186 A.D. 116 | N.Y. App. Div. | 1919
The plaintiff brought this action to recover the value of stocks purchased on margin by him from the defendants, who were stockbrokers, and by whom the stocks were held as collateral for sums advanced by them for the plaintiff’s account upon the several purchases. The action is for conversion because of the sale of these stocks by the defendants without notice to the plaintiff. It is not a case where the defendants required further margins; at the time of the alleged conversion the plaintiff owned a substantial equity in the stocks.
The case was tried before a referee who directed that judgment be entered for the plaintiff for the sum of $4,372.68, which was the amount of the equity realized upon the sale by the defendants, plus interest from that day to the time of the signing of the referee’s findings.
Both parties have appealed, the defendants urging that as to the defendant Gilmore the complaint should have been dismissed, because he was a special partner, and as to both defendants the plaintiff should not succeed for the reason that he was estopped to urge the claim. On his appeal the plaintiff contends that he was entitled to a judgment larger by many thousands of dollars than that directed by the referee.
The orderly examination of the propositions offered for our consideration by these appeals suggests that the question of the liability of the special partner Gilmore be first discussed.
The defendant Gilmore contends that the failure to file and record in the county of Albany does not render him liable as a general partner as to the transactions with the plaintiff. All the plaintiff’s business transacted with the partnership was had with and through the office located in Albany. No logical reason is suggested nor can be conceived why the Legislature should have inserted the provision in respect to filing and recording in counties other than the county of the principal place of business unless it was intended to affect the status of the parties as to transactions occurring, in such other counties. Section 3 of the Partnership Law provides that “ a partnership formed otherwise than in the manner prescribed in this chapter for the formation of a limited partnership, is a general partnership.” Then, too, while limited partnerships have been recognized in some of the European countries since the twelfth and thirteenth centuries, they were unknown to the common law, and it follows, under familiar principles, that one who seeks to escape the liability of a general partnership must at his peril comply strictly with the provisions of the statute. While this does not mean that
The defendants’ contention that the plaintiff is estopped to make this claim against his brokers is not valid. The claim is based upon the argument that the defendants turned over their business to the New England Securities Company to whom the plaintiff should look, and upon the further argument that the defendants carried the plaintiff’s account under a fictitious name. It is necessary to state some of the facts surrounding the transactions between the parties in order to determine whether any rule of law has been violated in this branch of the case by awarding a judgment to the plaintiff.
McClure was the defendants’ manager in Albany. Mallett was an employee in that office, who had been himself in the
We have searched the record diligently and failed to discover any evidence of the fact that the plaintiff was ever advised or knew or had reason to suppose that the securities company or any concern other than the defendants’ had been intrusted with carrying his stock. It is true that he and Mallett had been business acquaintances for some years and during that period the plaintiff had consummated stock transactions through Mallett. It may also be possibly inferred from the evidence that between September 1, 1914, and April, 1915, he and Mallett might have lunched together on one or more occasions, and it seems that two or three times during this period the plaintiff called up Mallett to inquire about prices of stock generally. But aside from this there is no suggestion that the plaintiff ever knew or heard of the securities company. While it is true, as the defendants urge, that triers of the facts are the judges of the credibility of witnesses, that principle by
The same may be said in relation to the carrying of plaintiff’s transactions on the books of the defendants’ business in an account under a fictitious name. It is true that the plaintiff’s stocks and a considerable number of stocks of other customers were so carried both at the Albany office and the principal office in New York under the name of D. H. Andrews, but there is nothing to suggest that plaintiff ever requested this to be done or ever knew that it was being done. We do not mean to say that if he had known of it the defendants would be entitled to succeed; what we do hold is that here again no facts were established upon which the argument of estoppel may be founded.
