White v. Smith

| N.Y. Sup. Ct. | Feb 15, 1871

By the Court—Gilbert, J.

The questions of fact in the case were presented to the jury in a charge from the court, to which no exception was taken, and which was free from legal objection. The only questions brought up for review are, whether the plaintiff is entitled to recover at all, and, if he is, what is the rule of damages.

The defendants are stock-brokers, doing business in the city of blew York. The plaintiff resides in St. Louis. In August, 1869, he was in the city of blew York, and ..while there, he made an agreement with the defendants, whereby they agreed to purchase and hold, and sell stocks for him, on the security of a margin or deposit, for the usual commission and interest on the advances they might make over and above the margin. At first, Mr. Treadway, a resident of the city of blew York, was the agent of the plaintiff, and, as such, gave orders to the defendants, and transacted the plaintiff’s business with them ; but his authority had been revoked, and the defendants notified of such revocation, before the transaction out of which this action arose occurred. That transaction was a purchase on the 1st Hovember, 1869, of 300 shares of stock, to cover a short sale of the same stock, made by the defendants for the plaintiff on the 18th October, 1869. This purchase was no doubt made by the defendants in good faith, under an apprehension, arising from the uncertain and fluctuating state of the stock market, that stocks would advance in price, and thereby the plaintiff would be subjected.to loss. But they had no authority from the plaintiff to make the purchase. The sanction given to it by Mr. Treadway in no way affected the plaintiff, for his authority had been revoked with the acquiescence of the defendants. After this revocation, it became the duty of the defendants to await the orders of the plaintiff, and they became responsible for any loss plaintiff might sustain by reason of a violation of this duty. The plaintiff might adopt an unauthorized transaction made on his behalf, and thus be entitled to any profit accruing from it, but his right to repudiate it, and cast all loss occasioned by it on the defendants, is equally clear. These principles are essential to preserve fidelity in agents, and are well settled in law.

On the 2d Hovember, 1869, the stock having declined, the plaintiff directed the defendants to cover the 300 shares which they had sold. This the defendants refused to do. If the defendants had not made the unauthorized purchase on the 1st Hovember, and had complied with this direction, the plaintiff would have made a profit on the transaction in question, amounting to the sum awarded by the jury. But it is said that the defendants are not under an obligation to act for the plaintiff, either for any fixed period or to any definite amount. We think the rule of law is otherwise. By the agreement by which the agency was created, no period was fixed for its continuance, and the only limit as to amount was fixed by the margin or deposit. The agency was not revoked by the plaintiff. It could not be revoked by the defendants without notice to the plaintiff, and having been founded upon a valuable consideration, a renunciation of the agency by the defendants would have subjected them to a liability for any damages the plaintiff might have sustained thereby. (Story Ag., § é78.)

It is also said that the defendants were not bound to make the advance requisite "to make the purchase ordered by the plaintiff, because they might demand an immediate return of the sum advanced, and that no loss can arise from a failure to lend money, to an immediate return of which the lender is entitled. This, also, is a fallacy. For by the agreement the defendants were to make the necessary advances, and to be reimbursed at the close of the transaction. Their security was, in all cases, the sum deposited with them by the plaintiff, and in case of an advance to make a purchase, they held, in addition to such deposit, a pledge of the stocks purchased.

The liability of the defendants was fully established, and the only remaining question is, what is the measure of that liability ? It is evident that the plaintiff coxild not avoid the loss by purchasing the stock, and delivering it himself in fulfillment of the contract made on his behalf by the defendants, for such purchase and delivery had already been made by the defendants themselves—the contract had been performed. Whether, if the plaintiff had purchased the stocks, he could have found a purchaser for them at the price for which the defendants had sold them is conjectural. The inference, from the market price on the day the order was given, is that he could not. But the complete answer is, that he had a right to rely implicitly upon the fidelity of his agents.

The loss resulting directly from their delinquency was the difference between the price they paid for the stocks upon the purchase made without authority, and the market price thereof at the time they were instructed to make the purchase. The verdict of the jury was for this sum.

The judgment and order denying a new trial must, therefore, be affirmed, with costs.

Judgment affirmed.