Bank of Montgomery v. Reese , 26 Pa. 143 ( 1856 )

The judgment of the court was delivered by

Lewis, 0. J.

Morgan L. Reese, as one of the stockholders of the bank of Montgomery, was entitled to a portion of the unsold capital stock. His right was as valid as that of a tenant in common of real estate to his purpart on a partition. The corporation was a trustee for the stockholders, but in disregard of the duties of the trust, in distributing this stock it deprived Mr. Reese of the number of shares to which he was entitled. He has established his right in this action. The court advised the jury, to allow him the highest price of the stock between the time of conversion and the day of trial, less the par value, which he would have been bound to pay had the stock been assigned to him. The par value was $50. The value, as it existed at the time of the trial, according to one witness, was $73.75. The plaintiff was entitled to 10 shares, and the jury found a verdict in his favour for $237.50. The stock has been yielding a dividend of from 9 to 10 per cent, but no compensation for these dividends was allowed, except that the plaintiff was not charged interest on the par value, in adjusting the difference between that and the highest price which the stock had reached at the time of trial. The bank now complains of the measure of damages.

The paramount rule in assessing damages is that every person unjustly deprived of his. rights should at least be fully compensated for the injury he sustained. Where articles have a determinate value and are unlimited in production, the general rule is to give their value, at the time the owner was deprived of them, with interest to the time of the verdict. This rule has been adopted because of its convenience, and because it in general answers the objects of the law, which is to compensate for the injui-y. In relation to such articles, the supply usually keeps pace with the demand, and the fluctuations in the value is so inconsiderable as to justify the courts in disregarding them, for the sake of convenience and uniformity. In these cases the reason why the value at the time of conversion, with interest, generally reaches the justice of the case, is that when the owner is deprived of the articles, he may purchase others at that price. But it is manifest that this would not remunerate him, where the article could not be obtained elsewhere, or where from restrictions on its production, or other causes, its price is nécessarily subject to very considerable fluctuations. The stock in a bank, with a capital limited by law to a certain amount, is an article of this description. If the bank be favourably located, and well managed, the demand for its stock will increase rapidly, while, on the other hand, the supply is restricted by law. A great increase in the price must be the necessary result. In such a case the value at the time of conversion might be an insult instead of -a compensation for a wrongful deprivation. Such a rule would hold out temptations to acts of wrongful conversion by making them profitable to the wrongdoer. If a bank, or any other trustee, might deprive the cestui que trust of his stock, without answering for the rise in the value, the beneficial owner would be deprived of the Very advantage which he had in view when he made the investment. It is plain therefore, that the ordinary measure of damages, for the conversion or refusal to deliver chattels of determinate value and unlimited production, will not reach the justice of the case when applied to the conversion of bank stock. On principle there is a distinction, and that distinction is well sustained by abundant authority. See Payne v. Burke, cited in note 2 East 213; Shepherd v. Johnson, 2 East 211; McArthurs v. Seaforth, 2 Taunton 257; Harrison v. Harrison, 1 Car. & Payne 412; Greening v. Wilkinson, 1 Car. & Payne 625; Cortelyon v. Lansing, 2 Caines Cases in Error 216; Hart v. Ten Eyck, 2 John Ch. Rep. 117; 1 Saunders Pl. Ev. 377, 677; 3 Phillips Ev. 103; 3 Starkie’s Ev. 1624; West v. Beach, 3 Cowen 83; Clark v. Pinney, 7 Cowen 681. In 3 Starkie’s Ev. 1624, it is said that the plaintiff may elect to claim the highest price as it existed at any time between the breach, and the trial. In Hart v. Ten Eyck, 2 John. Ch. 117, Chancellor Kent recognised the justice of the rule which allowed the value of the stock at the day of the trial, if the market price of it had risen in the meantime. The other cases cited, sustain the same doctrine. In Harrison v. Harrison, 1 Car. & Payne 412, Chief Justice Best remarked with great truth, “ that justice is not done if you do not place the plaintiff in the same situation in which he would have been if the stock had been replaced at the stipulated time. We cannot act on the possibility of his not keeping it there. All we can say is you have effectually prevented him from doing so.” In Vaughan v. Woods, 1 Mylne & Keene 403, it was held that the lender of stock, on a bond given for its replacement, has an equity to be placed in the same situation as if the stock had remained in his name, and that he was consequently entitled to the replacement of the original stock, increased by the amount of a bonus which had been declared and paid in stock, and to dividends in the mean time, as well upon the bonus, as upon the original stock, 1 Mylne & Keene 403. An attempt has been made, in some of the cases, to distinguish between the rights of a plaintiff who has paid the consideration for the stock and one whose payment has been offered and refused. The only difference which that circumstance can make is that where the consideration has not been paid it is to be deducted from the value. Girard v. Taggart, 5 Ser. & R. 33; 1 P. Wms. 570. If the party entitled to the stock is not in default, and offers to pay the consideration in due time, surely it is unjust that the wrongdoer shall gain any advantage by refusing to accept it. It is a settled principle in the Court of Chancery, that where a trustee sells stock contrary to his trust the cestui que trust is entitled to his election to have the stock replaced, or the produce of it with the highest interest. Hart v. Ten Eyck, 2 John. Ch. 117; Forrest v. Elwes, 4 Ves. 492; 5 Ves. 799. If the cestui que trust has an election in equity to have the stock replaced, why shall he not have its value in an action at law where he cannot have the stock itself? If the chancellor would compel the trustee to go into the market and purchase stock to replace what he had improperly sold, although it had risen in value in the meantime, is not that done upon the principle that he is liable for the increased value ? And when a court of law compels him to pay that increased value, it does nothing more than prescribe the same, rule of justice which a court of equity enforces in another form.

