181 N.E. 464 | NY | 1932
Lead Opinion
At a time when American stocks and other securities were selling at grossly inflated prices on all the exchanges of the world, plaintiff, a youth lacking a few months of the attainment of his majority, opened a speculative account with a firm of brokers in New York. He transferred that account to defendants, another brokerage firm, and on November 1, 1928, he caused to be delivered to them four hundred shares of three different issues which his former brokers had carried for him and which then possessed a market value of $17,250. Defendants paid the debit balance of $13,907.91 to those brokers, leaving to plaintiff on that day an interest or equity of *243 $3,342.09 in these stocks. Prior to the date of this transaction, defendants were carrying a marginal account with plaintiff. It was continued with numerous purchases and sales until it was closed April 2, 1929, by payment to him of the sum of $70.99. While yet in his minority, plaintiff rescinded his agreement with his brokers and disaffirmed the entire transaction. This action is for the recovery of the amount which he alleges to represent the value of his equity in the four hundred shares of stock November 1, 1928, minus the sum paid to him on the closing of his account.
The contract between defendants and their infant customer was not void. At his election it was merely voidable. (Casey v.Kastel,
Since this contract is voidable only, it cannot be made voidab initio by the mere act of rescission. Prior to avoidance no tort is committed (Casey v. Kastel, supra) and in this case no tort by the brokers was at any time committed. Acts by defendants, if authorized by the *244
infant, were not wrongful. All their acts were authorized by him. After disaffirmance, the infant is not entitled to be put in a position superior to such a one as he would have occupied if he had never entered into his voidable agreement. He is not entitled to retain an advantage from a transaction which he repudiates. "The privilege of infancy is to be used as a shield and not as a sword." (Kent, vol. 2, p. 240; Rice v. Butler,
The stability of plaintiff's interest or, if the term may be accurately used, his equity in these securities was less firmly established than would be such property right as he might have had in a cash credit, if money instead of stocks had been deposited as margin. The value of cash, or of credit based upon a deposit of cash, would have remained constant. As the market price of the *245
stocks which were purchased for him rose or fell, the margin between their prices and the value of a credit founded upon a cash deposit would have expanded or contracted but the standard of value represented by the cash deposit would have continued immutable. Not so in respect to the value of the stocks which were pledged as security for the unpaid balance of their own market price and also as collateral for those other stocks which were later acquired and which were included within plaintiff's account. The value of this collateral security, unlike cash, was subject to constant fluctuation and, of course, it did in fact vary from day to day. Two decisions in the former General Term are cited by the adverse parties at bar. They are in conflict but, although the actual determination of one was affirmed without opinion by this court, neither controls the rule to be applied by us. (Crummey v. Mills, 40 Hun, 370; Mordecai v.Pearl, 63 Hun, 553; affd.,
The judgment of the Appellate Division and that of the Trial Term should be reversed and a new trial granted, with costs to abide the event.
Concurrence Opinion
In the result arrived at by Judge O'BRIEN I agree, but I have a different view regarding the recovery permitted the plaintiff. As an infant repudiating his transactions with the stockbrokers he can receive no benefit whatever from his bargain. He must repudiate or confirm in toto from the beginning of his dealings in the transaction. From this speculation in stocks he can derive no benefit. He cannot accept part of the profits and repudiate all the losses. (1 Williston on Contracts, § 236; Anson on Contracts [3d Amer. ed. by Corbin], p. 184, § 161b; Meyer, The Law of Stock Brokers and Stock Exchange, § 125, p. 496; seeMyers v. Hurley Motor Co.,
Applying this rule to the present facts, all the infant can get back on this transaction which he has repudiated is the amount of the margin which he deposited with Leopold Spingarn Co. With this brokerage house he had opened a margin account which they carried for him. He could not obtain the stocks which he had purchased on margin without paying to them the amount due. This he never paid. He procured these defendants to take over the account by paying to Leopold Spingarn Co. $13,907.91. These defendants, at the plaintiff's request, were merely substituted for the first brokers. It was all one transaction. The only money ever parted with by the infant was the amount he put up with Leopold Spingarn Co. He cannot confirm his transaction with Spingarn Co. and repudiate it with these defendants. To do so would permit him to recover a profit which he never took, and was never entitled to receive until he had met the conditions by paying up his margin of $13,907.91. From the beginning of his dealings with the first brokerage firm until his account was sold out, he, as an infant, had only lost that which he first parted with. If the courts give him more it is to give him the profits on a transaction to which he was never entitled without confirmation of his dealings and a payment by him of the margin due. When these defendants took over the account and advanced that margin to Leopold Spingarn Co., the apparent profits or increase in the value of the stocks was not the absolute money of this plaintiff; he could not get it even from these defendants without confirming the transaction by repaying to them the amount they had advanced. On the very day these defendants took over his account, he could only have recovered the actual amount parted with by him; he could not recover profits without confirming his dealings.
Consequently, all that this plaintiff is entitled to is the actual money, with interest, which he parted with to Leopold Spingarn Co. The record does not show *248 us the amount of this deposit. While there must be a reversal and new trial, I am of the opinion that the infant is entitled to the return of this money, and no more.
POUND, Ch. J., LEHMAN and HUBBS, JJ., concur with O'BRIEN, J.; CRANE, J., concurs in result in memorandum; KELLOGG, J., not sitting.
Judgments reversed, etc.