obtained the information by Telex from the New York office. The only record which Hutton had of the numbers of the Treasury Notes was a handwritten list of certificate numbers prepared in May 1966 by the Clerk who clipped the coupons from the Treasury Notes. That list was never produced. The list was essential because it was the beginning point from which Hutton then reviewed its records of Treasury Note transactions from May 15, 1966 to September 1966 to determine which certificates were delivered and received in order to determine which certificates should have been in the vault. The fact that Hutton was required to go through this process in order to determine what securities it had on hand indicates that its system was, to say the least,as the assignee of Hutton.
This action was commenced on May 22, 1968. The complaint alleges that the Treasury Notes which Hutton found to be missing were stolen sometime between May 16, 1966 and August 5, 1966. Some of those notes were presented for sale at the 149th Street branch of defendant Royal National Bank (Royal) by one Frank Mazzochi, Jr. (Mazzochi). In accordance with Mazzochi's request Royal sold the notes to defendant Merrill Lynch, Pierce, Fenner & Smith, Inc. (Merrill Lynch) and deposited the proceeds into a personal checking account of Mazzochi which he had opened for that purpose and from which he withdrew the proceeds in cash. The basis for liability is that neither Royal nor Merrill Lynch negotiated the Treasury Notes in good faith or observed