Barbour v. Sproul

Per Curiam,

We agree with the conclusion of the learned court below. This is not a case for contribution. When a customer orders his broker to buy stock, and the broker does buy it from a sub-broker, and the broker then notifies the customer that the stock has been bought, the broker’s title to the stock thereby passes to the customer, subject to any amount due from the customer to the broker and to any lien of the sub-broker: 2 Cook on Corp. 1161. Robinson & Orr and Bell, the appellees, and Wheeler and Banch placed their orders for the stock with Sproul & Company, their Pittsburgh brokers, who purchased it through their New York correspondents. The latter at once notified Sproul & Company of the purchase who gave notice to their customers. Robinson and Orr and Wheeler paid to Sproul & Company the purchase price and commissions in full, and a balance remained due from Bell and Banch on their stock. When Sproul & Company notified their customers that the stock had been bought the sale was complete and the title passed to the customers subject only to the payment of commissions and of such balance of the purchase money as remained due. The broker and the customer were both bound by the contract and neither could repudiate it. The customer was bound to receive the stock and pay the balance due upon it, and an obligation rested on the broker to deliver it. When the receiver was appointed the stock had been purchased, the customers had been notified, Robinson & Orr and Wheeler had paid the broker in full, and a balance was yet due from Bell and Banch, the marginal purchasers. At this time Robinson & Orr and Wheeler had the right to demand the immediate delivery of their stock and Bell and Banch the delivery of their stock on payment of the residue of the purchase money by the latter two purchasers, subject, however, to the payment of the balance due from Sproul & Company to the New York brokers. The sub-brokers dealt only with the broker and not with the customer, and they had the right to hold all the stock purchased for the broker until the accounts had been settled between them and the balance due had been paid to the former. When the New York brokers sold sufficient stock in their hands, owned by Sproul & Company, to pay the latter’s indebtedness to them, their lien was discharged, and they were required to surrender to the receiver the stock . purchased for the appellees. Robinson & Orr and Wheeler having paid in full for their stock were entitled to immediate possession, and Bell and Banch could obtain possession of their stock when they paid to the receiver the residue of the purchase price and commissions. The South Side Trust Co. as receiver of Sproul & Company never had title to the stock. It stood in the place of and represented the broker and was, therefore, only a pledgee of the stock and was required to deliver it to the pledgor when the marginal traders paid the receiver the balance due. The other creditors of Sproul & Company could not subject the stock to the payment of their debts through the receiver. They could only demand the right to participate in the unpaid balance of purchase money due from Bell and Banch.

Le Marchant v. Moore, 150 N. Y. 209, is very similar in its facts to the case in hand, except that the customers waived their right to the stock by proving their claims against the estate of the broker. It was there held that the customers were the owners of the stock, and that the title .did not pass to the assignee of the brokers. In the opinion it is said: “But this fact (the brokers permitting the stock to remain in possession of the sub-brokers) does not operate to prevent the title vested in Evans & Co. (brokers) from passing to the plaintiffs (customers). They became vested with the title subject only to the lien of the defendants (sub-brokers) . The title being in the plaintiffs, it did not and could not pass to the assignee under the assignment of Evans & Co.” Denison v. Emery (U. S. C. C.), 153 Fed. Rep. 427, is also like the present case in its facts. In the opinion of the court it is said: “It seems to me, therefore, clear that, subject to the rights of Finley, Barrel & Co. (sub-brokers), Corner (customer) was, at the time of the failure of Dension, Prior & Co. (brokers) entitled, to the possession of the fifty shares of the Quaker Oats stock, which had been bought for him, and that he is now entitled to the proceeds of the sale of the stock.”

The title to the stock involved in this case not being in Spronl & Company at the time of the appointment of the receiver, the latter was not entitled to possession of it, except to enforce the lien against the marginal traders for unpaid balances. When they were liquidated, neither the other customer creditors of Sproul & Company nor the receiver had any interest in or claim on the stock. A receiver has the right to the possession of and deals only with the property interests of his insolvent. We need not concern ourselves with the rights of the parties if all the stock held by the New York brokers to secure Sproul & Company’s indebtedness to them had been sold by the pledgees, or if the present claimants to the stock in the hands of thh receiver had consented to or joined in a request for the sale of any or all the stock held by the pledgees as collateral for the Sproul indebtedness. These facts are not in this case. The New York brokers had the right to enforce payment of their claim against Sproul & Company by proceeding against any of the stock in their hands at their election: 31 Cyc. 863, Jennings v. Loeffler, 184 Pa. 318, but they sold the stock of the present claimants to contribution at the suggestion or on the order of the receiver with the consent of the owners. The appellees refused their consent to have their stock sold by the sub-brokers and the unsold stock was returned to the receiver by the sub-brokers and belongs to the appellees. As pointed out above, the stock is not the property of Sproul & Company, and hence the receiver has no right to retain possession of it as against the owners. Under the facts of the case we are. unable to see that the receiver has the right to withhold the stocks from the owners to enforce contribution or for any other purpose.

Orders affirmed.