This brings us to a consideration of the sole point upon which the plaintiff bases the appeal he had lodged against the judgment. He insists that the judgment should be much larger than that directed by the referee. The computation to determine the amount of the judgment depends on the date when the plaintiff knew or should have known of the conversion of his stock. The referee has held that plaintiff was under the circumstances bound to ascertain the condition of his affairs and learn of the sale soon enough after September 1, 1914, the date of the actual conversion, so that before December 1,1914, he would have had a reasonable time to determine whether he wished to replace them. The Stock Exchange being closed between July thirty-first and December twelfth, and no change in prices occurring, the referee has measured the amount of the plaintiff’s damage by taking the prevailing prices on July 31, 1914, as their value at the time they were converted, which in the aggregate was $23,843.75. From this sunThe has subtracted the amount of plaintiff’s indebtedness including
It is conceded that the conversion took place on or about September 1, 1914, but the plaintiff denies that he knew of it until a year afterward, and seriously contends that the circumstances were such that he was not charged either with knowledge or the duty of making an investigation which might have revealed that knowledge. On the other hand, it appears that the plaintiff and Mallett had been business acquaintances ■ for a number of years; that they had been to lunch together; that the plaintiff had grown familiar with the stock market and had dealt in stocks for twenty years, keeping in constant touch with the market when he was in town and having a ticker in his office. But Mallett testifies that he does not think he ever saw the plaintiff during the four months and a half that the market was closed; that he never communicated to the plaintiff between the middle and the latter part of April, 1915, any information that the defendants intended to go out of business; that his stock had been sold, or that the securities company were interested in any way in this field; and the plaintiff himself testifies to the same facts. What was there, then, to suggest to the plaintiff that it was his duty to make inquiry to find out the condition of the stocks? He had carried 500 of Copper from December, 1914, and 200 of American Can and United States Rubber from the spring of 1914, during the decline of prices. He had, therefore, owned 500 shares of one stock a year and a half and 200 shares of other stock for several months without disposing of them or changing his trades in them. Without doubt he knew, and it is so argued by the defendants, that the Stock Exchange closed on July thirty-first, and he himself says that, because he knew the Stock Exchange was closed, he realized that nothing would be done with his stocks until the exchange reopened. These circumstances, it seems to us, fall far short of presenting conditions which imposed upon the plaintiff a duty to inquire where his stocks were or what was being done with them. The learned referee has placed his decision, in this branch of the case, upon Mayer v. Monzo (221 N. Y. 442). In that case it was held that circumstances might charge the owner of stocks with this duty; and these were such -circumstances
Upon this branch of the case the facts that the Stock Exchange was closed for several months and that the plaintiff at the time of the closing had a substantial equity in the stocks are of persuading force in the determination of the question of fact whether the plaintiff was chargeable with the duty to inquire in respect to the condition of his stock. There is no proof in the record that the closing of the Stock Exchange was accompanied by business failures, or by any other condition which would suggest to one accustomed to trading in stocks that his holdings were in a precarious condition. It stands out strongly that the plaintiff was entirely justified during the period of closure in supposing that his stocks were intact. We are, therefore, compelled to hold that the referee’s findings of fact in this connection are not supported by the evidence, and to make a contrary finding in this court.
What has been said deals with the situation up to the reopening of the Stock Exchange on December 12, 1914. For the purpose of fixing a date to start running that reasonable period within which the plaintiff would be compelled to determine what course he would pursue and which would fix the limit of prices to be used as a basis for determining damages, it becomes necessary to examine the conditions subsequent to the reopening of the exchange. At that time the prices of stocks generally started to increase and kept on increasing, and the plaintiff says, what it is entirely reasonable to suppose is the truth, that he knew of these increases and appreciated that his stocks were becoming more valuable the longer he allowed them to remain with the defendants, where he supposed them to be. During this period of enchancement of value there was, therefore, certainly no condition or circumstance to suggest a duty on the part of the plaintiff to inquire what was being done with them. The value of stocks was still increasing in the month of April and between the middle and the latter part of that month the plaintiff was advised by Mallett that the defendants had gone out of business. On the same day the plaintiff arranged to pay his indebtedness to the defendants and directed Mallett to have his stocks delivered to his bank. They were, of course, never
Conforming to the views expressed, the 14th and 15th findings of fact must be overruled; the highest prices that these stocks attained between the 1st and 31st of May, 1915, inclusive, should measure the extent of the plaintiff’s damage. The items of interest chargeable to the plaintiff, and of dividends chargeable to the defendants, and the values of the stocks during the immediate period are not in dispute, and will form the basis of new findings, which will be settled, on notice, to support the enchanced judgment we direct.
The judgment so far as it denies the plaintiff’s larger recovery is, therefore, reversed, and the balance of the judgment modified as here expressed, and so as modified affirmed, with costs to the plaintiff.
All concurred, except John M. Kellogg, P. J., who voted for reversal.