, Harvey & Company 593 shares of the Common Stock of the Houston Oil Company, 200 shares of the Preferred Stock of the Houston Oil Company, $10,000 six per cent. Bonds of the Georgia & Pennsylvania Railroad Company, 200 shares of tbe Superior Oil Company, 9 shares of the Common Stock of the Oosden Oil Company and a $500 five per cent, bond of the Elk Ridge Hunt Club, all of the approxi ⁴¹⁸ mate value of $53,600, and was indebted to said firm in the sum of $44,923.36. “(b) That on the 21st day of June, 1921, Archer, Harvey & Company informed the plaintiff by telephone that they would require $10,000 in cash or securities as additional margin on his account, in response to which call Spalding L. Jenkins visited the office of Archer, Harvey & Company on that date, and then and there was advised of the status of his account, as above set forth. That there was delivered to him the pencil memorandum which purported to show the account of Spalding L. Jenkins as it stood on June 20, 1921; * * * that * * * Archer, Harvey & Company went over this memorandum with the said Spalding L. Jenkins, and figured the margin that would be required on this account, in accordance with their custom, and these figures * * * indicated that a margin of $18,700 would be required. That the said Spalding L. Jenkins did thereupon deliver to said Archer, Harvey & Company Certificate No. 14961, issued May 19, 1920, for 111 shares of the Common Capital Stock of the United States Eidelity and Guaranty Company, a corporation organized under the laws of Maryland, of the approximate value of $12,876, and received from Archer, Harvey & Company a receipt for said certificate, * * * and at the same time signed the power of attorney on the back of said certificate. * * * That said Spalding L. Jenkins knew and intended when he delivered said certificate that the said Archer, Harvey & Company could and might rehypothecate the same to protect the Jenkins account. “(c) That as a matter of fact on the 21st day of June, 1921, the said Archer, Harvey & Company did not in truth and in fact have all of the securities of said Spalding L. Jenkins in their possession, and on such of his securities as they did have on hand they had borrowed to the full extent of the value thereof as collateral, and the firm of Archer, Harvey & Company had without instructions from Spalding L. Jenkins and without his knowledge previously sold most ⁴¹⁹ of the said securities so carried for him, and that the said Jenkins was not indebted at all to Archer, Harvey & Company, but, on the contrary, Archer, Harvey & Company were indebted to Mm in the sum of approximately $9,000, and in fact were at that time insolvent, in that the value of their assets did not equal their liabilities, all of wbicb was discovered some time after December 22, 1921. “(d) That on or about June 23, 1921, Archer, Harvey & Company, * * * without the knowledge of Spalding L Jenkins, borrowed from the defendant the sum of $10,000, and executed its note, * * * and delivered the certificate of 111 shares of the stock of the United States Fidelity & Guaranty Company, to The Continental Trust, Company, at the same time guaranteeing the signature of Spalding L. Jenkins endorsed on said certificate by placing its name beneath the signature of Spalding L. Jenkins, with the intent and for the purpose of securing such loan of $10,000 and any other indebtedness to The Continental Trust Company in accordance with the terms of said note.

That at the time The Continental Trust Company received the certificate of stock aforesaid and made said loan thereon, and until the interview of December 20, 1921, next mentioned, it had no knowledge, actual or implied, of any interest of the said Jenkins in the said stock or the condition of Archer, Harvey & Company, or the relations between said Jenkins and Archer, Harvey & Company, except such, if any, as might be indicated by the stock certificate itself, including the power of attorneys, signatures, assignments and/or endorsements thereon. That on the 20th day of December, Spalding L. Jenkins, having heard that Archer, Harvey <& Company were in financial difficulty, and having ascertained that his stock was in the possession of The Continental Trust Company, visited the office of The Continental Trust Company, told the YicePresident thereof of the situation of said Archer, Harvey & Company, and informed Mm that the stock of the United States Fidelity & Guaranty Company ⁴²⁰ held by said trust company was his stock, and requested The Continental Trust Company to take no action with respect thereto. That subsequently, to wit, on the morning of December 22, 1921, without notice to the plaintiff, defendant, having theretofore made due and proper demand on said Archer, Harvey & Company for the payment of said loan and no payment having been made, sold on the Baltimore Stock Exchange where said stock was customarily dealt in, 100 shares of the aforesaid 111 shares of the United States Fidelity & Guaranty Company stock at the price of $126 per share, less the usual brokerage commission, producing the net amount of $12,549, out of which it repaid to itself the amount of the note of Archer, Harvey & Company for the loan made at the time when said stock was pledged, and applied the surplus in accordance with one of the terms of said note toward the payment of other indebtedness of the said firm of Archer, Harvey & Company to it evidenced by other notes for loans similarly made prior to December 20, 1921, and that The Continental Trust Company thereafter delivered to the Receiver in Bankruptcy of Archer, Harvey & Company the remaining 11 shares of stock of the United States Fidelity and Guaranty Company. The amount to which the plaintiff would be entitled to judgment if successful is $9,015.12. “(e) That a petition in bankruptcy was filed against Archer^ Harvey & Company on the 29th day of December, 1921, and that said firm has been adjudicated a bankrupt and was and is hopelessly insolvent.

