Case Name: Horton v. Morgan
Court: New York Court of Appeals
Jurisdiction: New York
Decision Date: 1859
Citations: 19 N.Y. 170
Docket Number: 
Parties: Horton v. Morgan.
Judges: 
Reporter: New York Reports
Volume: 19
Pages: 170–173

Head Matter:
Horton v. Morgan.
A person directing a broker to purchase stock for him must, in the absence of evidence to the contrary, be regarded as consenting to its purchase according to the custom of brokers, of dealing in their own names without disclosing their principals.
Where the broker is to advance a portion of the purchase money upon the security of the stock, he may properly take the title in his own name.
In such case he is not bound to keep his employer’s stock separate from other stock of the same kind, owned by himself, but fulfills his duty if he keeps in possession and ready for delivery to his principal on demand an amount of stock equal to that purchased by him.
Appeal from the Superior Court of the city of New York. The action was brought to recover $3,600, which the plaintiff had, in August, 1853, deposited with the defendant, a broker in New York, to purchase stock, as the plaintiff should after-wards order; and also $349.76, which the plaintiff afterwards paid the defendant, as for the balance of the price of stock purchased for the latter by him, which, as the plaintiff contended, he had paid under a mistake of fact.
The defendant having the first mentioned sum in his hands belonging to the plaintiff, the latter directed him, by letter, from Skaneateles, where he lived, on the 2d September, 1853, to purchase two hundred shares of “Parker Vein” Coal Company stock, and requested him to carry for him, the plaintiff, any excess of what it might cost, above the deposit in the defendant’s hands, until it should be sold. The defendant accordingly, a few days afterwards, purchased the two hundred shares in different parcels, and it was transferred to his name, and certificates for it were taken to him. The excess of the cost beyond the deposit was between $300 and $400. The defendant promptly advised the plaintiff of these purchases, and the latter repeatedly asserted his ownership of the stock in various ways, and particularly by requesting the defendant to make a further advance upon it. The balance of the price remained unpaid by the plaintiff until the 13th June, 1854, when the defendant sent him his account current, showing a balance due, including interest, of $349.76. The plaintiff accordingly remitted this sum to the defendant, and asked that the stock certificates should be sent to him. On the 17th June the defendant sent the plaintiff scrip for two hundred shares of the stock, in two several certificates, issued in the name of D. H. Westervelt, a clerk of the defendant, with a power of attorney attached, authorizing the plaintiff to transfer it. Sometime before this the transfer office of the Parker Vein Company, which was a corporation under the laws of Maryland, had been withdrawn from the city of New York, and the stock had become unsalable, and the company was supposed to be insolvent. The plaintiff, after some delay, returned the certificates to the defendant,i claiming to have the money paid on it returned to him, which the defendant refused to do.
It was shown that the defendant dealt extensively in this stock, buying and selling for other persons; and that he often had stocks transferred to one or other of his clerks, with their consent, for the purpose of avoiding the personal responsibility which might attach to stockholders. It was in this way that the scrip, which was offered to the plaintiff, came to be issued in the name of Westervelt. It was shown, on the part of the defendant, that purchases of stock, at the board of brokers, were always made in the name of the broker, without disclosing the name of his principal; and that when the broker agreed to hold the stock as a security for money advanced, it was not usual to distinguish it in any manner from other stock of the same kind held by him;. and a witness testified that it was customary, in such cases, for the broker to sell or hypothecate it on his own account, if he had occasion; and that his liability to his principal was limited to transferring to him the required number of shares when called upon. This testimony was given under an objection by the plaintiff, he excepting against the ruling by which it was admitted. The defendant proved that at all times after he made the purchases for the plaintiff, and before he sent him the certificates, he had stock of this kind to a greater amount than that which the plaintiff was entitled to under his contract, and standing in his own name or in that of his clerks.
The judge ordered the complaint to be dismissed, and that the exceptions be heard ' in the first instance at the general term. His decision was sustained at the general term, where final judgment was given against the plaintiff, who appealed to this court.
Nicholas Hill, for the appellant.
F. F. Marbury, for the respondent.

Opinion:
Denio, J.
It is unnecessary to. pass upon the ruling by which evidence was admitted to show the custom of brokers to sell and hypothecate stock held by them as security on advances; and we do not give any judgment upon that question. There was no evidence that the defendant had ever disposed of the stock which he had purchased for the plaintiff. If the case had been decided by a jury, it may be that we could not say that they were not influenced by this evidence; but as there was a nonsuit in the case, we ought to look at the facts properly in evidence to ascertain whether the judgment was warranted. The other .evidence objected to, seems to us to have been properly received. The practice at the stock board, by which the brokers only, and not their customers, are known in their dealings with each other, was not unreasonable; and the plaintiff, by directing this purchase to be made, must be understood as consenting that it should be done in the usual manner. Ho breach of duty was committed by the defendant, therefore, in making the purchase in his own name. As he was to hold the shares as security for the balance of the purchase money which he had advanced, it was proper, and entirely consistent with the nature of the transaction, that he should take the title in his own name. This was necessary, moreover, for his safety; for if default should be made, he would have a right to sell it to reimburse himself, and he would be obliged, in that event, to give a title to the purchaser from him: and we do not see anything unlawful in his transferring it to his clerks, if it remained under his control, "and if he was ready, when called on by the plaintiff, to transfer it to him upon the advance being paid. We suppose it would have been his duty to have procured transfers- to the plaintiff, if the transfer office had remained in Hew York, when the plaintiff paid the balance of the price; but the failure of the company, and the removal of the office, excused him from "the performance of that act. We can see nothing, therefore, in the conduct of the defendant to render him liable to the plaintiff - for the money which the latter had chosen to invest in his stock. .
The plaintiff had no interest in having his shares kept separate from the mass of the defendant's- stock. One share was precisely equal in value to every other share. Chancellor Kent said, in a case precisely similar in-principle, that.it. was sufficient if the defendant always had the requisite quantity of shares on hand, and that the law would- presume that the shares so on hand from time to time were the shares deposited, because the parties had not reduced them to any . more certainty. (Nourse v. Prime, 4 John. Ch., 490; S. C., 7 id., 69.)
The judgment of the Superior Court must.be -affirmed; -
All the judges concurring,
Judgment affirmed.