Hartnett v. Wilson

This is an action of replevin brought by the plaintiff to recover certain certificates of stock and a certain bond, alleged to be his property, in possession of the defendants and unlawfully detained by them. The defendants were partners doing business under a firm name as stockbrokers engaged in the business of buying and selling stocks and bonds on margin and otherwise. The complaint shows * that on July 30, 1912, a series of transactions began between the plaintiff and the defendants wherein, as it is alleged, contracts were made between the parties, whereby the plaintiff employed the defendants to purchase for him shares of the capital stock of corporations on margin, without any intention on the part of either of the parties for delivery of the shares sold or bought, and without any actual delivery of such shares

On several dates, beginning on August 8th, the plaintiff deposited with defendants the certificates and the bond, one at a time, until all of them had passed to the possession of defendants. It was alleged that the property was deposited as collateral security for any debt that might accrue from the plaintiff to defendants on account of any loss caused by reason of any contract that plaintiff might make with defendants whereby defendants might purchase of or for, or sell to or for, plaintiff, on margin without intention to deliver, shares of the capital stock of divers corporations, or bales of cotton; that since said delivery of the certificates and bond plaintiff has entered into divers verbal contracts with defendants whereby the plaintiff sold to or for defendants, and divers other verbal contracts whereby the plaintiff purchased of defendants shares of the capital stock of corporations or bales of cotton on margin; that in each instance and in every case and as agreed to in each of said contracts, there was no intention either on the part of the plaintiff or on the part of the defendants to deliver by the party selling or to receive by the party purchasing any of said shares or bales of cotton, and no shares of capital stock or bales of cotton were ever delivered by plaintiff to defendants or by defendants to plaintiff, ás the case might be, and no agreement was ever made for such delivery or receipt; that each of said contracts provided that only the difference between the contract price and the market price of said shares or bales of cotton on divers days should be paid and only such difference was ever paid; that said certificates and bond were deposited with the defendants for no other purpose than as so stated. By their answer the defendants raised issues upon the material allegations of the complaint, both as to the ultimate facts and the evidentiary facts thus pleaded, other than as to plaintiff’s ownership and deposit of the certificates and bond. The ease was tried upon those issues with resulting findings and judgment in favor of

It is not disputed that the complaint states facts sufficient to entitle the plaintiff to recover. (Willcox v. Edwards, 162 Cal. 455 , [Ann. Cas. 1913C, 1392, 123 Pac. 276 ]; Cal. Const., art. IV, sec. 26.) Appellants also admit that the evidence is sufficient to justify the court in finding that all of the transactions involved were of the character alleged, except those involved in the account of one M. T. Zorn. We are satisfied, however, that the Zorn transaction was like the others. The defendants maintained an office in the city of Los Angeles in which they kept a blackboard for market quotations arid maintained a telegraph operator, a manager, a bookkeeper, and agents for soliciting business. One of these agents, Mr. C. H. Marshall, introduced the plaintiff to that place of business, and suggested that there was a chance for plaintiff to make some easy money there by buying stock on margin. Upon being informed that plaintiff had never done business of that kind, Marshall compared it to horse-racing. He said: “It is just about the same as making a book. You bet that the stock will either go up or down. If you bet it goes up and it goes up, you win the equivalent of what you bet or what you buy. ” The transactions which followed, and which are set forth at great length in the record as occurring between the plaintiff and the defendants, were of the nature thus described and nothing else. After the plaintiff had invested a few hundred dollars there came a time when he was called upon for more cash to protect his margins, but did not have the money. In lieu of cash the defendants accepted from plaintiff the certificate for ten shares of Northern Pacific Railroad stock as collateral for plaintiff’s account. The other deposits were made from time to time under like circumstances.

At the office of defendants the plaintiff was made acquainted with Mr. Zorn. Plaintiff’s testimony concerning Zorn is not disputed and in substance is as follows: “He had some deals on- there in corn, and they were calling him for

Appellants next contend that since the burden was on plaintiff to show the unlawful character of the transactions, and since there were many of those transactions, the court erred in allowing the plaintiff to make this proof in a wholesale manner and by general questions, for if any of these were lawful transactions and indebtedness arose out of them, defendants were entitled to hold plaintiff’s collateral therefor. A great deal of evidence was received covering particular details of the several transactions, including numerous statements in writing made by the defendants. The character of the business of the defendants was thus thoroughly exposed to view. The facts as to the manner in which the business was done were almost wholly within the knowledge of the defendants and were not known to the plaintiff. This is peculiarly true of that portion of these transactions well along toward the end of them, when (the plaintiff then being “ahead of the house”) the defendants got the plaintiff drunk for three days, during which time numerous transactions occurred, and then or soon thereafter nearly all of the “losses” occurred whereby they claimed that his collateral had been absorbed. The principal objection made by appellants under this head is to the following question put to the plaintiff by the court: ‘ ‘ Subsequent to the time that you put up these collaterals was there ever any stock you owned sold by them for you in Los Angeles or anywhere else, after you put up these collaterals?” to which the plaintiff answered, “No, sir.” Objection was made that the question was too general and called for the conclusion of the witness. This matter must be considered in the light of occurrences immediately preceding the asking of this question, as shown in several pages of the transcript. Plaintiff’s showing of facts had progressed to a point where it was appropriate for the court