Upon the above stated facts the court was asked to decide the following question: “Did or did not the defendant, by virtue of the pledge of the certificate for the stock of the United States Fidelity and Guaranty Company, as set forth in the foregoing statement, acquire such title to the shares represented by said certificate, that its title thereto for the purpose of such pledge was superior to ⁴²¹ any title of the plaintiff, in such manner that the acceptance of said shares in pledge, or the subsequent sale thereof by the defendant as hereinbefore recited was not a conversion of said stock as against the plaintiff entitling him to maintain an action of trover against the defendant on such alleged conversion?” It was agreed that, upon the determination of this question in favor of the plaintiff, judgment should be entered for the plaintiff for the sum of $9,015.12, with interest and costs, or if determined in favor of the defendant, a judgment should be entered for its costs. Each of the parties reserved the right to appeal to this court from any judgment so entered against him or it, and, as the judgment was against the plaintiff, he has appealed. The question raised in the court below was whether there was a conversion by the defendant of the plaintiff’s certificate of stock. The determination of this question depends upon the wording of the endorsement or power of attorney found upon the back of the certificate.

It is contended by the plaintiff, appellant in this court, that by such endorsement or power of attorney, “the defendant -was put on notice of the fact that at the time Archer, Harvey & Company delivered, as collateral, for its personal loan, the Jenkins certificate, it was apparent from the power of attorney through which title purported to pass to the Continental Trust Company that Archer, Harvey & Company was acting solely as the agent of Jenkins, to sell, assign and transfer the certificate of stock and the shares represented thereby, and bad no authority or power to pledge the certificate for its personal indebtedness.” In support of this contention the plaintiff cites the cases of Taliaferro v. First Nat. Bank, 71 Md. 200 ; German Savings Bank v. Renshaw, 78 Md. 475 ; Merchants Bank v. Williams, 110 Md. 334 . In Taliaferro v. First Nat. Bank, supra, Mrs. Taliaferro and her sister, Mrs. Sarah L. Waters, each owned $8,600 of ⁴²² registered Virginian Coupon Consols,- payable to them respectively or to tbeir respective order.

Wishing to dispose of the securities, the owners entrusted them to- I. Parker Veazey to be sold by him when they reached sixty cents on the dollar. To this end, by form of assignment appearing upon the back thereof, they were assigned to blank, and blank was, by power of attorney likewise appearing upon the back of the securities, appointed to sell, assign and transfer such securities. They were thereafter pledged by Veazey to the bank to secure a personal loan from it to him. The loan was not paid and the securities were sold by the bank.

The court said in that case, “that Veazey had no title whatever to these securities. They did not belong to him. They had been entrusted to him for sale. * * * Upon their face they - disclosed the fact that he was not the owner. The blank assignment and power of attorney did not operate as an endorsement of them to him.

It was a power to sell and not a power to pledge. It can by no possible construction be made to appear to be a power to pledge for debt. * * * The very face of the instrument shows that it authorized the attorney to bargain and sell and transfer to blank, but not to pledge for debt. Any one taking this instrument must necessarily see this. A power to sell does not authorize the agent to pledge for his own debt the thing which he was employed to sell.

Story on Agency, sec. 78; Byles on Bills, 25; Bank v. Livingston, 74 N. Y. 223 ; Haynes v. Foster, 2 Cr. & M. 237.” In German Savings Bank v. Renshaw, supra, Renshaw delivered to Nicholson & Sons, brokers, certain certificates of stock, upon the back of which were blank forms of assignment and power of attorney. These were signed by Renshaw, but the blanks were left for the names of the assignors and assignees, and the dates were not filled up. The certificates were so delivered as collateral security for stock purchased, or to be purchased, by Nicholson & Sons for Renshaw on margin, with authority to Nicholson & Sons to sell them, if necessary, to meet any indebtedness by Renshaw ⁴²³ to them, resulting from said stock transactions. Nicholson & Sons thereafter failed in business.

At the time of their failure nothing was due them by Renshaw, the balance of accounts between them being in his favor. Before the failure Nicholson & Sons had hypothecated said stock to the German Savings Bank as security for a loan made to themselves. At the time the stock was received by the bank, the blanks had not been filled up. In that case, which was an