217 Pa. 173 | Pa. | 1907
Opinion by
The appellee, John D. Armstrong, and his deceased partner, Lathrop R. Bacon, were brokers doing business in Pittsburg and New York. The appellant was one of their customers, for whom they sold “ short,” in November, 1900, 200 shares of Northern Pacific Railway stock. They borrowed this stock, through Menzesheimer & Company, their New York correspondents, from Hertzfeld & Stern, a firm of brokers in that city. The “short” sales of the 200 shares of stock had been made at about $60.00 or $70.00 per share. In May, 1901, there was a most extraordinary rise in this stock, due to the efforts of two rival interests to acquire control of a majority of it. On the morning of May 9, at about 10 o’clock, the appellant went to the office of his brokers, and was told by the appellee that the stock might go up to $180 or $200 per share and additional margin was asked for the firm’s protection. Bickel complied with this demand and protected the stock by depositing satisfactory collaterals which brought the margin up to $230 per share. So rapid and abnormal was the rise, however, that within an hour the stock was selling at $600 or $700 per share, and Bickel was asked for more margin. To this he replied that he could not margin it at that price ; that he had not sufficient margin to give the firm to cover at that price, and that it was all nonsense to request margins, because the firm would not cover the stock. An hour later, at about 12 o’clock, the stock was quoted at $700 or $800 per share, and the request for more margin was renewed by the appellee. Bickel states that he said he could not margin the stock at that price. The reply was that if margins were not given they would have to buy. To this, according to his own testimony, he replied: “ I told him he ought not to do that; in fact, he must not do it; if he did he certainly would ruin me and he would hurt himself; and I further told him of a rumor I had
The appellant had other deals with his brokers, but with them we have no concern. The single question which he now raises is whether as to this one transaction the “ short ” sales of 200 shares of stock, and the subsequent purchase of the same number by the firm on his account to enable them to return the stock they had borrowed for the purpose of making the sales for him, he had submitted on the trial sufficient evidence of their negligence or failure to perform their duty to him to defeat their right to recover the difference between $350 per share and the sum for which he had protected the stock. "Under the facts stated, and which are conceded by the appellant, the court directed a verdict against him, and his complaint is that the jury were not allowed to determine whether there was such a failure on the part of the brokers to perform their duty to him in this transaction as ought to defeat their right to be reimbursed for their loss sustained in purchasing the stock for him.
"When Bickel authorized Bacon & Company to sell the stock short for him, that is, to sell on his account stock which he did not have, and which they would be compelled to borrow for him, his undertaking with them was to reimburse them for any payments they might be compelled to make in the execution of his order, and to repay them for any losses that might result from it: Bibb v. Allen, 149 U. S. 481. On the other hand, the duty of the brokers to the customer was to protect him against any loss that might result from disregard of the- express terms of their agency, or of an obligation manifestly implied in it. The undertaking of the appellant was to have, at all times, money or securities in the hands of the appellee and his partner sufficient to enable them to buy 200 shares of the stock which they borrowed for him and which they might at any time be called upon to return. All this he well knew and acknowledged his obligation by increasing his margin to $230 per share. When
In his charge the learned trial judge said : “ On the turning point of the case, as I view it, there are no disputed questions of fact.” This is true. What the appellant complains of as the negligence of the appellee’s firm is their failure to give him notice of information that had come to them about the situation of the market. With the stock jumping, according to the testimony, $75.00 and $100 at a time, reaching $1,000 per share at 11:30, the brokers were not bound to hunt him up and repeat to him every rumor or piece of information that had come to them before they could take steps for their own protection. After his refusal to protect them they were not required, in the admitted condition of the market, to go to him, after hearing rumors or receiving information, and give him an opportunity to reconsider his determination not to protect the stock. They were in peril, placed there by his failure of duty to them, and their right was to go into the
Judgment affirmed.