The defendants called as their witness at the trial one Ellis M. Harris, who on and after November 1, 1912, was the manager of their Los Angeles office, and propounded to him the following question: “Do you know what the rules of the New York Stock Exchange are in regard to buying and selling stock?” Objection_to this question was sustained, and was properly sustained, unless the rules of that exchange were in some way material and of benefit to the defendants. Some of the statements of account furnished by the defendants to the plaintiff contained a statement in the following form: “It is agreed between broker and customer: 1. That all transactions are subject to the rules and customs of the New York Stock Exchange and its clearing-house.” There is no evidence that the defendants were members of the New York Stock Exchange, or transacted any of the plaintiff’s business through that exchange, and if we may suppose that the rules of the New York Stock Exchange prohibit mere gambling and fictitious transactions, that fact would be of no value to the defendants if, in truth, the transactions between them and the plaintiff were not conducted in accordance with those rules. Neither at the time when the foregoing question was asked of the witness Harris, nor at any other time, was evidence offered tending to show that in any instance there was a genuine purchase by the plaintiff or a genuine sale by him. It is true that, referring to two or three orders received from the plaintiff, Mr. Harris testified that the orders were transmitted to New York, that the orders were executed and that the cotton mentioned was bought; but there is nothing to show that the word “bought” was used in any other sense than in the multitude of other transactions in which that word was current in the business of defendants. Harris admitted that never in his experience as an employee of the defendants did

Appellants contend that the court erred in its findings as to the value of the property involved. At the trial an attempt was made by the attorneys for the respective parties to agree upon these values. Plaintiff’s attorney claimed that he was entitled to the value of the property as of the dates when the certificates and bond were deposited. Defendants’ attorney claimed that the value should be taken as of December 17, 1912, the day when plaintiff made his demand for their return to him. As to the latter date, defendants’ answer admitted values amounting to only $4,848.75. The answer of defendants had admitted values at the date when the properties were deposited by the plaintiff with the defendants, which admitted values in the aggregate amounted to $5,017.50, or $168.75 more than the values at the time of the demand. The court in its decision adopted the larger figures, proceeding evidently upon the theory that the value should be fixed as of the earlier dates. Appellant's now contend that the court’s findings as to values are wholly without support in the evidence, because there is no evidence of the value of the property at the time of the trial, which they now for the first time contend is the time for which the values should have been fixed. It is provived by the Code of Civil Procedure, section 667, that “In an action to recover the possession of personal property, judgment for the plaintiff may be for the possession or the value thereof, in case a delivery cannot be had, and damages for the detention.” As no damages for the detention of the property

It is contended by appellants that the court erred in refusing to allow a continuance at the close of the evidence presented on behalf of the plaintiff. When the plaintiff presented his amendment to the complaint at the beginning of the trial, the defendants made no objection thereto, but stated that they would desire to have a continuance. The court responded that the plaintiff might introduce his evidence, and that whenever it became necessary in the interest of fair play to get the defendants ’ evidence on the transactions in cotton, the court would adjourn the trial of the case for such time as was necessary. After the plaintiff had rested his case, the attorney for appellants stated that on account of the cotton transaction having been received as part of the evidence, he would want further time before he could finish putting in his defense; that it would be necessary for the defendants to show that the deals in cotton were actually made, and he was not prepared to produce such evidence at that time. He said that the man Marshall was not then in the employment of the defendants, and they had no means of communicating with him, and did not know whether they could find him or not. He said he wanted to prove that the cotton deals were actually carried out on the New York exchange; that there was a telegraph-line from their office to New York, and messages were

In addition to the foregoing matters directly involved in the appeals herein, we are required to consider a motion presented by counsel for appellants whereby they ask for an order staying all proceedings in the action on the ground that since the rendition of the judgment appealed from, and since the time óf the appeal, the defendants have been duly discharged in bankruptcy. The motion is accompanied by a certified copy of an order duly made in the district court of the United States for the Northern District of California, discharging the defendants from all debts and claims provable under the acts of Congress relating to bankruptcy, and which existed on the seventh day of November, 1914, when the petition for adjudication of bankruptcy against them was filed; with the usual

Regardless of the suggestion thus made with respect to the existence of a stay bond, we also think that appellants are not on this motion entitled to anything more than is thus conceded to them by counsel for respondent. The principal object of the judgment was to enforce the plaintiff’s right to have certain personal property restored to his possession. If that property remains in the possession or under the control of the defendants, it may be redelivered to the plaintiff, in which event the alternative money judgment would be of no consequence. We are not aware of anything in the bankruptcy proceedings which would prevent such return of his property by the defendants to the plaintiff. The respondent is entitled to a determination of this appeal, so that if the judgment be affirmed he may recover that property; and since the condition of the bond was that the defendants would obey the order of this court upon the appeal (which upon an affirmance of the judgment would in substance be an order for the return of the property), we see no reason why the respondent is not equally entitled to a determination of the appeal so that if the judgment be affirmed he may assert his rights with respect to that bond. All the protection to which the appellants are entitled by reason of a discharge in bankruptcy will be obtained by them under an order perpetually staying proceedings by execution or otherwise, against them, to realize upon the alternative money judgment which was rendered against them.

James, J., and Shaw, J., concurred.