151 N.Y.S. 822 | N.Y. App. Div. | 1915
Lead Opinion
This controversy is between a firm of stockbrokers and a customer. Defendant was a speculator in stocks and plaintiffs acted as his brokers for a period of about thirteen months, during which time he had about 100 transactions resulting, according to the accounts kept by plaintiffs, in a considerable loss. Defendant received from plaintiffs the. usual memoranda or slips showing each transaction, and also received at the end of each month an account showing the transactions for the month. These he accepted as veracious accounts of his transactions, and on April 1, 1907, when his relations with plaintiffs had terminated, they made a statement of the general account, which he accepted. This statement showed a balance against him of $14,910.15, for which he gave a series of notes, on which he subsequently paid $4,090. He then refused to pay further, and the present action is commenced. It is found by the referee, and is undoubtedly the fact, that defendant accepted plaintiffs’ statement of the account as accurate, and, because he so believed it, gave the notes.
Defendant again amended his answer by adding a counterclaim for what he had already paid upon the notes. Plaintiffs replied, but did not otherwise amend their complaint. Nowhere did plaintiffs assert a cause of action upon the general account between defendant and themselves. We have thus stated the course of pleading in detail because it has a direct bearing upon the final judgment from which the appeal is taken.
We have examined with care the voluminous record of the trial before the referee, in the light of the very careful and exhaustive briefs of counsel for the respective parties. It would serve no good purpose to go over in detail the evidence upon which the referee has based his findings as to the facts. It will suffice to say that we entirely agree with his conclusions. These in brief are that one of the transactions upon which the account stated is based was in no sense a bona fide transaction, but was merely a cover for a bet upon the future price of a certain stock made between defendant and one of the plaintiffs, in the presence and with the knowledge of at least one other of the plaintiffs; that as to two transactions going to make up the account stated, in which defendant gave orders to sell stocks for his account, plaintiffs without defendant’s knowledge, became themselves the purchasers; that as to two other transactions in which defendant gave orders to buy stocks for his account, plaintiffs, without defendant’s knowledge, became
The complaint, therefore, was rightly dismissed, and it follows logically that defendant is entitled to recover back what he has already paid upon the notes. His payment of them cannot be considered as voluntary because when he paid them he relied, as he did when he gave them, upon the accuracy of the account.
It is urged that the referee should have restated the account, eliminating the objectionable items and awarding judgment upon the account as thus restated. Apart from the practical difficulties of doing this which are well pointed out in the opinion of the referee, it is obvious that to adopt this course would be to render judgment upon an issue not tendered by the pleadings. As already pointed out, the plaintiffs, although warned by defendant’s amended answer that he proposed to impeach the account stated, elected deliberately to stand upon it, by omitting to plead, as they might have done, the general account between themselves and the defendant. Thus the plaintiffs elected to stand upon causes of action which affirmed the integrity and conclusiveness of the account stated as a whole. Its integrity and conclusiveness having been successfully attacked the whole basis of the action fails. It remained, and still remains, if no statute of limitations intervenes, open to them to sue upon the general account making common-law proof of
- A large part of the judgment in defendant’s favor is made up of damages for the conversion of those stocks ordered to be sold for his account of which plaintiffs themselves became the purchasers. On February 9,1910, upon discovery of the facts, defendant, electing to disavow plaintiffs’ acts in themselves purchasing the stocks, tendered to them the amount which would have been due them for purchasing and carrying said • stocks to the date of tender, and demanded delivery of the stocks which was refused. Treating this refusal as a conversion of the stocks defendant counterclaimed for damages which have been allowed by the referee on the basis of the value of the stocks at the date of tender, being the difference between the market prices of the stocks at the date of the alleged sale, and the market prices on the date of tender. The plaintiffs insist that the conversion, if any, took place when they purchased defendant’s stocks and credited him on their books with the proceeds thereof, and that, since that purchase was made at the market prices on that day, defendant suffered no damage through their unauthorized act. They concede that the rule of damages adopted by the referee is the correct one where the customer desires to continue to carry the stocks for an anticipated profit (McIntyre v. Whitney, 139 App. Div. 557; affd., 201 N. Y. 526), but insist that it has no application where, as in the present case, the customer has ordered the stocks to be sold. The argument is plausible, but fails to take note of the law applicable to the relations of principal and agent. These are well settled and are stated in Dos Passes on Stock Brokers and Stock Exchanges (Vol. 1 [2d ed.], p. 382), as follows: “The effect of a purchase by a Broker or pledgee of the stocks of the Client or pledgor, as we have seen, is to render the transaction void, and the cases hold that such a
The rule of damages adopted by the referee is supported in this State by Evans v. Wrenn (93 App. Div. 346; affd., 181 N. Y. 566), and in England by Brookman v. Rothschild (3 Sim. 153, 224; affd., H. L. 5 Bligh [N. S.], 165). To apply the rule contended for by plaintiffs would be to require the customer to forego his privilege of election, upon discovery of the facts, whether to adopt or to disavow the unauthorized act of his brokers, and to compel him to accept and ratify their unlawful act. The practical efficacy of the rule forbidding a broker to deal himself with his customers’ property would be wholly destroyed.
We regret to observe in the appellants’ brief (not signed by the counsel who argued the appeal) many intemperate reflections upon the intelligence and impartiality of the referee — reflections which are in no degree justified by the record. Experienced counsel must know, and those less experienced should learn, that appellate courts are never favorably impressed by practices of this nature.
The judgment should be affirmed, with costs.
Laughlin, Dowling and Hotchkiss, JJ., concurred; Ingraham, P. J., dissented.
Dissenting Opinion
I concur with my brother Scott except as to the two transactions in which defendant gave orders to sell stock theretofore
Two cases are cited in the prevailing opinion, neither of which, I think, is controlling. In Evans v. Wrenn (93 App. Div. 346; affd., 181 N. Y. 566) plaintiff sued stockbrokers, claiming to recover damages for failure of their duty in regard to a speculative account. The case was tried before a referee, who wrote an opinion in which he allowed to the plaintiff the difference between the value of the stock and the amount credited in the account on one hundred shares of stock sold by Belden to himself. The dates are not given in the case, but as plaintiff disaffirmed the sale made by Belden to himself on June 6, 1901, and on that day the stock sold at 173, the referee found plaintiff entitled to be credited with the value of the stock at that price. There was no objection by the defendants to this credit and they did not appeal from the judgment. Plaintiff, however, appealed because the referee disallowed him certain sums he claimed, and the case was affirmed in this court on opinion of the referee, and in the Court of Appeals in 181 Mew York, 566, without opinion. Mo question was, however, presented as to the correctness of the referee’s ruling, and the dates in the opinion are not sufficient to say that it was error or that -the proof did not show that the plaintiff sustained the damages awarded by the referee. The other case relied on is Brookman v. Rothschild (3 Sim. 153, 224; affirmed by the House of Lords in 5 Bligh [N. S.], 165). That case has been criticised in England and it has not been followed as authority for allowing such recovery as this. But
My conclusion, therefore, is that this judgment should be modified by striking out the recovery allowed to the defendant on account of these two sales of stock which the plaintiffs purchased, and as thus modified affirmed.
Judgment affirmed, with costs.