It is admitted that there is some conflict among the decisions in the different states on this question. We have adopted the rule which seems to be the best sustained by principle and authority. The case of Gray v. The Portland Bank, 3 Mass. 363, stands in opposition to that rule. The influence which that decision would otherwise possess is diminished by the peculiar circumstances under which it was pronounced. Judge Thatcher, from some cause, gave no opinion on the measure of damages. Chief Justice Parsons and Judge Parker took no part in the decision, the first because he had been of counsel in the cause, and the last because he was a stockholder in the Bank. The opinion on the measure of damages was therefore given by Judges Sedgwick and Sewadl, who constituted a minority of the court. If the case had been decided by a full bench, the decision might have been the other way. The case of Kimmel v. Stoner, 6 Harris 156, was one in which the plaintiff claimed no more than the value of the stock at the time of the purchase. The defendant was dissatisfied and took a writ of error; but the judgment allowing the value claimed, was affirmed. No question was raised or decided respecting the plaintiff’s right to the increased value; nor did it appear that the stock had in fact increased in value. When the case now under consideration was here before, the question respecting the damages was whether the value should be ascertained by an examination into the accounts of the Bank, or by the market price after the additional stock was subscribed. The latter rule was adopted. No question was decided respecting the plaintiff’s right to elect the highest price between the conversion and the trial. In Cud v. Rutter, 1 P. Wms. 570, Lord Chancellor Parker reversed the decree for specific performance of a contract for the transfer of South Sea stock, but declared that the defendant should pay the plaintiff the difference of the stock not only as it was on the day when it was by the contract to have been delivered, but as it was when the plaintiff bought other stock, in pursuance of notice that he would do so, 'if the defendant did not transfer according to the contract. The stock had risen in value 14l. 5s. per cent., and the plaintiff had a decree for that difference, with interest, from the time he had supplied himself with new stock. See note (3) to Cud v. Rutter, 1 P. Wms. 572, 4th Lond. ed., 1787.

The case of stock is an exception to the general rule applicable to chattels. It is made an exception in obedience to the paramount obligation to indemnify the party for his loss. The rule of convenience gives place to the rule of justice. The moment we proceed, on this ground, to take it out of the general rule, we are obliged to substitute one that will do complete justice to the party injured. “The question'is, what did the plaintiff lose?” Kimmel v. Stoner, 6 Harris 157. He is entitled to all the advantages he could have derived from the stock, if it had been delivered at the specified time: Harrison v. Harrison, 1 C. & P. 412. Those advantages are the highest market value between the breach and the trial, together with the bonus and dividends which have been received in the mean time: Vaughan v. Wood, 1 Mylne & Keene 403. This is the rule where the consideration has been paid. Where it has not been paid the plaintiff should be allowed' the difference between it and the value of the stock, together with the difference between the interest on the consideration and the dividends on the stock. Nothing short of this will do justice, because nothing short of it will give the plaintiff the benefits he could have enjoyed if he had not been deprived of his rights. Applying these principles to the case before us, it is clear that the plaintiff in error has no just ground of complaint.

Judgment affirmed.