21 N.Y.S. 691 | N.Y. Sup. Ct. | 1893
This action was brought by the plaintiff, as assignee for the benefit of the creditors of the late firm of Gallaudet & Co., who had been bankers and brokers in stocks, bonds, and other securities, against the defendant, who had been a customer of said firm. Certain stock having been purchased for the defendant by said Gallaudet & Co., it was carried for a long period of time. In June, 1886, pursuant to a request then made by Gallaudet & Co., the defendant deposited a certificate of 50 shares of Pacific Mail stock as margin on the account. A son of the defendant was throughout this period an employe of said firm, and said employment continued up to the time of the failure. In December, 1888, the defendant transferred a stock-dealing account which she then had with other brokers to Gallaudet & Co. This account was at all times kept fully margined up, and there was sufficient margin up to the 10th November, on which day there was a depreciation in the market, and Gallaudet & Co. sold out all the defendant’s stocks. No demand was made upon the defendant to supply margins, and no notice was given to her of the intention to sell; but one of the members of the firm, testified that he notified the defendant’s son that he should have to sell out the stocks of the mother,—the market being at this time very ragged, very weak, and panicky,—ánd that he sold the stocks right away. After the sale, notices were offered to the defendant’s son, at his office, which he refused to accept, but no notice was ever sent to the defendant. This suit was subsequently brought to recover a balance claimed to have been created by this sale
It is difficult, and we will not .undertake, to reconcile the conflicting decisions which have been made by the court of last resort upon the relative rights and duties of stockbrokers and their customers. If we are to follow the deductions claimed to be drawn from the statements contained in some of the decisions, we should be compelled to hold; where there is a contract to carry stocks upon a margin-, that a sale of such stocks without notice to a customer is not a breach of such contract,—the relation of the parties being simply that of pledgor and • pledgee,—and that for a conversion of the pledge the pledgee is only liable for the damages sustained by the pledgor by such conversion; but whether they would equal the amount of the claim of the pledgee would depend upon the facts developed. But we -think that this claim is not directly supported by the case cited; and the implied agreement from the contract to carry upon a margin is also lost sight of. Where there is a contract to carry stocks upon a margin, an agreement, as part of the contract, is implied, that such stocks shall not be sold, in case there is danger of the exhaustion of the margin, until additional, margins shall be applied for, and a reasonable time afforded for the furnishing of the same. Therefore, where the relations of the parties are such as they were in the case at bar, the sale of stock without notice is, a breach upon the part of the broker of the contract under which the stocks were purchased; and one of the essential elements of recovery, in every contract, is an allegation upon the part of the party seeking to recover that he has fully performed the contract upon his part. To hold that under such circumstances the broker is necessarily- entitled to recover any advances that he may have made, and that in case of a sale without authority the customer must go into the market and repurchase, if it is possible to do so, and thereby save himself from the losses arising from his unauthorized sale, is to lose sight entirely of the fact that such a construction of - the law would give the party a right to recover upon a contract which he has himself violated. In one of the cases, [that of Capron v. Thompson, 86 N. Y. 418,) it was undoubtedly held that a sale of stock which had been bought upon a margin without notice to the customer did not constitute a failure to perform a condition precedent, but was a breach of a condition subsequent to the purchase. But it seems to me that this is a misstatement in reference to the relations of the parties. The contract in regard to the carrying of the stock is an entire contract, and a failure to carry until the customer has been placed in default is a breach sf the entire contract, and the broker, under such circumstances, is not